**Exhibit 10.1**

 

**WATSON PHARMACEUTICALS, INC.**

 

**KEY EMPLOYEE AGREEMENT**

 

 

This Key Employee Agreement(“Agreement”) is entered into as of May 5, 2003 (the “Effective Date”), by andbetween Charles Slacik (“Executive”) and Watson Pharmaceuticals, Inc., a Nevadacorporation (the “Company”).

 

**WHEREAS,** the Company desires to employ Executive toprovide personal services to the Company, and wishes to provide Executive withcertain compensation and benefits in return for his services; and

 

**WHEREAS,** Executive wishes to be employed by theCompany and provide personal services to the Company in return for certaincompensation and benefits, including the benefits provided under thisAgreement;

 

**NOW,THEREFORE,** inconsideration of the mutual promises and covenants contained herein, it ishereby agreed by and between the parties hereto as follows:

 

**1.**                                      **EMPLOYMENT BY THE COMPANY.** Subject to terms set forth herein, the Company agrees to employExecutive in the position of Executive Vice President and Chief FinancialOfficer, and Executive hereby accepts employment effective as of the EffectiveDate.  In this position, Executive shallperform such duties as are assigned from time to time by the Chief ExecutiveOfficer (“CEO”) of the Company or such other officer of the Company or one ofits subsidiaries that the CEO in his discretion may from time to time designate(the “Designated Officer”), consistent with the Bylaws of the Company and asmay be required by the Company’s Board of Directors (the “Board”).  During his employment with the Company,Executive will devote his best efforts and substantially all of his businesstime and attention (except for vacation periods as set forth herein andreasonable periods of illness or other incapacity permitted by the Company’sgeneral employment policies) to the business of the Company.  Executive shall abide by the generalemployment policies and procedures of the Company, except that wherever theterms of this Agreement may differ from or are in conflict with the Company’sgeneral employment policies or procedures, this Agreement shall control.

 

**2.**                                      **COMPENSATION.**

 

**2.1**                               **Salary.**  Forservices to be rendered hereunder, Executive shall receive a base salary as setforth in Section 1 of the Compensation and Severance Terms Schedule,attached hereto as Exhibit A.  Executivewill be considered annually for increases in base salary in accordance withCompany policy and subject to review and approval by the CEO, DesignatedOfficer, or the Compensation Committee of the Board, as appropriate.

 

**2.2**                               **Bonus.** Executive shall be eligible to participate in the Company’s bonus planat the executive level throughout the duration of Executive’s employment withthe Company.  The Company shall have thesole discretion to determine whether Executive is entitled to any such bonusand to determine the amount of the bonus. The amount of Executive’s bonus may be determined in part based onExecutive’s performance with respect to certain goals

 

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established bythe Company and attainment by the Company of its planned financial objectivesfor the bonus period.  Notwithstandingthe foregoing, no bonus is guaranteed to Executive.  Any bonus is subject to the approval of the CEO, DesignatedOfficer, or the Compensation Committee of the Board, as appropriate.  The Company retains the authority to review,grant, deny or revise any bonus in its sole discretion.  To be eligible to receive a bonus, Executivemust remain in employment with the Company throughout the entire fiscal year oras otherwise set forth in the applicable bonus plan.  The target level of such bonus is set forth in Section 2 ofExhibit A attached hereto.

 

**2.3**                               **Stock Options.**  Subject to approval of the Board or the Compensation Committee ofthe Board, as appropriate, Executive will receive the stock option grants (ifany) set forth in Section 3 of Exhibit A, and such additional grants of stockoptions as may from time to time be granted, pursuant to the terms andconditions set forth in the applicable stock option agreement and plandocuments, copies of which will be made available upon Executive’srequest.  For the purposes of thisAgreement, all stock options granted to Executiveby the Company hereunder, or granted in the future, shall be referred tohereinafter as the “Options.”

 

**2.4**                               **Paid Time Off.**  Executive shall be eligible to accrue paid time off (“PTO”)during the term of this Agreement, in accordance with the Company’s standardpolicy regarding PTO and in an amount commensurate with other employees at alevel similar to that of the Executive.

 

**2.5**                               **Standard Company Benefits.** Executive shall be entitled to all rights andbenefits for which he is eligible under the terms and conditions of thestandard Company benefits plans (e.g., health and disability insurance, 401(k)retirement plan, etc.) and other benefits and incentives which may be in effectfrom time to time and provided by the Company to employees at levels similar tothe Executive.

 

**3.**                                      **PROPRIETARY INFORMATION ANDINVENTIONS.**

 

Executiveagrees to execute and abide by the Employee Proprietary Information andInventions Agreement attached hereto as Exhibit C and made a part hereof bythis reference.

 

**4.**                                      **OUTSIDE ACTIVITIES.**

 

**4.1**                               **Activities. **Exceptwith the prior written consent of the CEO or the Board, as appropriate,Executive will not during his employment with the Company undertake or engagein any other employment, occupation or business enterprise, other than ones inwhich Executive is a passive investor. Executive may engage in civic and not-for-profit activities so long assuch activities do not materially interfere with the performance of his dutieshereunder.  Executive will not duringhis employment with the Company publicly or privately disparage the Company orany of its subsidiaries, or their respective past or present products,officers, directors, employees or agents.

 

**4.2**                               **Investments and Interests.**  Duringhis employment by the Company, Executive agrees not to acquire, assume orparticipate in, directly or indirectly, any position, investment or interestknown by him to be adverse to or in conflict with the interest of the Company,its business or prospects, financial or otherwise.  By way of clarification, nothing

 

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contained inthis Agreement shall prevent Executive from holding, for investment purposesonly, no more than one percent (1%) of the capital stock of any publicly tradedcompany.

 

**4.3**                               **Non-Competition.**  During hisemployment by the Company, except on behalf of the Company, Executive will notdirectly or indirectly, whether as an officer, director, stockholder, partner,proprietor, associate, representative, consultant, or in any capacitywhatsoever engage in, become financially interested in, be employed by or haveany business connection with any other person, corporation, firm, partnershipor other entity whatsoever known by him to compete directly with the Company,anywhere in the world, in any line of business engaged in (or planned to beengaged in) by the Company.

 

**5.**                                      **Other Agreements.**

 

Executiverepresents and warrants that his employment by the Company will not conflictwith and will not be constrained by any prior agreement or relationship withany third party.  Executive representsand warrants that he will not disclose to the Company or use on behalf of theCompany any confidential information governed by any agreement with any thirdparty except in accordance with an agreement between the Company and any suchthird party.  During Executive’semployment by the Company, Executive may use, in the performance of his duties,all information generally known and used by persons with training andexperience comparable to his own and all information which is common knowledgein the industry or otherwise legally in the public domain.

 

**6.**                                      **TERMINATION****OF EMPLOYMENT.**

 

**6.1**                               **At-Will Employment.  **Executive’srelationship with the Company is at-will. The Company shall have the right to terminate Executive’s employmentwith the Company at any time with or without Cause and with or without notice.

 

**6.2**                               **Termination by Company for Cause. **If the Company terminatesExecutive’s employment at any time for Cause, Executive’s salary shall cease onthe date of termination; and Executive will not be entitled to severance pay,pay in lieu of notice or any other such compensation.

 

**(a)**                        **Definition of “Cause.”  **Forpurposes of this Agreement, “Cause” shall mean (i) Executive’s conviction ofany felony; or, (ii) Executive’s gross misconduct, material violation ofCompany policy, or material breach of Executive’s duties to the Company, whichExecutive fails to correct within thirty (30) days after Executive is givenwritten notice by the CEO or the Board, as appropriate.

 

**6.3**                               **Termination by Company Without Cause.  **Ifthe Company terminates Executive’s employment at any time without Cause,Executive shall be entitled to severance benefits as set forth in Section 4.1of the Compensation and Severance Terms Schedule, attached hereto as Exhibit A.

 

**6.4**                               **Executive’s Voluntary Resignation.**  Executivemay terminate his employment with the Company at any time, with or without GoodReason, and with or without notice.  Inthe event Executive voluntarily terminates his employment other than for Good

 

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Reason, he will not be entitled to severancepay, pay in lieu of notice or any other such compensation.

 

**6.5**                               **Executive’s Resignation for Good Reason.**  Executivemay resign his employment for Good Reason so long as Executive tenders hisresignation to the Company within sixty (60) days after the occurrence of theevent which forms the basis for his termination for Good Reason.  If Executive terminates his employment forGood Reason, Executive shall be eligible for severance benefits as set forth inSection 4.2 of Exhibit A, attached hereto.

 

**(b)**                        **Definition of “Good Reason.”**  Forpurposes of this Agreement, “Good Reason” shall mean any one of the followingevents which occurs on or after the Effective Date: (i) after a Change ofControl, any material reduction of the Executive’s then existing annual basesalary, except to the extent the annual base salary of all other executiveofficers of the Company is similarly reduced (provided such reduction does notexceed fifteen percent (15%) of Executive’s then existing annual base salary); (ii)after a Change of Control, any material reduction in the package of benefitsand incentives, taken as a whole, provided to the Executive (except thatemployee contributions may be raised to the extent of any cost increasesimposed by third parties) or any action by the Company which would materiallyand adversely affect the Executive’s participation or reduce the Executive’sbenefits under any such plans, except to the extent that such benefits andincentives of all other executive officers of the Company are similarlyreduced; (iii) after a Change of Control, any material diminution of theExecutive’s duties and responsibilities, taken as a whole, excluding for thispurpose an isolated, insubstantial or inadvertent action not taken in bad faithwhich is remedied by the Company immediately after notice thereof is given bythe Executive; (iv) any material breach by the Company of its obligations underthis Agreement; (v) any failure by the Company to obtain the assumption of thisAgreement by any successor or assign of the Company; or (vi) any requirementthat the Executive relocate to a work site that would increase the Executive’sone-way commute distance by more than thirty-five (35) miles from his thenprincipal residence, unless the required relocation is to the Company’s NewJersey offices, or the Executive otherwise accepts such relocation opportunity.

 

**6.6**                               **Termination for Death or Disability.**  Executive’semployment with the Company will be terminated in the event of Executive’sdeath, or any illness, disability or other incapacity in such a manner thatExecutive is physically rendered unable regularly to perform his dutieshereunder for a period in excess of one hundred eighty (180) consecutive daysor more than one hundred eighty (180) days in any consecutive twelve (12) monthperiod.  The determination regardingwhether Executive is physically unable regularly to perform his duties shall bemade by the Board.  Executive’sinability to be physically present on the Company’s premises shall not constitutea presumption that Executive is unable to perform such duties.  In the event that Executive’s employmentwith the Company is terminated for death or disability as described in thisSection 6.6, Executive or Executive’s heirs, successors, and assigns shall notreceive any compensation or benefits other than payment of accrued salary andPTO and such other benefits as expressly required in such event by applicablelaw or the terms of applicable benefit plans.

 

**6.7**                               **Cessation.**  If Executive violatesany provision of Section 8 of this Agreement or the Employee ProprietaryInformation and Inventions Agreement and Executive

 

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fails to correct such violation within ten (10) days after Executive isgiven written notice by the CEO or the Board, as appropriate, then anyseverance payments or other benefits being provided to Executive will ceaseimmediately, and Executive will not be entitled to any further compensationfrom the Company.

 

**7.**                                      **CHANGE OF CONTROL.**

 

**7.1**                               **Definition.**  For purposes of this Agreement, Change of Control means theoccurrence of any of the following:

 

**(a)**               a sale of assetsrepresenting fifty percent (50%) or more of the net book value and of the fairmarket value of the Company’s consolidated assets (in a single transaction orin a series of related transactions);

 

**(b)**               aliquidation or dissolution of the Company;

 

**(c)**               a merger orconsolidation involving the Company or any subsidiary of the Company after thecompletion of which: (i) in the case of a merger (other than a triangularmerger) or a consolidation involving the Company, the shareholders of theCompany immediately prior to the completion of such merger or consolidationbeneficially own (within the meaning of Rule 13d-3 promulgated under the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”), or comparable successorrules), directly or indirectly, outstanding voting securities representing lessthan fifty percent (50%) of the combined voting power of the surviving entityin such merger or consolidation, and (ii) in the case of a triangular mergerinvolving the Company or a subsidiary of the Company, the shareholders of theCompany immediately prior to the completion of such merger beneficially own(within the meaning of Rule 13d-3 promulgated under the Exchange Act, orcomparable successor rules), directly or indirectly, outstanding votingsecurities representing less than fifty percent (50%) of the combined votingpower of the surviving entity in such merger and less than fifty percent (50%)of the combined voting power of the parent of the surviving entity in suchmerger;

 

**(d)**               an acquisition byany person, entity or “group” (within the meaning of Section 13(d) or 14(d) ofthe Exchange Act or any comparable successor provisions), other than anyemployee benefit plan, or related trust, sponsored or maintained by the Companyor an affiliate of the Company and other than in a merger or consolidation ofthe type referred to in clause “(c)” of this sentence, of beneficial ownership(within the meaning of Rule 13d-3 promulgated under the Exchange Act, orcomparable successor rules) of outstanding voting securities of the Companyrepresenting more than fifty percent (50%) of the combined voting power of theCompany (in a single transaction or series of related transactions); or

 

**(e)**               in the event thatthe individuals who, as of the Effective Date, are members of the Board (the“Incumbent Board”), cease for any reason to constitute at least fifty percent(50%) of the Board.  (If the election, ornomination for election by the Company’s shareholders, of any new member of theBoard is approved by a vote of at least fifty percent (50%) of the IncumbentBoard, such new member of the Board shall be considered as a member of theIncumbent Board.)

 

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**7.2**                               **Termination After a Changeof Control.**  Inthe event Executive’s employment with the Company is terminated without Cause,or Executive resigns for Good Reason, within ninety (90) days prior to ortwenty-four (24) months following a Change of Control (a “Change of ControlTermination”), then Executive shall be eligible for severance benefits as setforth in Section 4.3 of Exhibit A, attached hereto.

 

**7.3**                               **Parachute Payments.**  In the event that it shall be determinedunder this Section 7.3 that any payment or benefit to Executive or for thebenefit of Executive or on Executive’s behalf (whether paid or payable ordistributed or distributable) pursuant to the terms of this Agreement or anyother agreement, arrangement or plan with the Company or any Affiliate (asdefined below) (including, without limitation, the severance benefits as setforth in Section 4.3 of Exhibit A, attached hereto) (individually, a “Payment”and collectively, the “Payments”) would be subject to the excise tax imposed bySection 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), orany successor provision thereto (the “Excise Tax”), then Executive shall beentitled to receive from the Company one or more additional payments(individually, a “Gross-Up Payment” and collectively, the “Gross-Up Payments”)in an aggregate amount such that the net amount of the Payments and theGross-Up Payments retained by Executive after the payment of all Excise Taxes(and any interest and penalties imposed with respect to such Excise Taxes) onthe Payments and all federal, state and local income tax, employment taxes andExcise Taxes (including any interest and penalties imposed with respect to suchtaxes and Excise Taxes) on the Gross-Up Payments provided for in this Section7.3, and taking into account any lost or reduced tax deductions on account ofthe Gross-Up Payments, shall be equal to the Payments.  For purposes of this Section 7.3, an“Affiliate” shall mean any successor to all or substantially all of thebusiness and/or assets of the Company, any person acquiring ownership oreffective control of the Company or ownership of a substantial portion of theassets of the Company’s assets, or any other person whose relationship to theCompany, such successor or such person acquiring ownership or control is suchas to require attribution between the parties under Section 318(a) of the Code.

 

**(a)**                        All determinations required to be made underthis Section 7.3, including whether and when any Gross-Up Payment is requiredand the amount of such Gross-Up Payment, and the assumptions to be utilized inarriving at such determinations, shall be made by the Accountants (as definedbelow), which shall provide Executive and the Company with detailed supportingcalculations with respect to such Gross-Up Payment within thirty (30) days ofthe receipt of notice from Executive or the Company that Executive has receivedor will receive a Payment.  For thepurposes of this Section 7.3, the “Accountants” shall mean the Company’sindependent certified public accounting firm serving immediately prior to theChange of Control (or other change in ownership or effective control, or changein ownership of a substantial portion of the assets, of a corporation, asdefined in Section 280G of the Code) with respect to which suchdetermination is being made.  In theevent that the Accountants are also serving as the accountants, auditors orconsultants for the individual, entity or group effecting the Change of Control(or other change in ownership or effective control, or change in ownership of asubstantial portion of the assets, of a corporation, as defined in Section 280Gof the Code), the Company shall appoint another nationally recognizedindependent certified public accounting firm, reasonably acceptable toExecutive, to make the determinations required hereunder (which accounting firmshall then be referred to as the “Accountants” hereunder).  All fees and expenses of the Accountantsshall be borne solely by the Company.

 

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**(b)**                        For thepurposes of determining whether any of the Payments will be subject to theExcise Tax and the amount of such Excise Tax, such Payments will be treated as“parachute payments” within the meaning of section 280G of the Code, andall “parachute payments” in excess of the “base amount” (as defined underSection 280G(b)(3) of the Code) of Executive shall be treated as subjectto the Excise Tax, unless and except to the extent that, in the opinion of theAccountants, such Payments (in whole or in part) either do not constitute“parachute payments” or represent reasonable compensation for services actuallyrendered (within the meaning of section 280G(b)(4) of the Code) in excessof the “base amount,” or such “parachute payments” are otherwise not subject tosuch Excise Tax.

 

**(c)**                        Forpurposes of determining the amount of the Gross-Up Payment, Executive shall bedeemed to pay federal income taxes at the highest applicable marginal rate offederal income taxation for the calendar year in which the Gross-Up Payment isto be made and to pay any applicable state and local income taxes at thehighest applicable marginal rate of taxation for the calendar year in which theGross-Up Payment is to be made, net of the maximum reduction in federal incometaxes which could be obtained from the deduction of such state or local taxesif paid in such year (determined without regard to limitations on deductionsbased upon the amount of Executive’s adjusted gross income); and to haveotherwise allowable deductions for federal, state and local income tax purposes at least equal to thosedisallowed because of the inclusion of the Gross-Up Payment in Executive’sadjusted gross income.

 

**(d)**                        Anydetermination by the Accountants shall be binding upon the Company andExecutive.  As a result of uncertaintyin the application of Section 4999 of the Code at the time of the initialdetermination by the Accountants hereunder, it is possible that the Gross-UpPayment made will have been an amount less than the Company should have paidpursuant to this Section 7.3 (the “Underpayment”).  In the event that the Company exhausts its remedies pursuant toSection 7.3(f) and Executive is required to make a payment of any Excise Tax,the Underpayment shall be promptly paid by the Company to or for Executive’sbenefit.

 

**(e)**                        Executiveshall notify the Company in writing of any claim by the Internal RevenueService or other taxing authority that, if successful, would require thepayment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable after Executiveis informed in writing of such claim and shall apprise the Company of thenature of such claim and the date on which such claim is requested to bepaid.  Executive shall not pay suchclaim prior to the expiration of the 30-day period following the date on whichExecutive gives such notice to the Company (or such shorter period ending onthe date that any payment of taxes, interest and/or penalties with respect tosuch claim is due).  If the Companynotifies Executive in writing prior to the expiration of such period that theCompany desires to contest such claim, Executive shall: (i) give the Companyany information reasonably requested by the Company relating to such claim;(ii) take such action in connection with contesting such claim as the Companyshall reasonably request in writing from time to time, including, withoutlimitation, engaging legal representation with respect to such claim by anattorney selected by the Company and reasonably acceptable to Executive; (iii)cooperate with the Company in good faith in order to effectively contest suchclaim; and (iv) permit the Company to participate in any proceedings relatingto such**claims;*provided, however,* that the Company shallbear and pay directly all costs and expenses, including attorneys’ fees(including additional interest and penalties) incurred in

 

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connectionwith such contest and shall indemnify Executive for and hold Executive harmlessfrom, on an after-tax basis, any Excise Tax or income, employment or othertaxes (including interest and penalties with respect thereto) imposed as aresult of such representation and payment of all related costs and expenses.

 

**(f)**                          Withoutlimiting the foregoing provisions of this Section 7.3, the Company shallcontrol all proceedings taken in connection with such contest and, at theCompany’s sole option, may pursue or forgo any and all administrative appeals,proceedings, hearings and conferences with the Internal Revenue Service orother taxing authority in respect of such claim and may, at the Company’s soleoption, either direct Executive to pay the amount claimed and sue for a refundor contest the claim in any permissible manner, and Executive agrees toprosecute such contest to a determination before any administrative tribunal,in a court of initial jurisdiction and in one or more appellate courts, as theCompany shall determine; *provided, however,*that if the Company directs Executive to pay such claim and sue for a refund,the Company shall advance the amount of such payment to Executive, on aninterest-free basis, and shall indemnify Executive for and hold Executiveharmless from, on an after-tax basis, any Excise Tax or income, employment orother taxes (including interest or penalties with respect thereto) imposed withrespect to such advance or with respect to any imputed income with respect tosuch advance (including as a result of any forgiveness by the Company of suchadvance);*provided, further,* thatany extension of the statute of limitations relating to the payment of taxes,interest and penalties for the taxable year of Executive with respect to whichsuch contested amount is claimed to be due shall be limited solely to suchcontested amount.  Furthermore, theCompany’s control of the contest shall be limited to issues with respect towhich a Gross-Up Payment would be payable hereunder and Executive shall be entitledto settle or contest, as the case may be, any other issue raised by theInternal Revenue Service or any other taxing authority.

 

**(g)**                       TheGross-Up Payments provided for in this Section 7.3 shall be paid to Executivenot later than the date upon which the severance benefits payable to Executiveunder Section**4.3 of Exhibit A,attached hereto, are**due*; provided, however,* that if the amountsof such Gross-Up Payments cannot be finally determined by the Accountants on orbefore such day, the Company shall pay to Executive on such day an estimate, asdetermined in good faith by the Company, of the minimum amount of such Gross-UpPayments and shall pay the remainder of such Gross-Up Payments (together withinterest at the rate provided in Section 1274(b)(2)(B) of the Code) not laterthan 30 days after the amount thereof can be determined by theAccountants.  In the event that theamount of the estimated payments exceeds the amount subsequently determined bythe Accountants to have been due to the Executive, such excess shall constitutea loan by the Company to Executive, payable not later than 30 days after suchdetermination and demand by the Company (together with interest at the rateprovided in Section 1274(b)(2)(B) of the Code).

 

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**8.**                                      **NONSOLICITATION.**  While employedby the Company, and for one (1) year following the termination of Executive’semployment with the Company, Executive agrees not to solicit, attempt tosolicit, induce, or otherwise cause any employee or independent contractor ofthe Company to terminate his or her employment or contractual relationship inorder to become an employee or independent contractor to or for Executive orany other person or entity.

 

**9.**                                      **RELEASE.**  In exchange for theseverance compensation and benefits provided under this Agreement to whichExecutive would not otherwise be entitled, Executive shall enter into andexecute a release substantially in the form attached hereto as Exhibit B (the“Release”) upon Executive’s termination of employment.  Unless the Release is executed by Executiveand delivered to the Company within twenty-one (21) days (forty-five (45) daysin the event of a group termination) after the termination of Executive’semployment with the Company, Executive shall not receive any severance benefitsprovided under this Agreement, acceleration, if any, of Executive’s Options asprovided in this Agreement shall not apply and Executive’s Options in suchevent may be exercised following the date of Executive’s termination only tothe extent provided under their original terms in accordance with theapplicable stock option plan and option agreements.

 

**10.**                               **GENERAL PROVISIONS.**

 

**10.1**                        **Notices.**  Any notices providedhereunder must be in writing and shall be deemed effective upon personaldelivery (including, personal delivery by facsimile transmission) or the thirdday after mailing by first class mail, to the Company at its primary officelocation and to Executive at his address as listed on the Company payroll(which address may be changed by written notice).

 

**10.2**                        **Severability.**  Whenever possible, each provision of this Agreement will beinterpreted in such manner as to be effective and valid under applicable law,but if any provision of this Agreement is held to be invalid or unenforceablein any respect under any applicable law or rule in any jurisdiction, suchinvalidity or unenforceability will not affect any other provision or any otherjurisdiction, and such invalid or unenforceable provision shall be reformed,construed and enforced in such jurisdiction so as to render it valid andenforceable consistent with the intent of the parties insofar as possible.

 

**10.3**                        **Waiver.**  If either party shouldwaive any breach of any provisions of this Agreement, he or it shall notthereby be deemed to have waived any preceding or succeeding breach of the sameor any other provision of this Agreement.

 

**10.4**                        **Entire Agreement.**  This Agreement, together with the Employee ProprietaryInformation and Inventions Agreement, constitute the final, complete, andexclusive embodiment of the entire agreement between Executive and the Companyregarding the subject matter hereof and supersede any prior agreement, promise,representation, or statement, written or otherwise, between Executive and theCompany with regard to this subject matter. This Agreement is entered into without reliance on any promise,representation, statement or agreement other than those expressly contained orincorporated herein, and it cannot be modified or amended except in a writingsigned by Executive and a duly authorized officer of the Company.

 

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**10.5**                        **Counterparts.**  This Agreement maybe executed in separate counterparts, any one of which need not containsignatures of more than one party, but all of which taken together willconstitute one and the same Agreement.

 

**10.6**                        **Headings.**  The headings of thesections hereof are inserted for convenience only and shall not be deemed toconstitute a part hereof nor to affect the meaning thereof.

 

**10.7**                        **Successors and Assigns.**  ThisAgreement is intended to bind and inure to the benefit of and be enforceable byExecutive, the Company and their respective successors, assigns, heirs,executors and administrators, except that Executive may not assign any of hisduties hereunder and he may not assign any of his rights hereunder without thewritten consent of the Company, which shall not be withheld unreasonably.

 

**10.8**                        **Attorneys’ Fees.**  If either partyhereto brings any action to enforce his or its rights hereunder, the prevailingparty in any such action shall be entitled to recover his or its reasonableattorneys’ fees and costs incurred in connection with such action.

 

**10.9**                        **Arbitration.**  To provide amechanism for rapid and economical dispute resolution, Executive and the Companyagree that any and all disputes, claims, or causes of action, in law or equity,arising from or relating to this Agreement (including the Release) or itsenforcement, performance, breach, or interpretation, will be resolved, to thefullest extent permitted by law, by final, binding, and confidentialarbitration held in Orange County, California and conducted by JudicialArbitration & Mediation Services/Endispute (“JAMS”), under itsthen-existing Rules and Procedures. Nothing in this Section 10.9 or in this Agreement is intended to preventeither Executive or the Company from obtaining injunctive relief in court toprevent irreparable harm pending the conclusion of any such arbitration.

 

**10.10**                 **Remedies.**  Executive’s dutiesunder Section 8 and the Employee Proprietary Information and InventionsAgreement shall survive termination of Executive’s employment with theCompany.  Executive acknowledges that aremedy at law for any breach or threatened breach by Executive of theprovisions of these sections and the Employee Proprietary Information andInventions Agreement would be inadequate, and that such a breach would causeirreparable harm to the Company; and Executive therefore agrees that theCompany shall be entitled to injunctive relief in case of any such breach orthreatened breach.

 

**10.11**                 **Governing Law.**  All questionsconcerning the construction, validity and interpretation of this Agreement willbe governed by the law of the State of California as applied to contracts madeand to be performed entirely within California.

 

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**IN WITNESSWHEREOF,** the partieshave executed this Agreement effective as of the Effective Date above written.

 
| **WATSON PHARMACEUTICALS, INC.** |
|----------------------------------|
|                             |
|                             |
| By:                              | /s/ Allen Chao |   |
|                             | Name:  Allen  Chao |
|                             | Title:  CEO  & Chairman |
|                             |
|                             |
| **EXECUTIVE:**                   |
|                             |
|                             |
| /s/ Charles  Slacik              |   |
| Name:                            |   |   |
|                                  |  |  |  |

 

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**EXHIBIT A**

 

**COMPENSATIONAND SEVERANCE TERMS SCHEDULE**

 

**1.**                                     **BASE SALARY**

 

For services to be renderedunder this Agreement, Executive shall receive an initial base salary at anannualized rate of $450,000, payable in accordance with the Company’s standardpayroll practices, and subject to increases as set forth in the Agreement.

 

**2.**                                     **BONUS**

 

Executive’s annual bonus, ifgranted, shall be at a target level of 40% of the Executive’s then current basesalary.

 

**3.**                                     **STOCK OPTIONS**

 

Within thirty days of theEffective Date, Executive shall receive an Option grant of 100,000 shares ofCompany common stock.  Such Option grantshall be subject to the terms and conditions of the Company’s 2001 IncentiveAward Plan.

 

**4.**                                     **SEVERANCE BENEFITS**

 

**4.1**                               **Termination By Companywithout Cause.**  Ifthe Company terminates Executive’s employment at any time without Cause, theCompany shall provide to Executive, within thirty (30) days after the EffectiveDate of the Release attached hereto as Exhibit B (as “Effective Date” isdefined in the Release), as the only severance compensation and benefits all ofthe following:

 

(a)                                  A lump sum severance payment, subject to standardwithholdings or deductions, in an amount equal to the sum of: (i) twenty-four(24) months of Executive’s then base salary; (ii) two times Executive’s targetbonus to be earned for the year in which termination occurs or two times thebonus amount paid to the Executive in the prior year, whichever is greater; and(iii) Executive’s prorated bonus for the year in which the termination occurs,at the Company’s discretion.

 

(b)                                 Continued group health insurance benefits(e.g., medical, dental, vision, etc.) for Executive and Executive’s eligibledependents for a period of up to eighteen (18) months under COBRA, and ifExecutive is not covered under the Company’s group health insurance plan at theend of eighteen (18) months, the Company shall use its best efforts to provideExecutive and Executive’s eligible dependents with comparable health insurancecoverage for an additional period of up six (6) months, but the Company shallnot be obligated to pay more than one hundred fifty percent (150%) of the costof COBRA coverage for such comparable coverage; provided, however, that in anyevent the Company’s obligation to provide any health benefits pursuant to thissentence ends when Executive becomes eligible for health insurance with a new

 

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employer (and Executiveagrees to promptly notify the Company in writing of any such event ofeligibility).

 

(c)                                  Outplacement services for one year with anationally recognized service selected by the Company.

 

**4.2**                               **Executive’s Resignation forGood Reason.**  IfExecutive terminates his employment with the Company for Good Reason, theCompany shall provide to Executive, within thirty (30) days after the EffectiveDate of the Release attached hereto as Exhibit B (as “Effective Date” isdefined in the Release), as the only severance compensation and benefits, thesame severance compensation and benefits provided in Section 4.1 hereof.

 

**4.3**                               **Change of ControlTermination.**  Inthe event of a Change of Control Termination, the Company shall provide toExecutive, within thirty (30) days after the Effective Date of the Releaseattached hereto as Exhibit B (as “Effective Date” is defined in the Release),as the only severance compensation and benefits, (a) the same severancecompensation and benefits provided in Section 4.1 hereof and, (b) any unvestedOptions held by Executive shall have their vesting accelerated in full so as tobecome one hundred percent (100%) vested and immediately exercisable in full asof the date of such termination.

 

**5.**                                     **Relocation****.**

 

Executive shall relocate his principal residence within the thirty daysfollowing the Effective Date to a location in the Corona, California, vicinityand shall report to the Company’s facility in Corona, California as hisprincipal place of business.  Executiveshall be eligible to receive such relocation assistance as offered generally bythe Company to its executives pursuant to the Company’s then existing policiesas of the Effective Date; provided however, that should Executive’s employmentwith the Company terminate (other than by the Company without Cause) within 1(one) year of the Effective Date, Executive will reimburse the Company for suchrelocation expenses incurred by the Company in accordance with the terms of theReimbursement Agreement executed by Executive concurrently with the executionof this Agreement.

 

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regarding my former dutiesand responsibilities.  Effective as ofthe Separation Date, I resign any and all offices and directorships with theCompany and any of its affiliates, and will execute all documents reasonablyrequested by the Company or its affiliates to effectuate suchresignations.  Further, I agree that Iwill not hereafter disparage the Company or any of the Releasees, either orallyor in writing, to any person or entity. The Company agrees that its officers and directors will not disparageme, either orally or in writing, to any person or entity.

 
| Agreed: |                          |
|---------|-------------------------------|
|    |                          |
|    |                          |   |   |
| Date    | **[Employee]**                |
|    |                          |
|    |                          |   |   |
| Date    | WATSON PHARMACEUTICALS,  INC. |

 

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**EXHIBIT C**

 

**EMPLOYEEPROPRIETARY INFORMATION AND INVENTION AGREEMENT**

 

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