**Exhibit 10.3**

 

*Non-Employee Director – Option*

 

**WATSON Pharmaceuticals, Inc.**

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

**NOTICE OF GRANT AND SIGNATUREPAGE**

 

Congratulations, you (“Holder”)have been granted an option to purchase Common Stock of Watson Pharmaceuticals, Inc.,a Nevada corporation (the “Company”). The Option is subject to the terms and conditions of the Award Agreementand the Amendment and Restatement of The 2001 Incentive Award Plan of WatsonPharmaceuticals, Inc., as amended from time to time (the “Plan”), whichare attached hereto as Exhibit 1-A and 1-B, and of which this Notice ofGrant and Signature Page is a part. By signing this Notice of Grant and Signature Page, you represent andwarrant to the Company that you have read the Award Agreement and the Plan andagree to be bound by their terms. Capitalized terms not otherwise defined in this Notice of Grant andSignature Page shall be as defined in the Plan and the Award Agreement.

 

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

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

 

Subjectto the terms of the Award Agreement and the Plan, this Option shall becomeexercisable on the first anniversary of the Date of Grant with respect to the totalnumber of shares of Common Stock subject thereto.

 

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

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

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

 

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**EXHIBIT 1-A**

 

**AWARD AGREEMENT**

 

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

 

WHEREAS,the Company wishes to grant Holder an option (the “Option”)  to purchase shares of its common stock, parvalue $.0033 per share (the “Common Stock”), pursuant to the terms of theNotice of Grant and Signature Page, this Agreement and the Amendment andRestatement of The 2001 Incentive Award Plan of Watson Pharmaceuticals, Inc.,as amended from time to time (the terms of which are hereby incorporated byreference and made a part of this Agreement, the “Plan”); and

 

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

 

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

 

ARTICLE I

GRANT OF OPTION

 

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

 

Section 1.2- Consideration to Company.  Inconsideration of the granting of this Option by the Company, Holder agrees torender faithful and efficient services to the Company, with such duties andresponsibilities as the Company shall from time to time prescribe, for a periodof at least one (1) year from the date this Option is granted.  Nothing in this Agreement or in the Planshall confer upon Holder any right to continue as a Director of the Company.

 

ARTICLE II

PERIOD OF EXERCISABILITY

 

Section 2.1- Exercisability.  Subject to Section 2.2and Section 4.5, the Option shall become exercisable as set forth in theNotice of Grant and Signature Page hereto. No portion of the Option which is unexercisable at Termination ofDirectorship shall thereafter become exercisable.  If the Option becomes exercisable pursuant tothis Section 2.1, the Option shall remain exercisable until it becomesunexercisable under Section 2.2 or the Plan.

 

Section 2.2- Expiration of Option.  TheOption may not be exercised to any extent by anyone after the first to occur ofthe following events:

 

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

 

(b)                                 Theexpiration of two (2) years from the date of Holder’s Termination ofDirectorship.

 

ARTICLE III

EXERCISE OF OPTION

 

Section 3.1- Person Eligible to Exercise. During the lifetime of Holder, only Holder may exercise the Option orany portion thereof.  After the death ofHolder, any exercisable portion of the Option may, prior to the time when theOption becomes unexercisable under Section 2.2 or the Plan, be exercisedby Holder’s personal representative or by any person empowered to do so underthe deceased Holder’s will or under the then applicable laws of descent anddistribution.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(c) Full payment to the Company (or other employer corporation) of all amountswhich, under federal, state or local tax law, it is required to withhold uponexercise of the Option.  With the consentof the Administrator (which consent may be withheld in its sole and absolutediscretion), all or part of such payment may be made in the form of (i) sharesof the Company’s Common Stock owned by Holder, duly endorsed for transfer, witha Fair Market Value equal to the sums required to be withheld, or (ii) sharesof

 

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the Company’s CommonStock issuable to Holder upon exercise of the Option with a Fair Market Valueequal to the sums required to be withheld; provided, that  the number of shares of Common Stock whichmay be withheld with respect to the issuance, vesting, exercise or payment of theOption (or which may be repurchased from Holder within six months after suchshares of Common Stock were acquired by Holder from the Company) in order tosatisfy Holder’s federal and state income and payroll tax liabilities withrespect to the issuance, vesting, exercise or payment of the Option shall belimited to the number of shares which have a Fair Market Value on the date ofwithholding or repurchase equal to the aggregate amount of such liabilitiesbased on the minimum statutory withholding rates for federal and state taxincome and payroll tax purposes that are applicable to such supplementaltaxable income; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE IV

OTHER PROVISIONS

 

Section 4.1– Administration.  The Administratorshall have the power to interpret the Plan and this Agreement, and to adoptsuch rules for the administration, interpretation and application of thePlan as are consistent therewith, to interpret, amend or revoke any such rules andto amend this Agreement provided that the rights or obligations of Holder arenot affected adversely.  All actionstaken and all interpretations and determinations made by the Administrator ingood faith shall be final and binding

 

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upon Holder, the Companyand all other interested persons.  Nomember of the Administrator shall be personally liable for any action,determination or interpretation made in good faith with respect to the Plan orthe Option.

 

Section 4.2- Option Not Transferable. Neither the Option nor any interest or right therein or part thereofshall be sold, pledged, assigned or transferred in any manner other than bywill or the laws of descent and distribution or, subject to the consent of theAdministrator, pursuant to a DRO, unless and until the shares underlying suchOption have been issued.  Neither theOption nor any interest or right therein or part thereof shall be liable forthe debts, contracts or engagements of Holder or his successors in interest orshall be subject to disposition by transfer, alienation, anticipation, pledge,encumbrance, assignment or any other means whether such disposition bevoluntary or involuntary or by operation of law by judgment, levy, attachment,garnishment or any other legal or equitable proceedings (including bankruptcy),and any attempted disposition thereof shall be null and void and of no effect,except to the extent that such disposition is permitted by the precedingsentence.

 

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

 

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

 

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

 

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

 

ARTICLE V

DEFINITIONS

 

Allcapitalized terms used herein without definition shall have the meaningsascribed to such terms in the Plan.

 

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**EXHIBIT 1-B**

 

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

 

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