**Exhibit 10.16**

 

**EXECUTION COPY**

 

 

**Resale Registration Rights Agreement**

 

among

 

**WATSONPHARMACEUTICALS, INC.**

 

and

 

**LEHMAN BROTHERS INC.,**

 

**MORGAN STANLEY &CO. INCORPORATED**

 

and

 

**CIBC WORLD MARKETSCORP.**

** **

**WACHOVIA SECURITIES,INC.**

** **

**BANC OF AMERICASECURITIES LLC**

** **

**COMERICA SECURITIES,INC.**

** **

**WELLS FARGOSECURITIES, LLC**

** **

** **

**DATED AS OF MARCH 7,2003**

 

----

 

**TABLE OF CONTENTS**

 
| 1. | Definitions                                 |
|----|---------------------------------------------|
| 2. | Shelf Registration                          |
| 3. | Additional Amounts                          |
| 4. | Registration Procedures                     |
| 5. | Registration Expenses                       |
| 6. | Indemnification and Contribution            |
| 7. | Rule  144A                                  |
| 8. | Participation in Underwritten Registrations |
| 9. | Miscellaneous                               |

 

 

----

 

**RESALE REGISTRATIONRIGHTS AGREEMENT**, dated as of March 7, 2003, amongWatson Pharmaceuticals, Inc., a Nevada corporation (the “**Company**”), and LehmanBrothers Inc., Morgan Stanley & Co. Incorporated, CIBC World Markets Corp.,Wachovia Securities, Inc., Banc of America Securities LLC, Comerica Securities,Inc. and Wells Fargo Securities, LLC (collectively, the “**Initial Purchasers**”).

 

Pursuant tothe Purchase Agreement, dated March 4, 2003, among the Company and the InitialPurchasers (the “**Purchase Agreement**”), the Initial Purchasers have agreed topurchase from the Company $500,000,000 ($575,000,000 if the Initial Purchasersexercise their option thereunder in full) in aggregate principal amount atmaturity of the Company’s 1.75% Convertible Contingent Senior Debentures dueMarch 15, 2023 (the “**Debentures**”).  The Debentures will be convertible into fully paid, nonassessableshares of common stock, par value $0.0033 (the “**Conversion Shares**”) of theCompany on the terms, and subject to the conditions, set forth in the Indenture(as defined herein).  To induce theInitial Purchasers to purchase the Debentures, the Company has agreed toprovide the registration rights set forth in this Agreement pursuant to Section3(k) of the Purchase Agreement.

 

The partieshereby agree as follows:

 

1.*             Definitions.*.  As used in this Agreement, the followingcapitalized terms shall have the following meanings:

 

**AdditionalAmount Payment Date**: Each Interest Payment Date.  Forpurposes of this Agreement, if no Debentures are outstanding, “AdditionalAmount Payment Date” shall mean each of March 15 and September 15.

 

**Additional Amounts**:  As defined in Section 3(a) hereof.

 

**Affiliate**: As such term is defined in Rule 405 under the Securities Act.

 

**Agreement**:  This Resale Registration Rights Agreement,as amended, modified or otherwise supplemented from time to time in accordancewith the terms hereof.

 

**Blue Sky Application**:  As defined in Section 6(a) hereof.

 

**Broker-Dealer**: Any broker or dealer registered under the Exchange Act.

 

**BusinessDay**:  A dayother than a Saturday or Sunday or any day on which banking institutions in NewYork City are authorized or obligated by law or executive order to close.

 

**Closing Date:**  The date of this Agreement.

 

**Commission**:  Securities and Exchange Commission.

 

**Company**:  As defined in the preamble hereto.

 

**Conversion Shares**:  Asdefined in the preamble hereto.

 

 

----

 

**Debentures**:  As defined in the preamble hereto.

 

**Effectiveness Period**:  As defined in Section 2(a)(iii) hereof.

 

**Effectiveness TargetDate**:  Asdefined in Section 2(a)(ii) hereof.

 

**ExchangeAct**: Securities Exchange Act of 1934, as amended, and the rules andregulations of the Commission thereunder.

 

**Holder**:  A Person who owns, beneficially or otherwise,Transfer Restricted Securities.

 

**Holder Questionnaire**:  As defined in Section 2(b) hereof.

 

**Indemnified Holder**:  As defined in Section 6(a) hereof.

 

**Indenture**:  The Indenture, dated as of March 7, 2003,between the Company, and Wells Fargo Bank, National Association, as trustee,pursuant to which the Debentures are to be issued, as such Indenture isamended, modified or supplemented from time to time in accordance with theterms thereof.

 

**Initial Purchasers**:  As defined in the preamble hereto.

 

**Interest Payment Date**:  As defined in the Indenture.

 

**Majority of Holders**:  Holders holding over 50% in aggregateprincipal amount of the Debentures outstanding at the time of determination inquestion; *provided*,*however*, that, for the purpose of thisdefinition, a holder of Conversion Shares which constitute Transfer RestrictedSecurities when issued upon conversion of Debentures shall be deemed to hold anaggregate principal amount of Debentures (in addition to the principal amountof Debentures held by such holder) equal to the product of (x) the number ofsuch Conversion Shares held by such holder and (y) the prevailing conversionprice, such prevailing conversion price as determined in accordance withSection 12 of the Indenture.

 

**NASD**:  National Association of Securities Dealers,Inc.

 

**Person**:  An individual, partnership, corporation,unincorporated organization, limited liability company, trust, joint venture ora government or agency or political subdivision thereof.

 

**Purchase Agreement**:  As defined in the preamble hereto.

 

**Prospectus**:  The prospectus included in a ShelfRegistration Statement, as amended or supplemented by any prospectus supplementand by all other amendments thereto, including post-effective amendments, andall material incorporated by reference into such Prospectus.

 

 

----

 

**QuestionnaireDeadline**:  Asdefined in Section 2(b) hereof.

 

**RecordHolder**:  Withrespect to any Additional Amount Payment Date, each Person who is a Holder onthe record date with respect to the Interest Payment Date on which suchAdditional Amount Payment Date shall occur. In the case of a Holder of shares of Conversion Shares, “Record Holder”shall mean each Person who is a Holder of shares of Conversion Shares whichconstitute Transfer Restricted Securities on the 15th day preceding therelevant Additional Amount Payment Date.

 

**Registration Default**:  As defined in Section 3(a) hereof.

 

**Sale Notice**:  As defined in Section 4(e) hereof.

 

**SecuritiesAct**: Securities Act of 1933, as amended, and the rules and resolutions of theCommission thereunder.

 

**Shelf Filing Deadline**:As defined in Section 2(a)(i) hereof.

 

**Shelf RegistrationStatement**:  Asdefined in Section 2(a)(i) hereof.

 

**Suspension Notice**.  As defined in Section 4(c) hereof.

 

**Suspension Period**.  As defined in Section 4(b)(i) hereof.

 

**TIA**:  Trust Indenture Act of 1939, as amended, andthe rules and regulations of the Commission thereunder, in each case, as ineffect on the date the Indenture is qualified under the TIA.

 

**Transfer Restricted Securities**:  Each Debenture and each Conversion Shareissued upon conversion of the Debentures until the earliest to occur of:

 

### (i)  the date on which suchDebenture or such Conversion Shares issued upon conversion has been effectivelyregistered under the Securities Act and disposed of in accordance with theShelf Registration Statement;

 

### (ii)  the date on which suchDebenture or such Conversion Shares issued upon conversion (A) has beentransferred in compliance with Rule 144 under the Securities Act or (B) may besold or transferred by a person who is not an Affiliate of the Company pursuantto Rule 144 under the Securities Act (or any other similar provision then inforce) without any volume or manner of sale restrictions thereunder; or

###  

### (iii)  the date on which suchDebenture or such Conversion Shares issued upon conversion ceases to beoutstanding (whether as a result of redemption, repurchase and cancellation,conversion or otherwise).

 

**Trustee**:  As defined in Section 1.1 of the Indenture.

 

2.             Shelf Registration.

 

 

----

 

(a)           The Company shall:

 

(i)  not later than 90 days after the date hereof (the “**Shelf FilingDeadline**”), cause to be filed a registration statement pursuant toRule 415 under the Securities Act (together with any amendments thereto, andincluding any documents incorporated by reference therein, the “**ShelfRegistration Statement**”), which Shelf Registration Statement shallprovide for resales of all Transfer Restricted Securities held by Holders thathave provided the information required pursuant to the terms of Section 2(b)hereof;

 

(ii)  use its commercially reasonable efforts to cause theShelf Registration Statement to be declared effective by the Commission notlater than 180 days after the date hereof (the “**Effectiveness Target Date**”);and

 

(iii)   use its commercially reasonable efforts to keep theShelf Registration Statement continuously effective, supplemented and amendedas required by the provisions of Section 4(b) hereof to the extent necessary toensure that (A) it is available for resales by the Holders of TransferRestricted Securities entitled to the benefit of this Agreement and (B)conforms with the requirements of this Agreement and the Securities Act for aperiod (the “**Effectiveness Period**”) of:

 

(A)       twoyears following the last date of original issuance of Debentures; or

 

(B)       suchshorter period that will terminate when (x) all of the Holders of TransferRestricted Securities are able to sell all Transfer Restricted Securitiesimmediately without restriction pursuant to Rule 144(k) under the SecuritiesAct or any successor rule thereto, (y) when all Transfer Restricted Securitieshave ceased to be outstanding (whether as a result of redemption, repurchaseand cancellation, conversion or otherwise) or (z) all Transfer RestrictedSecurities registered under the Shelf Registration Statement have been sold.

 

(b)           To have its Transfer RestrictedSecurities included in the Shelf Registration Statement pursuant to thisAgreement, each Holder shall complete the Selling Securityholder Notice andQuestionnaire, the form of which is contained in Exhibit A to this Agreement(the “**Questionnaire**”),and deliver it to the Company prior to or on the 20th Business Day after thedate of a written request therefor by the Company (which request shall includea copy of the Questionnaire) (such deadline, the “**Questionnaire Deadline**”).  Prior to such time, each Holder may completethe Questionnaire and deliver it to the Company prior to such request and, as aresult, shall be entitled to have its Transfer Restricted Securities includedin the initial Shelf Registration Statement filed with the Commission.  In addition, upon receipt of written requestfor additional information from the Company, each Holder who intends to benamed as a selling securityholder in the Shelf Registration Statement shallfurnish to the Company in writing, within 20 Business Days after such Holder’sreceipt of such request, such additional information regarding such Holder andthe proposed distribution by such Holder of its Transfer Restricted Securities,in connection with the Shelf Registration Statement or Prospectus orPreliminary Prospectus included therein and in any application to be filed withor under state securities law, as the Company may reasonably request.  In connection with all such requests for

 

 

----

 

information from Holders ofTransfer Restricted Securities, the Company shall notify such Holders of therequirements set forth in this paragraph regarding their obligation to providethe information requested pursuant to this Section.  Each Holder as to which the Shelf Registration Statement is beingeffected agrees to furnish promptly to the Company all information required tobe disclosed in order to make information previously furnished to the Companyby such Holder not materially misleading.

 

3.             Additional Amounts.

 

(a)           If:

 

(i)  the Shelf Registration Statement is not filed with theCommission prior to or on the Shelf Filing Deadline;

 

(ii)  the Shelf Registration Statement has not been declaredeffective by the Commission prior to or on the Effectiveness Target Date;

 

(iii)  except as provided in Section 4(b)(i) hereof, theShelf Registration Statement is filed and declared effective but, during theEffectiveness Period, shall thereafter cease to be effective or fail to beusable for its intended purpose without being succeeded within ten BusinessDays by a post-effective amendment to the Shelf Registration Statement, asupplement to the Prospectus or a report filed with the Commission pursuant toSection 13(a), 13(c), 14 or 15(d) of the Exchange Act that cures such failureand, in the case of a post-effective amendment, is itself immediately declaredeffective; or

 

(iv)  (A)  prior to or on the 45th or 60thday, as the case may be, of any Suspension Period, such suspension has not beenterminated or (B) Suspension Periods exceed an aggregate of 90 days in any 360day period,

 

(each such event referred to inforegoing clauses (i) through (iv), a “**Registration Default**”), the Company herebyagrees to pay additional amounts (“**Additional Amounts**”) with respect to theTransfer Restricted Securities from and including the day following theRegistration Default to but excluding the day on which the Registration Defaulthas been cured, accruing at a rate:

 

(A)       in respect of theDebentures, to each holder of Debentures, (x) with respect to the first 90-dayperiod during which a Registration Default shall have occurred and becontinuing, equal to 0.25% per annum of the principal amount of the Debentures,and (y) with respect to the period commencing on the 91st day following the daythe Registration Default shall have occurred and be continuing, equal to 0.50%per annum of the principal amount of the Debentures; *provided* that in no eventshall Additional Amounts accrue at a rate per year exceeding 0.50% of theprincipal amount of the Debentures; and

 

(B)        in respect of anyConversion Shares issued upon conversion of Debentures, to each holder of suchConversion Shares, (x) with respect to the first 90-day period in which aRegistration Default shall have occurred and be continuing, equal to 0.25% perannum of the principal amount of the Debentures converted into

 

 

----

 

suchConversion Shares, and (y) with respect to the period commencing the 91st dayfollowing the day the Registration Default shall have occurred and becontinuing, equal to 0.50% per annum of the principal amount of the Debenturesconverted into such Conversion Shares; *provided* that in no event shall AdditionalAmounts accrue at a rate per year exceeding 0.50% of the principal amount ofthe Debentures converted into such Conversion Shares.

 

(b)           All accrued Additional Amounts shallbe paid in arrears to Record Holders by the Company on each Additional AmountPayment Date by wire transfer of immediately available funds or by federal bankcheck.  Following the cure of allRegistration Defaults relating to any particular Debenture or Conversion Sharesissued upon conversion of Debentures, the accrual of Additional Amounts withrespect to such Debenture or such Conversion Shares shall cease.  The Company agrees to deliver all notices,certificates and other documents contemplated by the Indenture in connectionwith the payment of Additional Amounts.

 

Allobligations of the Company set forth in this Section 3 that are outstandingwith respect to any Transfer Restricted Security at the time such securityceases to be a Transfer Restricted Security shall survive until such time asall such obligations with respect to such Transfer Restricted Security shallhave been satisfied in full.

 

The AdditionalAmounts set forth above shall be the exclusive monetary remedy available to theHolders of Transfer Restricted Securities for such Registration Default.

 

4.             Registration Procedures.

 

(a)           In connection with the ShelfRegistration Statement, the Company shall comply with all the provisions ofSection 4(b) hereof and shall use its commercially reasonable efforts to effectsuch registration to permit the sale of the Transfer Restricted Securitiesbeing sold in accordance with the intended method or methods of distributionthereof, and pursuant thereto, shall as expeditiously as possible prepare andfile with the Commission a Shelf Registration Statement relating to theregistration on any appropriate form under the Securities Act.

 

(b)           In connection with the Shelf RegistrationStatement and any Prospectus required by this Agreement to permit the sale orresale of Transfer Restricted Securities, the Company shall:

 

(i)  Subject to any notice by the Company in accordance withthis Section 4(b) of the existence of any fact or event of the kind describedin Section 4(b)(iii)(D), use its commercially reasonable efforts to keep theShelf Registration Statement continuously effective during the EffectivenessPeriod; upon the occurrence of any event that would cause the Shelf RegistrationStatement or the Prospectus contained therein (A) to contain a materialmisstatement or omission or (B) not be effective and usable for the resale ofTransfer Restricted Securities during the Effectiveness Period, the Companyshall file promptly an appropriate amendment to the Shelf RegistrationStatement, a supplement to the Prospectus or a report filed with the Commissionpursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the caseof clause (A), correcting any such misstatement

 

 

----

 

or omission,and, in the case of either clause (A) or (B), use its commercially reasonableefforts to cause such amendment to be declared effective and the ShelfRegistration Statement and the related Prospectus to become usable for theirintended purposes as soon as practicable thereafter.  Notwithstanding the foregoing, the Company -may suspend theeffectiveness of the Shelf Registration Statement by written notice to theHolders for a period not to exceed an aggregate of 45 days in any 90-day period(each such period, a “**Suspension Period**”) if:

 

(x)   an event occurs and iscontinuing as a result of which the Shelf Registration Statement would, in theCompany’s reasonable judgment, contain an untrue statement of a material factor omit to state a material fact required to be stated therein or necessary tomake the statements therein not misleading; and

 

(y)   the Company reasonablydetermines that the disclosure of such event at such time would have a materialadverse effect on the business of the Company (and its subsidiaries taken as awhole);

 

*provided*that in the event the disclosure relates to a previously undisclosed proposedor pending material business transaction, the disclosure of which would impedethe Company’s ability to consummate such transaction, the Company may extend aSuspension Period from 45 days to 60 days; *provided, however,* that Suspension Periods shall not exceed anaggregate of 90 days in any 360-day period.

 

(ii)  Prepare and file with the Commission such amendmentsand post-effective amendments to the Shelf Registration Statement as may benecessary to keep the Shelf Registration Statement effective during theEffectiveness Period; cause the Prospectus to be supplemented by any requiredProspectus supplement, and as so supplemented to be filed pursuant to Rule 424under the Securities Act, and to comply fully with the applicable provisions ofRules 424 and 430A under the Securities Act in a timely manner; and comply withthe provisions of the Securities Act with respect to the disposition of allsecurities covered by the Shelf Registration Statement during the applicableperiod in accordance with the intended method or methods of distribution by thesellers thereof set forth in the Shelf Registration Statement or supplement tothe Prospectus.

 

(iii)  Advise the selling Holders promptly (but in any eventwithin five Business Days) and, if requested by such Persons, to confirm suchadvice in writing:

 

(A)          when the Prospectusor any Prospectus supplement or post-effective amendment has been filed, and,with respect to the Shelf Registration Statement or any post-effectiveamendment thereto, when the same has become effective,

 

 

----

 

(B)           of any request bythe Commission for amendments to the Shelf Registration Statement or amendmentsor supplements to the Prospectus or for additional information relatingthereto,

 

(C)           of the issuance bythe Commission of any stop order suspending the effectiveness of the ShelfRegistration Statement under the Securities Act or of the suspension by anystate securities commission of the qualification of the Transfer RestrictedSecurities for offering or sale in any jurisdiction, or the initiation of anyproceeding for any of the preceding purposes, or

 

(D)          of the existence ofany fact or the happening of any event, during the Effectiveness Period, thatmakes any statement of a material fact made in the Shelf RegistrationStatement, the Prospectus, any amendment or supplement thereto, or any documentincorporated by reference therein untrue, or that requires the making of anyadditions to or changes in the Shelf Registration Statement or the Prospectusin order to make the statements therein not misleading.

 

Each Holder of the Debentures, by accepting the same, agrees to holdany communication from the Company pursuant to paragraphs 4(b)(iii)(B) and4(b)(iii)(B) in confidence.

 

If at any time the Commission shall issue any stop order suspending theeffectiveness of the Shelf Registration Statement, or any state securitiescommission or other regulatory authority shall issue an order suspending thequalification or exemption from qualification of the Transfer RestrictedSecurities under state securities or Blue Sky laws, the Company shall use itscommercially reasonable efforts to obtain the withdrawal or lifting of suchorder at the earliest possible time and will provide to the Initial Purchasersand each Holder who is named in the Shelf Registration Statement prompt noticeof the withdrawal of any such order.

 

(iv)   Furnish to each of the selling Holders  before filing with the Commission, a copy ofthe Shelf Registration Statement and copies of any Prospectus included thereinor any amendments or supplements to the Shelf Registration Statement orProspectus (other than documents incorporated by reference after the initialfiling of the Shelf Registration Statement), which documents will be subject tothe review of such holders for a period of at least ten Business Days (in thecase of the Shelf Registration Statement and Prospectus) and two Business Days (inthe case of any amendment or supplement thereto), and the Company will not filethe Shelf Registration Statement or Prospectus or any amendment or supplementto the Shelf Registration Statement or Prospectus (other than documentsincorporated by reference) to which a selling Holder of Transfer RestrictedSecurities covered by the Shelf Registration Statement shall reasonably objectprior to the filing thereof.

 

(v)  Make available at reasonable times for inspection by oneor more representatives of the selling Holders, designated in writing by aMajority of Holders whose Transfer Restricted Securities are included in theShelf Registration Statement, and any attorney or accountant retained by suchselling Holders all financial and other

 

 

----

 

records, pertinentcorporate documents and properties of the Company as shall be reasonablynecessary to enable them to exercise any applicable due diligenceresponsibilities, and cause the Company’s officers, directors, managers andemployees to supply all information reasonably requested by any suchrepresentative or representatives of the selling Holders, attorney oraccountant in connection with the Shelf Registration Statement after the filingthereof and before its effectiveness, *provided, however,* that any informationdesignated by the Company as confidential at the time of delivery of suchinformation shall be kept confidential by the recipient thereof.

 

(vi)  If requested by any selling Holders promptlyincorporate in the Shelf Registration Statement or Prospectus, pursuant to asupplement or post-effective amendment if necessary, such information assuch selling Holders may reasonably request to have included therein,including, without limitation: (1) information relating to the “Plan ofDistribution” of the Transfer Restricted Securities, (2) information withrespect to the principal amount of Debentures or number of Conversion Sharesbeing sold, (3) the purchase price being paid therefor and (4) any other termsof the offering of the Transfer Restricted Securities to be sold in suchoffering; provided, however, that with respect to any information requested forinclusion by a selling Holder, this clause (vi) shall apply only to informationthat relates to the Transfer Restricted Securities to be sold by such sellingHolder; and make all required filings of such Prospectus supplement or post-effectiveamendment as soon as reasonably practicable after the Company is notified ofthe matters to be incorporated in such Prospectus supplement or post-effectiveamendment.

 

(vii)  Furnish to each selling Holder without charge, atleast one copy of the Shelf Registration Statement, as first filed with theCommission, and of each amendment thereto (and any documents incorporated byreference therein or exhibits thereto (or exhibits incorporated in suchexhibits by reference) as such Person may request).

 

(viii)  Deliver to each selling Holder without charge, asmany copies of the Prospectus (including each preliminary prospectus) and anyamendment or supplement thereto as such Persons reasonably may request; subjectto any notice by the Company in accordance with this Section 4(b) of theexistence of any fact or event of the kind described in Section 4(b)(iii) (D),the Company hereby consents to the use of the Prospectus and any amendment orsupplement thereto by each of the selling Holders  in connection with the offering and the sale of the TransferRestricted Securities covered by the Prospectus or any amendment or supplementthereto.

 

(ix)  Before any public offering of Transfer RestrictedSecurities, cooperate with the selling Holders, and their respective counsel inconnection with the registration and qualification of the Transfer RestrictedSecurities under the securities or Blue Sky laws of such jurisdictions in the UnitedStates as the selling Holders may reasonably request and do any and all otheracts or things necessary or advisable to enable the disposition in suchjurisdictions of the Transfer Restricted Securities covered by the ShelfRegistration Statement; *provided, however,* that the Company shallnot be required (A) to register or qualify as a foreign corporation or a dealerof securities where it is not now so qualified or to take any action that wouldsubject it to the service of process in any

 

 

----

 

jurisdictionwhere it is not now so subject or (B) to subject itself to taxation in any suchjurisdiction if it is not now so subject.

 

(x)  Cooperate with the selling Holders  to facilitate the timely preparation anddelivery of certificates representing Transfer Restricted Securities to be soldand not bearing any restrictive legends (unless required by applicablesecurities laws); and enable such Transfer Restricted Securities to be in suchdenominations and registered in such names as the Holders may request at leastfive Business Days before any sale of Transfer Restricted Securities.

 

(xi)  Use its commercially reasonable efforts to cause theTransfer Restricted Securities covered by the Shelf Registration Statement tobe registered with or approved by such other U.S. governmental agencies orauthorities as may be necessary to enable the seller or sellers thereof toconsummate the disposition of such Transfer Restricted Securities.

 

(xii)  Subject to Section 4(b)(i) hereof, if any fact orevent contemplated by Section 4(b)(iii)(D) hereof shall exist or have occurred,use its commercially reasonable efforts to prepare a supplement orpost-effective amendment to the Shelf Registration Statement or relatedProspectus or any document incorporated therein by reference or file any otherrequired document so that, as thereafter delivered to the purchasers ofTransfer Restricted Securities, the Prospectus will not contain an untruestatement of a material fact or omit to state any material fact required to bestated therein or necessary to make the statements therein, in light of thecircumstances in which they were made, not misleading.

 

 

----

 

(xiii)  Provide CUSIP numbers for all Transfer RestrictedSecurities not later than the effective date of the Shelf RegistrationStatement and provide the Trustee under the Indenture with certificates for theDebentures that are in a form eligible for deposit with The Depository TrustCompany.

 

(xiv)  Cooperate and assist in any filings required to bemade with the NASD and in the performance of any due diligence investigationthat is required to be retained in accordance with the rules and regulations ofthe NASD.

 

(xv)  Otherwise use its commercially reasonable efforts tocomply with all applicable rules and regulations of the Commission and allreporting requirements under the Exchange Act.

 

(xvi)  Cause the Indenture to be qualified under the TIA notlater than the effective date of the Shelf Registration Statement required bythis Agreement, and, in connection therewith, cooperate with the Trustee andthe holders of Debentures to effect such changes to the Indenture as may berequired for such Indenture to be so qualified in accordance with the terms ofthe TIA; and execute and use its commercially reasonable efforts to cause theTrustee thereunder to execute all documents that may be required to effect suchchanges and all other forms and documents required to be filed with theCommission to enable such Indenture to be so qualified in a timely manner.

 

(xvii)  Cause all Transfer Restricted Securities covered bythe Shelf Registration Statement to be listed or quoted, as the case may be, oneach securities exchange or automated quotation system on which similarsecurities issued by the Company are then listed or quoted.

 

(c)           Each Holder agrees by acquisition ofa Transfer Restricted Security that, upon receipt of any notice (a “**SuspensionNotice**”) from the Company of the existence of any fact of the kinddescribed in Section 4(b)(iii)(D) hereof, such Holder will discontinue dispositionof Transfer Restricted Securities pursuant to the Shelf Registration Statementuntil:

 

(i)  such Holder has received copies of the supplemented oramended Prospectus contemplated by Section 4(b)(xiii) hereof; or

 

(ii)  such Holder is advised in writing by the Company thatthe use of the Prospectus may be resumed, and has received copies of anyadditional or supplemental filings that are incorporated by reference in theProspectus.

 

If so directed by the Company,each Holder will deliver to the Company (at the Company’s expense) all copies,other than permanent file copies then in such Holder’s possession, of theProspectus covering such Transfer Restricted Securities that was current at thetime of receipt of such notice of suspension.

 

(d)           Each Holder who intends to be namedas a selling Holder in the Shelf Registration Statement shall complete theQuestionnaire and deliver it to the Company within 20 Business Days after thedate of a written request therefor by the Company (which request shall includea copy of the Questionnaire).  Prior tosuch time, each Holder may complete the

 

 

----

 

Questionnaire and deliver it tothe Company prior to such request and, as a result, shall be entitled to haveits Transfer Restricted Securities included in the initial Shelf RegistrationStatement filed with the Commission. Holders who do not complete the Questionnaire and deliver it to theCompany shall not be eligible to be named as selling securityholders in theProspectus or preliminary Prospectus included in the Shelf RegistrationStatement and, therefore, shall not be permitted to sell any TransferRestricted Securities pursuant to the Shelf Registration Statement.  Thereafter, upon receipt of a completedQuestionnaire, the Company shall as promptly as practicable, but in any eventwithin ten Business Days of receipt of such Questionnaire, file any amendmentsor supplements to the Shelf Registration Statement to allow such Holder to benamed as a selling Holder in the Prospectus included therein.  In addition, each Holder who intends to benamed as a selling Holder in the Shelf Registration Statement shall promptlyrespond to the Company by providing such other information as the Company mayfrom time to time reasonably request in writing regarding the Holder and the proposeddistribution by such Holder of its Transfer Restricted Securities in connectionwith the Shelf Registration Statement or Prospectus or preliminary Prospectusincluded therein.

 

(e)           Upon the effectiveness of the ShelfRegistration Statement, each Holder shall notify the Company at least threeBusiness Days prior to any intended distribution of Transfer RestrictedSecurities pursuant to the Shelf Registration Statement (a “**Sale Notice**”),which notice shall be effective for five Business Days.  Each Holder of Transfer RestrictedSecurities, by accepting the same, agrees to hold any communication by theCompany in response to a Sale Notice in confidence.

 

5.             RegistrationExpenses.  All expenses incident tothe Company’s performance of or compliance with this Agreement shall be borneby the Company regardless of whether a Shelf Registration Statement becomeseffective, including, without limitation:

 

(i)  all registration and filing fees and expenses (includingfilings made by any Initial Purchasers or Holders with the NASD);

 

(ii)  all fees and expenses of compliance with federalsecurities and state Blue Sky or securities laws;

 

(iii)  all expenses of printing (including printing ofProspectuses and certificates for Conversion Shares to be issued upon conversionof the Debentures), messenger and delivery services and telephone;

 

(iv)  all fees and disbursements of counsel to the Companyand, subject to Section 5(b) below, the Holders of Transfer RestrictedSecurities;

 

(v)  all application and filing fees in connection withlisting (or authorizing for quotation) the Conversion Shares on a nationalsecurities exchange or automated quotation system pursuant to the requirementshereof; and

 

(vi)  all fees and disbursements of independent certifiedpublic accountants of the Company (including the expenses of any special auditand comfort letters required by or incident to such performance).

 

 

----

 

The Companyshall bear its internal expenses (including, without limitation, all salariesand expenses of its officers and employees performing legal, accounting orother duties), the expenses of any annual audit and the fees and expenses ofany Person, including special experts, retained by the Company.

 

6.             Indemnification and Contribution.

 

(a)           The Company shall indemnify and holdharmless each Holder, such Holder’s officers, directors and employees and eachperson, if any, who controls such Holder within the meaning of the SecuritiesAct (each, an “**Indemnified Holder**”),from and against any loss, claim, damage or liability, joint or several, or anyaction in respect thereof (including, but not limited to, any loss, claim,damage, liability or action relating to resales of the Transfer RestrictedSecurities), to which such Indemnified Holder may become subject, insofar asany such loss, claim, damage, liability or action arises out of, or is basedupon:

 

(i)  any untrue statement or alleged untrue statement of amaterial fact contained in (A) the Shelf Registration Statement or Prospectusor any amendment or supplement thereto or (B) any blue sky application or otherdocument or any amendment or supplement thereto prepared or executed by theCompany (or based upon written information furnished by or on behalf of theCompany expressly for use in such blue sky application or other document oramendment on supplement) filed in any jurisdiction specifically for the purposeof qualifying any or all of the Transfer Restricted Securities under thesecurities law of any state or other jurisdiction (such application or documentbeing hereinafter called a “**Blue Sky Application**”); or

 

(ii)  the omission or alleged omission to state therein anymaterial fact required to be stated therein or necessary to make the statementstherein, in the light of the circumstances under which they were made, notmisleading,

 

and shall reimburse eachIndemnified Holder promptly upon demand for any legal or other expensesreasonably incurred by such Indemnified Holder in connection with investigatingor defending or preparing to defend against any such loss, claim, damage,liability or action as such expenses are incurred; *provided, however,* that theCompany shall not be liable in any such case to the extent that any such loss,claim, damage, liability or action arises out of, or is based upon, (A) any untruestatement or alleged untrue statement or omission or alleged omission made inthe Shelf Registration Statement or Prospectus or amendment or supplementthereto or Blue Sky Application or other document referred to in Section6(a)(i) hereof in reliance upon and in conformity with written informationfurnished to the Company by or on behalf of any Holder (or its relatedIndemnified Holder) specifically for use therein or (B) the failure by theHolder or Indemnified Holder to deliver to any purchaser of its TransferRestricted Securities the Prospectus and any supplement or amendment thereto inthe form provided to such Holder or Indemnified Holder by the Company if suchHolder is required to so deliver pursuant to the prospectus deliveryrequirements of the Securities Act.  Theforegoing indemnity agreement is in addition to any liability which the Companymay otherwise have to any Indemnified Holder.

 

(b)           Each Holder, severally and notjointly, shall indemnify and hold harmless the Company, its officers, directorsand employees and each person, if any, who controls the

 

 

----

 

Company within the meaning ofthe Securities Act, from and against any loss, claim, damage or liability,joint or several, or any action in respect thereof, to which the Company or anysuch officer, director, employee or controlling person may become subject,insofar as any such loss, claim, damage or liability or action arises out of,or is based upon:

 

(i)  any untrue statement or alleged untrue statement of anymaterial fact contained in the Shelf Registration Statement or Prospectus orany amendment or supplement thereto or any Blue Sky Application or otherdocument referred to in Section 6(a)(i) hereof; or

 

(ii)  the omission or the alleged omission to state thereinany material fact required to be stated therein or necessary to make thestatements therein, in light of the circumstances under which they were made,not misleading,

 

but in each case only to theextent that such untrue statement or alleged untrue statement or omission oralleged omission was made in reliance upon and in conformity with writteninformation furnished to the Company by or on behalf of such Holder (or itsrelated Indemnified Holder) specifically for use therein, and shall reimbursethe Company and any such officer, employee or controlling person promptly upondemand for any legal or other expenses reasonably incurred by the Company orany such officer, employee or controlling person in connection withinvestigating or defending or preparing to defend against any such loss, claim,damage, liability or action as such expenses are incurred.  The foregoing indemnity agreement is inaddition to any liability which any Holder may otherwise have to the Companyand any such officer, director, employee or controlling person.

 

(c)           Promptly after receipt by anindemnified party under this Section 6 of notice of any claim or thecommencement of any action, the indemnified party shall, if a claim in respectthereof is to be made against the indemnifying party under this Section 6,notify the indemnifying party in writing of the claim or the commencement ofthat action; *provided, however,* that the failure to notify theindemnifying party shall not relieve it from any liability which it may haveunder this Section 6 except to the extent it has been materially prejudiced bysuch failure and, *provided, further,* that the failure to notify theindemnifying party shall not relieve it from any liability which it may have toan indemnified party otherwise than under this Section 6.  If any such claim or action shall be broughtagainst an indemnified party, and it shall notify the indemnifying partythereof, the indemnifying party shall be entitled to participate therein and,to the extent that it wishes, jointly with any other similarly notifiedindemnifying party, to assume the defense thereof with counsel satisfactory tothe indemnified party.  After noticefrom the indemnifying party to the indemnified party of its election to assumethe defense of such claim or action, the indemnifying party shall not be liableto the indemnified party under this Section 6 for any legal or other expensessubsequently incurred by the indemnified party in connection with the defensethereof other than reasonable costs of investigation; *provided, however,* that aMajority of Holders shall have the right to employ a single counsel torepresent jointly a Majority of Holders and their respective officers,employees and controlling persons who may be subject to liability arising outof any claim in respect of which indemnity may be sought by a Majority ofHolders against the Company under this Section 6, if a Majority of Holders beone or more legal defenses available to them and their respective officers,employees and controlling persons that are different from or additional tothose available to the Company

 

 

----

 

and its officers, directors,employees and controlling persons, the reasonable fees and expenses of a singleseparate counsel shall be paid by the Company. No indemnifying party shall:

 

(i)  without the prior written consent of the indemnifiedparties (which consent shall not be unreasonably withheld) settle or compromiseor consent to the entry of any judgment with respect to any pending orthreatened claim, action, suit or proceeding in respect of whichindemnification or contribution may be sought hereunder (whether or not theindemnified parties are actual or potential parties to such claim or action)unless such settlement, compromise or consent includes an unconditional releaseof each indemnified party from all liability arising out of such claim, action,suit or proceeding, or

 

(ii)  be liable for any settlement of any such actioneffected without its written consent (which consent shall not be unreasonablywithheld), but if settled with its written consent or if there be a finaljudgment for the plaintiff in any such action, the indemnifying party agrees toindemnify and hold harmless any indemnified party from and against any loss orliability by reason of such settlement or judgment.

 

(d)           If the indemnification provided forin this Section 6 shall for any reason be unavailable or insufficient to holdharmless an indemnified party under Section 6(a) or 6(b) in respect of anyloss, claim, damage or liability (or action in respect thereof) referred totherein, each indemnifying party shall, in lieu of indemnifying suchindemnified party, contribute to the amount paid or payable by such indemnifiedparty as a result of such loss, claim, damage or liability (or action inrespect thereof):

 

(i)  in such proportion as is appropriate to reflect therelative benefits received by the Company from the offering and sale of theTransfer Restricted Securities on the one hand and a Holder with respect to thesale by such Holder of the Transfer Restricted Securities on the other, or

 

(ii)  if the allocation provided by clause (6)(d)(i) is notpermitted by applicable law, in such proportion as is appropriate to reflectnot only the relative benefits referred to in clause 6(d)(i) but also therelative fault of the Company on the one hand and the Holders on the other inconnection with the statements or omissions or alleged statements or allegedomissions that resulted in such loss, claim, damage or liability (or action inrespect thereof), as well as any other relevant equitable considerations.

 

The relative benefits receivedby the Company on the one hand and a Holder on the other with respect to suchoffering and such sale shall be deemed to be in the same proportion as thetotal net proceeds from the offering of the Debentures purchased under thePurchase Agreement (before deducting expenses) received by the Company on theone hand, bear to the total proceeds received by such Holder with respect toits sale of Transfer Restricted Securities on the other.  The relative fault of the parties shall bedetermined by reference to whether the untrue or alleged untrue statement of amaterial fact or the omission or alleged omission to state a material factrelates to information supplied by the Company on the one hand or the Holderson the other, the intent of the parties and their relative knowledge, access toinformation and opportunity to correct or prevent such statement oromission.  The Company and each Holderagree that it

 

 

----

 

would not be just and equitableif the amount of contribution pursuant to this Section 6(d) were determined by *pro rata*allocation or by any other method of allocation that does not take into accountthe equitable considerations referred to in the first sentence of thisparagraph (d).  The amount paid orpayable by an indemnified party as a result of the loss, claim, damage orliability, or action in respect thereof, referred to above in this Section 6shall be deemed to include, for purposes of this Section 6, any legal or otherexpenses reasonably incurred by such indemnified party in connection withinvestigating or defending or preparing to defend any such action orclaim.  Notwithstanding the provisionsof this Section 6, no Holder shall be required to contribute any amount inexcess of the amount by which the total price at which the Transfer RestrictedSecurities purchased by it were resold exceeds the amount of any damages whichsuch Holder has otherwise been required to pay by reason of any untrue oralleged untrue statement or omission or alleged omission.  No person guilty of fraudulentmisrepresentation (within the meaning of Section 11(f) of the Securities Act)shall be entitled to contribution from any person who was not guilty of suchfraudulent misrepresentation.  TheHolders’ obligations to contribute as provided in this Section 6(d) are severaland not joint.

 

7.             Rule144A.  In the event the Company isnot subject to Section 13 or 15(d) of the Exchange Act, the Company herebyagrees with each Holder, for so long as any Transfer Restricted Securitiesremain outstanding, to make available to any Holder or beneficial owner ofTransfer Restricted Securities in connection with any sale thereof and anyprospective purchaser of such Transfer Restricted Securities from such Holderor beneficial owner, the information required by Rule 144A(d)(4) under theSecurities Act in order to permit resales of such Transfer RestrictedSecurities pursuant to Rule 144A.

 

8.             Participation in UnderwrittenRegistrations.  No Holder mayparticipate in any Underwritten Registration hereunder unless such Holder:

 

(a)           agrees to sell such Holder’s TransferRestricted Securities on the basis provided in any underwriting arrangementsapproved by the Persons entitled hereunder to approve such arrangements; and

 

(b)           completes and executes all reasonablequestionnaires, powers of attorney, indemnities, underwriting agreements,lock-up letters and other documents required under the terms of suchunderwriting arrangements.

 

9.             Miscellaneous*.*

 

(a)           ***Remedies***.  TheCompany acknowledges and agrees that any failure by the Company to comply withits obligations under Section 2 hereof may result in material irreparableinjury to the Initial Purchasers or the Holders for which there is no adequateremedy at law, that it will not be possible to measure damages for suchinjuries precisely and that, in the event of any such failure, the InitialPurchasers or any Holder may obtain such relief as may be required tospecifically enforce the Company’s obligations under Section 2 hereof.  The Company further agrees to waive thedefense in any action for specific performance that a remedy at law would beadequate.

 

 

----

 

**(b)           *AdjustmentsAffecting Transfer Restricted Securities***.  The Company shall not, directly orindirectly, take any action with respect to the Transfer Restricted Securitiesas a class that would adversely affect the ability of the Holders of TransferRestricted Securities to include such Transfer Restricted Securities in aregistration undertaken pursuant to this Agreement.

 

**(c)           *No Inconsistent Agreements***.  The Company will not, on or after the dateof this Agreement, enter into any agreement with respect to its securities thatis inconsistent with the rights granted to the Holders in this Agreement orotherwise conflicts with the provisions hereof.  In addition, the Company shall not grant to any of its securityholders (other than the Holders of Transfer Restricted Securities in suchcapacity) the right to include any of its securities in the Shelf RegistrationStatement provided for in this Agreement other than the Transfer RestrictedSecurities.  The Company has notpreviously entered into any agreement (which has not expired or beenterminated) granting any registration rights with respect to its securities toany Person which rights conflict with the provisions hereof.

 

**(d)           *Amendments and Waivers***.  This Agreement may not be amended, modifiedor supplemented, and waivers or consents to or departures from the provisionshereof may not be given, unless the Company has obtained the written consent ofa Majority of Holders or such greater percentage of the Holders as required bythe Indenture.

 

**(e)           *Notices*.**  All notices and other communicationsprovided for or permitted hereunder shall be made in writing by hand-delivery,first-class mail (registered or certified, return receipt requested), telex,facsimile transmission, or air courier guaranteeing overnight delivery:

 

(i)  if to a Holder, at the address set forth on the recordsof the registrar under the Indenture or the transfer agent of the ConversionShares, as the case may be; and

 

(ii)  if to the Company:

 

Watson Pharmaceuticals, Inc.

311 Bonnie Circle

Corona, California  92880

Attn: General Counsel

Fax: (909) 493-5300

 

*With a copy to:*

 

Latham & Watkins

650 Town Centre Drive, 20th Floor

Costa Mesa, CA  92626-1925

Attn: Charles K. Ruck, Esq.

Telephone:  (714) 755-8245

Fax: (714) 755-8290

 

All suchnotices and communications shall be deemed to have been duly given: at the timedelivered by hand, if personally delivered; five Business Days after beingdeposited in

 

 

----

 

the mail, postage prepaid, ifmailed; when answered back, if telexed; when receipt acknowledged, iftransmitted by facsimile; and on the next Business Day, if timely delivered toan air courier guaranteeing overnight delivery.

 

(f)**            *Successorsand Assigns***.  ThisAgreement shall inure to the benefit of and be binding upon the successors andassigns of each of the parties, including without limitation and without theneed for an express assignment, subsequent Holders of Transfer RestrictedSecurities; *provided,however,* that (i) this Agreement shall not inure to the benefit ofor be binding upon a successor or assign of a Holder unless and to the extentsuch successor or assign acquired Transfer Restricted Securities from suchHolder and (ii) nothing contained herein shall be deemed to permit anyassignment, transfer or other disposition of Transfer Restricted Securities inviolation of the terms of the Purchase Agreement or the Indenture.  If any transferee of any Holder shallacquire Transfer Restricted Securities, in any manner, whether by operation oflaw or otherwise, such Transfer Restricted Securities shall be held subject toall of the terms of this Agreement, and by taking and holding such TransferRestricted Securities such person shall be conclusively deemed to have agreedto be bound by and to perform all of the terms and provisions of thisAgreement.

 

(g)**           *Counterparts***.  This Agreement may be executed in any numberof counterparts and by the parties hereto in separate counterparts, each ofwhich when so executed shall be deemed to be an original and all of which takentogether shall constitute one and the same agreement.

 

(h)**           *SecuritiesHeld by the Company or its Affiliates***. Whenever the consent or approval of Holders of a specified percentage ofTransfer Restricted Securities is required hereunder, Transfer RestrictedSecurities held by the Company or its Affiliates shall not be counted indetermining whether such consent or approval was given by the Holders of suchrequired percentage.

 

(i)**            *Headings***.  The headings in this Agreement are forconvenience of reference only and shall not limit or otherwise affect themeaning hereof.

 

(j)**            *GoverningLaw*.**  ThisAgreement shall be governed by, and construed in accordance with, the law ofthe State of New York.

 

(k)**           *Severability*.**  If any one or more of the provisions contained herein, or the applicationthereof in any circumstance, is held invalid, illegal or unenforceable, thevalidity, legality and enforceability of any such provision in every otherrespect and of the remaining provisions contained herein shall not be affectedor impaired thereby.

 

(l)**            *EntireAgreement*.**  ThisAgreement is intended by the parties as a final expression of their agreementand intended to be a complete and exclusive statement of the agreement andunderstanding of the parties hereto in respect of the subject matter containedherein.  There are no restrictions,promises, warranties or undertakings, other than those set forth or referred toherein with respect to the registration rights granted by the Company withrespect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandingsbetween the parties with respect to such subject matter.

 

 

----

 

IN WITNESS WHEREOF, the parties have executedthis Agreement as of the date first written above.

 
|   | WATSON PHARMACEUTICALS, INC.          |
|--------|---------------------------------------|
|   |                                  |   |
|   |                                  |   |
|   | By:                                   | /s/ Allen Chao |   |
|   |                                  | Name:  Allen Chao, Ph.D. |
|   |                                  | Title:  Chairman and Chief  Executive Officer |
|   |                                  |   |
|   | LEHMAN BROTHERS INC.                  |
|   | MORGAN STANLEY & CO. INCORPORATED |
|   | CIBC WORLD MARKETS CORP.              |
|   | WACHOVIA SECURITIES, INC.             |
|   | BANC OF AMERICA SECURITIES, LLC       |
|   | COMERICA SECURITIES, INC.             |
|   | WELLS FARGO SECURITIES, LLC           |
|   |                                  |   |
|   | By:                                   |  LEHMAN BROTHERS INC. |
|   |                                  |   |
|   |                                  |   |
|   |                                  | /s/ Timothy B. Gould |   |
|   |                                  | Name:  Timothy B. Gould |
|   |                                  | Title:  Managing Director |
|   |                                  |   |
|   | By:                                   |  MORGAN STANLEY & CO.  INCORPORATED |
|   |                                  |   |
|   |                                  |   |
|   |                                  | /s/ William R. Salisbury |   |
|   |                                  | Name:  William R. Salisbury |
|   |                                  | Title:  Managing Director |
|        |                                       |  |  |  |  |

 

 

----

 

**EXHIBIT A**

 

**WATSON PHARMACEUTICALS, INC.**

 

**FORM OF SELLING SECURITYHOLDERNOTICE AND QUESTIONNAIRE**

 

***To be named as aselling securityholder in the prospectus, beneficial owners shall complete anddeliver this Questionnaire within 20 Business Days after the date of thewritten request therefor by the Company. Beneficial owners that do not complete this Questionnaire and deliver itto the Company will not be eligible to be named as selling securityholders inthe prospectus and therefore will not be permitted to sell any TransferRestricted Securities pursuant to the Shelf Registration Statement.***

 

Theundersigned beneficial owner of 1.75% Convertible Contingent Senior Debenturesdue March 15, 2023 (CUSIP No. 942683202AB9) (the “**Debentures**”), or commonstock, par value $0.0033 per share issuable upon conversion thereof (the “**ConversionShares**” and together with the Debentures, the “**Transfer Restricted Securities**”)of Watson Pharmaceuticals, Inc., a Nevada corporation (the “**Company**”),understands that the Company has filed, or intends shortly to file, with theSecurities and Exchange Commission (the “**Commission**”) a registration statement onForm S-3 or such other form as may be available (the “**Shelf Registration Statement**”),for the registration and resale under Rule 415 of the Securities Act of 1933,as amended (the “**Securities Act**”), of the Transfer Restricted Securities inaccordance with the terms of the Resale Registration Rights Agreement, dated asof March 7, 2003 (the “**Registration Rights Agreement**”) among theCompany, Lehman Brothers Inc., Morgan Stanley & Co. Incorporated, CIBCWorld Markets Corp., Wachovia Securities, Inc., Banc of America Securities,LLC, Comerica Securities, Inc. and Wells Fargo Securities, LLC.  A copy of the Registration Rights Agreementis available from the Company upon request at the address set forth below.  All capitalized terms not otherwise definedherein have the meaning ascribed thereto in the Registration Rights Agreement.

 

Eachbeneficial owner of Transfer Restricted Securities is entitled to the benefitsof the Registration Rights Agreement. In order to sell or otherwise dispose of any Transfer RestrictedSecurities pursuant to the Shelf Registration Statement, a beneficial owner ofTransfer Restricted Securities generally will be required to be named as aselling securityholder in the related Prospectus, deliver a Prospectus topurchasers of Transfer Restricted Securities and be bound by those provisionsof the Registration Rights Agreement applicable to such beneficial owner(including certain indemnification rights and obligations, as described below).

 

Upon any saleof Transfer Restricted Securities pursuant to a Shelf Registration Statement,the undersigned beneficial owner (the “**Selling Securityholder**”) will be requiredto deliver to the Company and the trustee for the Debentures the Notice toTransfer (completed and signed) set forth in Exhibit 1 to this Notice andQuestionnaire.

 

Certain legalconsequences arise from being named as a selling securityholder in the ShelfRegistration Statement and the related Prospectus.  Accordingly, holders and beneficial owners of Transfer RestrictedSecurities are advised to consult their own securities law counsel regardingthe consequences of being named or not being named as a selling securityholderin the Shelf Registration Statement and the related Prospectus.

 

A-1

----

 

**NOTICE**

 

The SellingSecurityholder of Transfer Restricted Securities hereby gives notice to theCompany of its intention to sell or otherwise dispose of Transfer RestrictedSecurities beneficially owned by it and listed below in Item 3 (unlessotherwise specified under Item 3) pursuant to the Shelf RegistrationStatement.  The undersigned, by signingand returning this Questionnaire, understands that it will be bound by theterms and conditions of this Questionnaire and the Registration RightsAgreement.

 

Pursuant tothe Registration Rights Agreement, the undersigned has agreed to indemnify andhold harmless the Company, the Company’s directors, the Company’s officers whosign the Shelf Registration Statement and each person, if any, who controls theCompany within the meaning of either Section 15 of the Securities Act orSection 20 of the Exchange Act, from and against certain losses arising inconnection with statements concerning the undersigned made in the ShelfRegistration Statement or the related Prospectus in reliance upon theinformation provided in this Questionnaire.

 

Theundersigned hereby provides the following information to the Company andrepresents and warrants that such information is accurate and complete:

 

**QUESTIONNAIRE**

 

1.**             Information RegardingSelling Securityholder**

 

(a)           Full legal name of SellingSecurityholder: _____________________________________________________

 

(b)                                    Fulllegal name of registered holder (if not the same as (a) above) through whichTransfer Restricted Securities listed in Item (3) below are held:_____________________________________________________________

 

(c)                                     Fulllegal name of DTC participant (if applicable and if not the same as (b) above)through which Transfer Restricted Securities listed in Item (3) are held:__________________________________________________

 

# *2.***                                      ****Addressfor Notices to Selling Securityholder**

 

Telephone:____________________________

 

Fax:__________________________________

 

ContactPerson: ________________________

 

# *3.***                                      ****BeneficialOwnership of Transfer Restricted Securities**

 

(a)                                     Typeof Transfer Restricted Securities beneficially owned, and principal amount ofDebentures or number of Conversion Shares of the Company, as the case may be,beneficially owned:                                                   

 

_________________________________________________________________________________________

 

A-2

----

 

(b)                                    CUSIP No(s). of such Transfer Restricted Securities beneficially owned:                                             

 

____________________________________________________________________________________

 

# *4.***                                       ****BeneficialOwnership of the Company’s Securities Owned by the Selling Securityholder**

# * *

Except as set forth below in this Item (4), the undersigned is not thebeneficial or registered owner of any securities of the Company other than theTransfer Restricted Securities listed above in Item (3) (“**Other Securities**”).

 

(a)                                     Typeand amount of Other Securities beneficially owned by the SellingSecurityholder:  ______________________

 

(b)                                    CUSIPNo(s). of such Other Securities beneficially owned:  ____________________________________________

 

# *5.*                                        **Relationshipwith the Company**

# * *

Except as setforth below, neither the undersigned nor any of its affiliates, officers,directors or principal equity holders (5% or more) has held any position oroffice or has had any other material relationship with the Company (or itspredecessors or affiliates) during the past three years.

 

State any exceptions here: ________________________________________________

 

# ***6.***                                      **Plan ofDistribution**

# * *

Except as setforth below, the undersigned (including its donees or pledgees) intends todistribute the Transfer Restricted Securities listed above in Item (3) pursuantto the Shelf Registration Statement only as follows (if at all).  Such Transfer Restricted Securities may besold from time to time directly by the undersigned or, alternatively, throughunderwriters, broker-dealers or agents. If the Transfer Restricted Securities are sold through underwriters orbroker-dealers, the Selling Securityholder will be responsible for underwritingdiscounts or commissions or agent’s commissions.  Such Transfer Restricted Securities may be sold in one or moretransactions at fixed prices, at prevailing market prices at the time of sale,at varying prices determined at the time of sale, or at negotiated prices.  Such sales may be effected in transactions(which may involve crosses or block transactions):

 

A-3

----

 

(i)            on any nationalsecurities exchange or quotation service on which the Transfer RestrictedSecurities  may be listed or quoted at the time of sale;

###  

(ii)           in theover-the-counter market;

###  

(iii)          in transactionsotherwise than on such exchanges or services or in the over-the-counter market;or

###  

(iv)          through the writingof options.

###  

In connectionwith sales of the Transfer Restricted Securities or otherwise, the undersignedmay enter into hedging transactions with broker-dealers, which may in turnengage in short sales of the Transfer Restricted Securities and deliverTransfer Restricted Securities to close out such short positions, or loan orpledge Transfer Restricted Securities to broker-dealers that in turn may sellsuch securities.

 

State anyexceptions here:  ______________________________________________

 

                                                                                                                                                                                                             

 

*Note*:  In no event will such method(s) ofdistribution take the form of an underwritten offering of the TransferRestricted Securities without the prior agreement of the Company.

 

# *7.*                                       **Instructionsfor Delivery of Questionnaire**

# * *

Please returnthe completed and executed Questionnaire to Watson Pharmaceuticals, Inc. at:

 

WatsonPharmaceuticals, Inc.

311 BonnieCircle

Corona,California  92880

Attn: GeneralCounsel

 

# *8.*                                       **Acknowledgments**

# * *

Theundersigned acknowledges that it understands its obligation to comply with theprovisions of the Exchange Act and the rules and regulations promulgatedthereunder relating to stock manipulation, particularly Regulation M thereunder(or any successor rules or regulations), in connection with any offering ofTransfer Restricted Securities pursuant to the Shelf RegistrationStatement.  The undersigned agrees thatneither it nor any person acting on its behalf will engage in any transactionin violation of such provisions.

 

The SellingSecurityholder hereby acknowledges its obligations under the RegistrationRights Agreement to indemnify and hold harmless certain persons as set forththerein.  Pursuant to the RegistrationRights Agreement, the Company has agreed under certain circumstances toindemnify the Selling Securityholders against certain liabilities.

 

A-4

----

 

In accordancewith the undersigned’s obligation under the Registration Rights Agreement to providesuch information as may be required by law for inclusion in the ShelfRegistration Statement, the undersigned agrees to promptly notify the Companyof any inaccuracies or changes in the information provided herein that mayoccur subsequent to the date hereof at any time while the Shelf RegistrationStatement remains effective.  Allnotices hereunder and pursuant to the Registration Rights Agreement shall bemade in writing at the address set forth above.

 

By signingbelow, the undersigned consents to the disclosure of the information containedherein in its answers to items (1) through (6) above and the inclusion of suchinformation in the Shelf Registration Statement and the related Prospectus. Theundersigned understands that such information will be relied upon by theCompany in connection with the preparation or amendment of the ShelfRegistration Statement and the related Prospectus.

 

IN WITNESSWHEREOF, the undersigned, by authority duly given, has caused thisQuestionnaire to be executed and delivered either in person or by its dulyauthorized agent.

 
|   | Beneficial  Owner |
|--------|-------------------|
|   |              |
|   |              |
|   | By:               |   |   |
|   | Name:             |
|   | Title:            |
|   | Date:             |

 

A-5

----

 

**EXHIBIT 1**

 

**NOTICE TO TRANSFERPURSUANT**

 

**TO REGISTRATION STATEMENT**

 

 

Watson Pharmaceuticals, Inc.

 

Re: Watson Pharmaceuticals,Inc. (the “Company”) 1.75% Convertible Contingent Senior Debentures due March15, 2023 (the “Debentures”)

 

Dear Sirs:

 

Please beadvised that ______________ has transferred $______________ aggregateprincipal amount of the above-referenced Debentures of the Company or thecommon stock issued on conversion of the Debentures (the “Common Stock”),pursuant to the Registration Statement on Form S-3 (FileNo.  ________) filed by the Company.

 

We herebycertify that the prospectus delivery requirements, if any, of the SecuritiesAct of 1933, as amended, have been satisfied with respect to the transferdescribed above and the above named beneficial owner of the Debentures or theCommon Stock is named as a selling securityholder in the prospectus dated______,  or in amendments or supplementsthereto, and that the aggregate principal amount of the Debentures or number ofthe Common Stock transferred are [all or a portion of] the Debentures or theCommon Stock listed in such prospectus, as amended or supplemented, oppositesuch owner’s name.

 

 
|   |   | Very truly  yours,      |
|--------|--------|-------------------------|
|   |   |                    |
|   |   | [name]                  |
|   |   |                    |
|   |   | By:                     |   |   |
|   |   | (Authorized  Signature) |
|   |   |                    |
| Dated: |   |                    |

 

A-6

----