Document:

Exhibit 10.16

 

EXECUTION COPY

 

 

Resale Registration Rights Agreement

 

among

 

WATSON
PHARMACEUTICALS, INC.

 

and

 

LEHMAN BROTHERS INC.,

 

MORGAN STANLEY &
CO. INCORPORATED

 

and

 

CIBC WORLD MARKETS
CORP.

 

WACHOVIA SECURITIES,
INC.

 

BANC OF AMERICA
SECURITIES LLC

 

COMERICA SECURITIES,
INC.

 

WELLS FARGO
SECURITIES, 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 REGISTRATION
RIGHTS AGREEMENT, dated as of March 7, 2003, among
Watson Pharmaceuticals, Inc., a Nevada corporation (the “Company”), and Lehman
Brothers 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 to
the Purchase Agreement, dated March 4, 2003, among the Company and the Initial
Purchasers (the “Purchase Agreement”), the Initial Purchasers have agreed to
purchase from the Company $500,000,000 ($575,000,000 if the Initial Purchasers
exercise their option thereunder in full) in aggregate principal amount at
maturity of the Company’s 1.75% Convertible Contingent Senior Debentures due
March 15, 2023 (the “Debentures”).  The Debentures will be convertible into fully paid, nonassessable
shares of common stock, par value $0.0033 (the “Conversion Shares”) of the
Company on the terms, and subject to the conditions, set forth in the Indenture
(as defined herein).  To induce the
Initial Purchasers to purchase the Debentures, the Company has agreed to
provide the registration rights set forth in this Agreement pursuant to Section
3(k) of the Purchase Agreement.

 

The parties
hereby agree as follows:

 

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

 

Additional
Amount Payment Date: 
Each Interest Payment Date.  For
purposes of this Agreement, if no Debentures are outstanding, “Additional
Amount 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 accordance
with the terms hereof.

 

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

 

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

 

Business
Day:  A day
other than a Saturday or Sunday or any day on which banking institutions in New
York 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:  As
defined in the preamble hereto.

 

 

 

Debentures:  As defined in the preamble hereto.

 

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

 

Effectiveness Target
Date:  As
defined in Section 2(a)(ii) hereof.

 

Exchange
Act: 
Securities Exchange Act of 1934, as amended, and the rules and
regulations 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 is
amended, modified or supplemented from time to time in accordance with the
terms 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 aggregate
principal amount of the Debentures outstanding at the time of determination in
question; provided, however, that, for the purpose of this
definition, a holder of Conversion Shares which constitute Transfer Restricted
Securities when issued upon conversion of Debentures shall be deemed to hold an
aggregate principal amount of Debentures (in addition to the principal amount
of Debentures held by such holder) equal to the product of (x) the number of
such Conversion Shares held by such holder and (y) the prevailing conversion
price, such prevailing conversion price as determined in accordance with
Section 12 of the Indenture.

 

NASD:  National Association of Securities Dealers,
Inc.

 

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

 

Purchase Agreement:  As defined in the preamble hereto.

 

Prospectus:  The prospectus included in a Shelf
Registration Statement, as amended or supplemented by any prospectus supplement
and by all other amendments thereto, including post-effective amendments, and
all material incorporated by reference into such Prospectus.

 

 

 

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

 

Record
Holder:  With
respect to any Additional Amount Payment Date, each Person who is a Holder on
the record date with respect to the Interest Payment Date on which such
Additional 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 which
constitute Transfer Restricted Securities on the 15th day preceding the
relevant Additional Amount Payment Date.

 

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

 

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

 

Securities
Act: 
Securities Act of 1933, as amended, and the rules and resolutions of the
Commission thereunder.

 

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

 

Shelf Registration
Statement:  As
defined 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, and
the rules and regulations of the Commission thereunder, in each case, as in
effect on the date the Indenture is qualified under the TIA.

 

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

 

(i)  the date on which such
Debenture or such Conversion Shares issued upon conversion has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement;

 

(ii)  the date on which such
Debenture or such Conversion Shares issued upon conversion (A) has been
transferred in compliance with Rule 144 under the Securities Act or (B) may be
sold or transferred by a person who is not an Affiliate of the Company pursuant
to Rule 144 under the Securities Act (or any other similar provision then in
force) without any volume or manner of sale restrictions thereunder; or

 

(iii)  the date on which such
Debenture or such Conversion Shares issued upon conversion ceases to be
outstanding (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 Filing
Deadline”), cause to be filed a registration statement pursuant to
Rule 415 under the Securities Act (together with any amendments thereto, and
including any documents incorporated by reference therein, the “Shelf
Registration Statement”), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities held by Holders that
have provided the information required pursuant to the terms of Section 2(b)
hereof;

 

(ii)  use its commercially reasonable efforts to cause the
Shelf Registration Statement to be declared effective by the Commission not
later than 180 days after the date hereof (the “Effectiveness Target Date”);
and

 

(iii)   use its commercially reasonable efforts to keep the
Shelf Registration Statement continuously effective, supplemented and amended
as required by the provisions of Section 4(b) hereof to the extent necessary to
ensure that (A) it is available for resales by the Holders of Transfer
Restricted Securities entitled to the benefit of this Agreement and (B)
conforms with the requirements of this Agreement and the Securities Act for a
period (the “Effectiveness Period”) of:

 

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

 

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

 

(b)           To have its Transfer Restricted
Securities included in the Shelf Registration Statement pursuant to this
Agreement, each Holder shall complete the Selling Securityholder Notice and
Questionnaire, 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 the
date of a written request therefor by the Company (which request shall include
a copy of the Questionnaire) (such deadline, the “Questionnaire Deadline”).  Prior to such time, each Holder may complete
the Questionnaire and deliver it to the Company prior to such request and, as a
result, shall be entitled to have its Transfer Restricted Securities included
in the initial Shelf Registration Statement filed with the Commission.  In addition, upon receipt of written request
for additional information from the Company, each Holder who intends to be
named as a selling securityholder in the Shelf Registration Statement shall
furnish to the Company in writing, within 20 Business Days after such Holder’s
receipt of such request, such additional information regarding such Holder and
the proposed distribution by such Holder of its Transfer Restricted Securities,
in connection with the Shelf Registration Statement or Prospectus or
Preliminary Prospectus included therein and in any application to be filed with
or under state securities law, as the Company may reasonably request.  In connection with all such requests for

 

 

 

information from Holders of
Transfer Restricted Securities, the Company shall notify such Holders of the
requirements set forth in this paragraph regarding their obligation to provide
the information requested pursuant to this Section.  Each Holder as to which the Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make information previously furnished to the Company
by such Holder not materially misleading.

 

3.             Additional Amounts.

 

(a)           If:

 

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

 

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

 

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

 

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

 

(each such event referred to in
foregoing clauses (i) through (iv), a “Registration Default”), the Company hereby
agrees to pay additional amounts (“Additional Amounts”) with respect to the
Transfer Restricted Securities from and including the day following the
Registration Default to but excluding the day on which the Registration Default
has been cured, accruing at a rate:

 

(A)       in respect of the
Debentures, to each holder of Debentures, (x) with respect to the first 90-day
period during which a Registration Default shall have occurred and be
continuing, 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 day
the 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 event
shall Additional Amounts accrue at a rate per year exceeding 0.50% of the
principal amount of the Debentures; and

 

(B)        in respect of any
Conversion Shares issued upon conversion of Debentures, to each holder of such
Conversion Shares, (x) with respect to the first 90-day period in which a
Registration Default shall have occurred and be continuing, equal to 0.25% per
annum of the principal amount of the Debentures converted into

 

 

 

such
Conversion Shares, and (y) with respect to the period commencing the 91st day
following the day the Registration Default shall have occurred and be
continuing, equal to 0.50% per annum of the principal amount of the Debentures
converted into such Conversion Shares; provided that in no event shall Additional
Amounts accrue at a rate per year exceeding 0.50% of the principal amount of
the Debentures converted into such Conversion Shares.

 

(b)           All accrued Additional Amounts shall
be paid in arrears to Record Holders by the Company on each Additional Amount
Payment Date by wire transfer of immediately available funds or by federal bank
check.  Following the cure of all
Registration Defaults relating to any particular Debenture or Conversion Shares
issued upon conversion of Debentures, the accrual of Additional Amounts with
respect 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 connection
with the payment of Additional Amounts.

 

All
obligations of the Company set forth in this Section 3 that are outstanding
with respect to any Transfer Restricted Security at the time such security
ceases to be a Transfer Restricted Security shall survive until such time as
all such obligations with respect to such Transfer Restricted Security shall
have been satisfied in full.

 

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

 

4.             Registration Procedures.

 

(a)           In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 4(b) hereof and shall use its commercially reasonable efforts to effect
such registration to permit the sale of the Transfer Restricted Securities
being sold in accordance with the intended method or methods of distribution
thereof, and pursuant thereto, shall as expeditiously as possible prepare and
file with the Commission a Shelf Registration Statement relating to the
registration on any appropriate form under the Securities Act.

 

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

 

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

 

 

 

or omission,
and, in the case of either clause (A) or (B), use its commercially reasonable
efforts to cause such amendment to be declared effective and the Shelf
Registration Statement and the related Prospectus to become usable for their
intended purposes as soon as practicable thereafter.  Notwithstanding the foregoing, the Company -may suspend the
effectiveness of the Shelf Registration Statement by written notice to the
Holders 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 is
continuing as a result of which the Shelf Registration Statement would, in the
Company’s reasonable judgment, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and

 

(y)   the Company reasonably
determines that the disclosure of such event at such time would have a material
adverse effect on the business of the Company (and its subsidiaries taken as a
whole);

 

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

 

(ii)  Prepare and file with the Commission such amendments
and post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement effective during the
Effectiveness Period; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Securities Act in a timely manner; and comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by the Shelf Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by the
sellers thereof set forth in the Shelf Registration Statement or supplement to
the Prospectus.

 

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

 

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

 

 

 

(B)           of any request by
the Commission for amendments to the Shelf Registration Statement or amendments
or supplements to the Prospectus or for additional information relating
thereto,

 

(C)           of the issuance by
the Commission of any stop order suspending the effectiveness of the Shelf
Registration Statement under the Securities Act or of the suspension by any
state securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, or

 

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

 

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

 

If at any time the Commission shall issue any stop order suspending the
effectiveness of the Shelf Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Transfer Restricted
Securities under state securities or Blue Sky laws, the Company shall use its
commercially reasonable efforts to obtain the withdrawal or lifting of such
order at the earliest possible time and will provide to the Initial Purchasers
and each Holder who is named in the Shelf Registration Statement prompt notice
of the withdrawal of any such order.

 

(iv)   Furnish to each of the selling Holders  before filing with the Commission, a copy of
the Shelf Registration Statement and copies of any Prospectus included therein
or any amendments or supplements to the Shelf Registration Statement or
Prospectus (other than documents incorporated by reference after the initial
filing of the Shelf Registration Statement), which documents will be subject to
the review of such holders for a period of at least ten Business Days (in the
case of the Shelf Registration Statement and Prospectus) and two Business Days (in
the case of any amendment or supplement thereto), and the Company will not file
the Shelf Registration Statement or Prospectus or any amendment or supplement
to the Shelf Registration Statement or Prospectus (other than documents
incorporated by reference) to which a selling Holder of Transfer Restricted
Securities covered by the Shelf Registration Statement shall reasonably object
prior to the filing thereof.

 

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

 

 

 

records, pertinent
corporate documents and properties of the Company as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the Company’s officers, directors, managers and
employees to supply all information reasonably requested by any such
representative or representatives of the selling Holders, attorney or
accountant in connection with the Shelf Registration Statement after the filing
thereof and before its effectiveness, provided, however, that any information
designated by the Company as confidential at the time of delivery of such
information shall be kept confidential by the recipient thereof.

 

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

 

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

 

(viii)  Deliver to each selling Holder without charge, as
many copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may request; subject
to any notice by the Company in accordance with this Section 4(b) of the
existence 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 or
supplement thereto by each of the selling Holders  in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or supplement
thereto.

 

(ix)  Before any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, and their respective counsel in
connection with the registration and qualification of the Transfer Restricted
Securities under the securities or Blue Sky laws of such jurisdictions in the United
States as the selling Holders may reasonably request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the Shelf
Registration Statement; provided, however, that the Company shall
not be required (A) to register or qualify as a foreign corporation or a dealer
of securities where it is not now so qualified or to take any action that would
subject it to the service of process in any

 

 

 

jurisdiction
where it is not now so subject or (B) to subject itself to taxation in any such
jurisdiction if it is not now so subject.

 

(x)  Cooperate with the selling Holders  to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to be sold
and not bearing any restrictive legends (unless required by applicable
securities laws); and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders may request at least
five Business Days before any sale of Transfer Restricted Securities.

 

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

 

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

 

 

 

(xiii)  Provide CUSIP numbers for all Transfer Restricted
Securities not later than the effective date of the Shelf Registration
Statement and provide the Trustee under the Indenture with certificates for the
Debentures that are in a form eligible for deposit with The Depository Trust
Company.

 

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

 

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

 

(xvi)  Cause the Indenture to be qualified under the TIA not
later than the effective date of the Shelf Registration Statement required by
this Agreement, and, in connection therewith, cooperate with the Trustee and
the holders of Debentures to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms of
the TIA; and execute and use its commercially reasonable efforts to cause the
Trustee thereunder to execute all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner.

 

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

 

(c)           Each Holder agrees by acquisition of
a Transfer Restricted Security that, upon receipt of any notice (a “Suspension
Notice”) from the Company of the existence of any fact of the kind
described in Section 4(b)(iii)(D) hereof, such Holder will discontinue disposition
of Transfer Restricted Securities pursuant to the Shelf Registration Statement
until:

 

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

 

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

 

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 the
Prospectus covering such Transfer Restricted Securities that was current at the
time of receipt of such notice of suspension.

 

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

 

 

 

Questionnaire and deliver it to
the Company prior to such request and, as a result, shall be entitled to have
its Transfer Restricted Securities included in the initial Shelf Registration
Statement filed with the Commission. 
Holders who do not complete the Questionnaire and deliver it to the
Company shall not be eligible to be named as selling securityholders in the
Prospectus or preliminary Prospectus included in the Shelf Registration
Statement and, therefore, shall not be permitted to sell any Transfer
Restricted Securities pursuant to the Shelf Registration Statement.  Thereafter, upon receipt of a completed
Questionnaire, the Company shall as promptly as practicable, but in any event
within ten Business Days of receipt of such Questionnaire, file any amendments
or supplements to the Shelf Registration Statement to allow such Holder to be
named as a selling Holder in the Prospectus included therein.  In addition, each Holder who intends to be
named as a selling Holder in the Shelf Registration Statement shall promptly
respond to the Company by providing such other information as the Company may
from time to time reasonably request in writing regarding the Holder and the proposed
distribution by such Holder of its Transfer Restricted Securities in connection
with the Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein.

 

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

 

5.             Registration
Expenses.  All expenses incident to
the Company’s performance of or compliance with this Agreement shall be borne
by the Company regardless of whether a Shelf Registration Statement becomes
effective, including, without limitation:

 

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

 

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

 

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

 

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

 

(v)  all application and filing fees in connection with
listing (or authorizing for quotation) the Conversion Shares on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and

 

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

 

 

 

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

 

6.             Indemnification and Contribution.

 

(a)           The Company shall indemnify and hold
harmless each Holder, such Holder’s officers, directors and employees and each
person, if any, who controls such Holder within the meaning of the Securities
Act (each, an “Indemnified Holder”),
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to resales of the Transfer Restricted
Securities), to which such Indemnified Holder may become subject, insofar as
any such loss, claim, damage, liability or action arises out of, or is based
upon:

 

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

 

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

 

and shall reimburse each
Indemnified Holder promptly upon demand for any legal or other expenses
reasonably incurred by such Indemnified Holder in connection with investigating
or defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that the
Company 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 untrue
statement or alleged untrue statement or omission or alleged omission made in
the Shelf Registration Statement or Prospectus or amendment or supplement
thereto or Blue Sky Application or other document referred to in Section
6(a)(i) hereof in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Holder (or its related
Indemnified Holder) specifically for use therein or (B) the failure by the
Holder or Indemnified Holder to deliver to any purchaser of its Transfer
Restricted Securities the Prospectus and any supplement or amendment thereto in
the form provided to such Holder or Indemnified Holder by the Company if such
Holder is required to so deliver pursuant to the prospectus delivery
requirements of the Securities Act.  The
foregoing indemnity agreement is in addition to any liability which the Company
may otherwise have to any Indemnified Holder.

 

(b)           Each Holder, severally and not
jointly, shall indemnify and hold harmless the Company, its officers, directors
and employees and each person, if any, who controls the

 

 

 

Company within the meaning of
the 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 any
such 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 any
material fact contained in the Shelf Registration Statement or Prospectus or
any amendment or supplement thereto or any Blue Sky Application or other
document referred to in Section 6(a)(i) hereof; or

 

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

 

but in each case only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder (or its
related Indemnified Holder) specifically for use therein, and shall reimburse
the Company and any such officer, employee or controlling person promptly upon
demand for any legal or other expenses reasonably incurred by the Company or
any such officer, employee or controlling person in connection with
investigating 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 in
addition to any liability which any Holder may otherwise have to the Company
and any such officer, director, employee or controlling person.

 

(c)           Promptly after receipt by an
indemnified party under this Section 6 of notice of any claim or the
commencement of any action, the indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under this Section 6,
notify the indemnifying party in writing of the claim or the commencement of
that action; provided, however, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have
under this Section 6 except to the extent it has been materially prejudiced by
such failure and, provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 6.  If any such claim or action shall be brought
against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and,
to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel satisfactory to
the indemnified party.  After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that a
Majority of Holders shall have the right to employ a single counsel to
represent jointly a Majority of Holders and their respective officers,
employees and controlling persons who may be subject to liability arising out
of any claim in respect of which indemnity may be sought by a Majority of
Holders against the Company under this Section 6, if a Majority of Holders be
one or more legal defenses available to them and their respective officers,
employees and controlling persons that are different from or additional to
those available to the Company

 

 

 

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

 

(i)  without the prior written consent of the indemnified
parties (which consent shall not be unreasonably withheld) settle or compromise
or consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of 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 action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.

 

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

 

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

 

(ii)  if the allocation provided by clause (6)(d)(i) is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause 6(d)(i) but also the
relative fault of the Company on the one hand and the Holders on the other in
connection with the statements or omissions or alleged statements or alleged
omissions that resulted in such loss, claim, damage or liability (or action in
respect thereof), as well as any other relevant equitable considerations.

 

The relative benefits received
by the Company on the one hand and a Holder on the other with respect to such
offering and such sale shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Debentures purchased under the
Purchase Agreement (before deducting expenses) received by the Company on the
one hand, bear to the total proceeds received by such Holder with respect to
its sale of Transfer Restricted Securities on the other.  The relative fault of the parties shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the Holders
on the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or
omission.  The Company and each Holder
agree that it

 

 

 

would not be just and equitable
if 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 account
the equitable considerations referred to in the first sentence of this
paragraph (d).  The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 6
shall be deemed to include, for purposes of this Section 6, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending or preparing to defend any such action or
claim.  Notwithstanding the provisions
of this Section 6, no Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the Transfer Restricted
Securities purchased by it were resold exceeds the amount of any damages which
such Holder has otherwise been required to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.  The
Holders’ obligations to contribute as provided in this Section 6(d) are several
and not joint.

 

7.             Rule
144A.  In the event the Company is
not subject to Section 13 or 15(d) of the Exchange Act, the Company hereby
agrees with each Holder, for so long as any Transfer Restricted Securities
remain outstanding, to make available to any Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities from such Holder
or beneficial owner, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.

 

8.             Participation in Underwritten
Registrations.  No Holder may
participate in any Underwritten Registration hereunder unless such Holder:

 

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

 

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

 

9.             Miscellaneous.

 

(a)           Remedies.  The
Company acknowledges and agrees that any failure by the Company to comply with
its obligations under Section 2 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of any such failure, the Initial
Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company’s obligations under Section 2 hereof.  The Company further agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.

 

 

 

(b)           Adjustments
Affecting Transfer Restricted Securities.  The Company shall not, directly or
indirectly, take any action with respect to the Transfer Restricted Securities
as a class that would adversely affect the ability of the Holders of Transfer
Restricted Securities to include such Transfer Restricted Securities in a
registration undertaken pursuant to this Agreement.

 

(c)           No Inconsistent Agreements.  The Company will not, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof.  In addition, the Company shall not grant to any of its security
holders (other than the Holders of Transfer Restricted Securities in such
capacity) the right to include any of its securities in the Shelf Registration
Statement provided for in this Agreement other than the Transfer Restricted
Securities.  The Company has not
previously entered into any agreement (which has not expired or been
terminated) granting any registration rights with respect to its securities to
any Person which rights conflict with the provisions hereof.

 

(d)           Amendments and Waivers.  This Agreement may not be amended, modified
or supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Company has obtained the written consent of
a Majority of Holders or such greater percentage of the Holders as required by
the Indenture.

 

(e)           Notices.  All notices and other communications
provided 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 records
of the registrar under the Indenture or the transfer agent of the Conversion
Shares, 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 such
notices and communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; five Business Days after being
deposited in

 

 

 

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

 

(f)            Successors
and Assigns.  This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties, including without limitation and without the
need for an express assignment, subsequent Holders of Transfer Restricted
Securities; provided,
however, that (i) this Agreement shall not inure to the benefit of
or be binding upon a successor or assign of a Holder unless and to the extent
such successor or assign acquired Transfer Restricted Securities from such
Holder and (ii) nothing contained herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms of the Purchase Agreement or the Indenture.  If any transferee of any Holder shall
acquire Transfer Restricted Securities, in any manner, whether by operation of
law or otherwise, such Transfer Restricted Securities shall be held subject to
all of the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities such person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this
Agreement.

 

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

 

(h)           Securities
Held by the Company or its Affiliates. 
Whenever the consent or approval of Holders of a specified percentage of
Transfer Restricted Securities is required hereunder, Transfer Restricted
Securities held by the Company or its Affiliates shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.

 

(i)            Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

(j)            Governing
Law.  This
Agreement shall be governed by, and construed in accordance with, the law of
the State of New York.

 

(k)           Severability.  If 
any one or more of the provisions contained herein, or the application
thereof in any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be affected
or impaired thereby.

 

(l)            Entire
Agreement.  This
Agreement is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein.  There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. 
This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.

 

 

 

IN WITNESS WHEREOF, the parties have executed
this 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 SECURITYHOLDER
NOTICE AND QUESTIONNAIRE

 

To be named as a
selling securityholder in the prospectus, beneficial owners shall complete and
deliver this Questionnaire within 20 Business Days after the date of the
written request therefor by the Company. 
Beneficial owners that do not complete this Questionnaire and deliver it
to the Company will not be eligible to be named as selling securityholders in
the prospectus and therefore will not be permitted to sell any Transfer
Restricted Securities pursuant to the Shelf Registration Statement.

 

The
undersigned beneficial owner of 1.75% Convertible Contingent Senior Debentures
due March 15, 2023 (CUSIP No. 942683202AB9) (the “Debentures”), or common
stock, par value $0.0033 per share issuable upon conversion thereof (the “Conversion
Shares” 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 the
Securities and Exchange Commission (the “Commission”) a registration statement on
Form 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 in
accordance with the terms of the Resale Registration Rights Agreement, dated as
of March 7, 2003 (the “Registration Rights Agreement”) among the
Company, Lehman Brothers 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.  A copy of the Registration Rights Agreement
is available from the Company upon request at the address set forth below.  All capitalized terms not otherwise defined
herein have the meaning ascribed thereto in the Registration Rights Agreement.

 

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

 

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

 

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

 

A-1

 

NOTICE

 

The Selling
Securityholder of Transfer Restricted Securities hereby gives notice to the
Company of its intention to sell or otherwise dispose of Transfer Restricted
Securities beneficially owned by it and listed below in Item 3 (unless
otherwise specified under Item 3) pursuant to the Shelf Registration
Statement.  The undersigned, by signing
and returning this Questionnaire, understands that it will be bound by the
terms and conditions of this Questionnaire and the Registration Rights
Agreement.

 

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

 

The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate and complete:

 

QUESTIONNAIRE

 

1.             Information Regarding
Selling Securityholder

 

(a)           Full legal name of Selling
Securityholder: 
_____________________________________________________

 

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

 

(c)                                     Full
legal 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.                                       Address
for Notices to Selling Securityholder

 

Telephone:
____________________________

 

Fax:
__________________________________

 

Contact
Person: ________________________

 

3.                                       Beneficial
Ownership of Transfer Restricted Securities

 

(a)                                     Type
of Transfer Restricted Securities beneficially owned, and principal amount of
Debentures 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.                                        Beneficial
Ownership of the Company’s Securities Owned by the Selling Securityholder

 

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

 

(a)                                     Type
and amount of Other Securities beneficially owned by the Selling
Securityholder:  ______________________

 

(b)                                    CUSIP
No(s). of such Other Securities beneficially owned:  ____________________________________________

 

5.                                        Relationship
with the Company

 

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

 

State any exceptions here:
 ________________________________________________

 

6.                                      Plan of
Distribution

 

Except as set
forth below, the undersigned (including its donees or pledgees) intends to
distribute the Transfer Restricted Securities listed above in Item (3) pursuant
to the Shelf Registration Statement only as follows (if at all).  Such Transfer Restricted Securities may be
sold from time to time directly by the undersigned or, alternatively, through
underwriters, broker-dealers or agents. 
If the Transfer Restricted Securities are sold through underwriters or
broker-dealers, the Selling Securityholder will be responsible for underwriting
discounts or commissions or agent’s commissions.  Such Transfer Restricted Securities may be sold in one or more
transactions 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 national
securities exchange or quotation service on which the Transfer Restricted
Securities  may be listed or quoted at the time of sale;

 

(ii)           in the
over-the-counter market;

 

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

 

(iv)          through the writing
of options.

 

In connection
with sales of the Transfer Restricted Securities or otherwise, the undersigned
may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the Transfer Restricted Securities and deliver
Transfer Restricted Securities to close out such short positions, or loan or
pledge Transfer Restricted Securities to broker-dealers that in turn may sell
such securities.

 

State any
exceptions here:  ______________________________________________

 

                                                                                                                                                                                                             

 

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

 

7.                                       Instructions
for Delivery of Questionnaire

 

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

 

Watson
Pharmaceuticals, Inc.

311 Bonnie
Circle

Corona,
California  92880

Attn: General
Counsel

 

8.                                       Acknowledgments

 

The
undersigned acknowledges that it understands its obligation to comply with the
provisions of the Exchange Act and the rules and regulations promulgated
thereunder relating to stock manipulation, particularly Regulation M thereunder
(or any successor rules or regulations), in connection with any offering of
Transfer Restricted Securities pursuant to the Shelf Registration
Statement.  The undersigned agrees that
neither it nor any person acting on its behalf will engage in any transaction
in violation of such provisions.

 

The Selling
Securityholder hereby acknowledges its obligations under the Registration
Rights Agreement to indemnify and hold harmless certain persons as set forth
therein.  Pursuant to the Registration
Rights Agreement, the Company has agreed under certain circumstances to
indemnify the Selling Securityholders against certain liabilities.

 

A-4

 

In accordance
with the undersigned’s obligation under the Registration Rights Agreement to provide
such information as may be required by law for inclusion in the Shelf
Registration Statement, the undersigned agrees to promptly notify the Company
of any inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof at any time while the Shelf Registration
Statement remains effective.  All
notices hereunder and pursuant to the Registration Rights Agreement shall be
made in writing at the address set forth above.

 

By signing
below, the undersigned consents to the disclosure of the information contained
herein in its answers to items (1) through (6) above and the inclusion of such
information in the Shelf Registration Statement and the related Prospectus. The
undersigned understands that such information will be relied upon by the
Company in connection with the preparation or amendment of the Shelf
Registration Statement and the related Prospectus.

 

IN WITNESS
WHEREOF, the undersigned, by authority duly given, has caused this
Questionnaire to be executed and delivered either in person or by its duly
authorized agent.

 

	
   

  	
  Beneficial
  Owner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
  Date:

  

 

A-5

 

EXHIBIT 1

 

NOTICE TO TRANSFER
PURSUANT

 

TO REGISTRATION STATEMENT

 

 

Watson Pharmaceuticals, Inc.

 

Re: Watson Pharmaceuticals,
Inc. (the “Company”) 1.75% Convertible Contingent Senior Debentures due March
15, 2023 (the “Debentures”)

 

Dear Sirs:

 

Please be
advised that ______________ has transferred $______________ aggregate
principal amount of the above-referenced Debentures of the Company or the
common stock issued on conversion of the Debentures (the “Common Stock”),
pursuant to the Registration Statement on Form S-3 (File
No.  ________) filed by the Company.

 

We hereby
certify that the prospectus delivery requirements, if any, of the Securities
Act of 1933, as amended, have been satisfied with respect to the transfer
described above and the above named beneficial owner of the Debentures or the
Common Stock is named as a selling securityholder in the prospectus dated
______,  or in amendments or supplements
thereto, and that the aggregate principal amount of the Debentures or number of
the Common Stock transferred are [all or a portion of] the Debentures or the
Common Stock listed in such prospectus, as amended or supplemented, opposite
such owner’s name.

 

 

	
   

  	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [name]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  (Authorized
  Signature)

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  

 

A-6Exhibit 10.34

 

March 4, 2003

 

William E. Meyer

 

Dear Bill:

 

BroadVision, Inc.
(“BroadVision” or “the Company”) is pleased to confirm its offer to you of the
position of Executive Vice President and Chief Financial Officer within the
Executive Team at BroadVision, with an effective start date of April 1, 2003
(the “Start Date”).  We are extremely
pleased to have you join as a new BroadVision executive and look forward to the
challenges and successes in our path. 
We believe that your leadership, past successes and style demonstrated
throughout the recruitment process will allow us to achieve new and
far-reaching dimensions to our business and Worldwide Organization.  As Executive Vice President and Chief
Financial Officer reporting directly to the Chief Executive Officer of the
Company, you will lead the Worldwide Finance, Legal, Operations, and
Information Systems organizations.

 

The following outlines the
terms of our employment offer to you (the “Agreement”).

 

Compensation and
Benefits

 

Your base salary will be
$18,666.66 per month ($224,000.00 per year), paid on a semi-monthly basis and
subject to standard payroll deductions and withholdings.  You will also be eligible for incentive
bonuses up to a total of $90,000.00 per year (or 40% of base salary) (to be
prorated for 2003 based on the Start Date), payable on a quarterly basis on the
first payday following the close of each quarter, and subject to standard
payroll deductions and withholdings. 
Whether you shall receive any such incentive bonuses, and the amount of
any such incentive bonuses, shall be determined by the Board of Directors in
its sole discretion based upon its assessment of your performance and the
Company’s performance.  If you are not
employed at the time any bonus is reported to you in writing, you will not have
earned the bonus and no partial or pro-rata bonus will be paid.

 

Although incentive bonuses are
not ordinarily guaranteed, as a sign-on incentive, during the first four (4)
quarters of your employment, the Company will guarantee you incentive bonus
payments of $5,000 per quarter, to be paid on the first pay day following the
close of each quarter.  You must be
employed on the last day of the quarter to earn the bonus for that quarter.  Therefore, if your employment terminates for
any reason before the end of a quarter, 
you will not earn a partial or prorata bonus for that quarter.  These bonus amounts will be considered part
of, not an addition to, your 2003 incentive bonus.

 

You will be eligible for salary
and stock adjustments at the next Company annual compensation review, although
no increases are assured.

 

You will be eligible for all
standard BroadVision employee benefits (subject to the terms and conditions of
those plans) which include: medical, dental, vision, and prescription package,
short-term and long-term disability insurance, group life insurance,
participation in our 401(k) Savings Plan, participation in the Employee Stock
Purchase Plan (ESPP), and two weeks accrued vacation per year (your annual
vacation accrual amount will change depending on your length of service),
pursuant to the terms of these plans. 
You are also entitled to take up to two (2) weeks of unpaid time off
during the second quarter of 2003, to be taken at a mutually agreed upon time.

 

While BroadVision pays for the
majority of your medical insurance, should you choose to participate in the
plan, your current financial contribution will be approximately 10% of your
monthly insurance premium, depending on your benefit selection.  Benefits start the first of the calendar
month after the Start Date.

 

You should note that
BroadVision reserves the right to modify your compensation and benefits from
time to time, as it deems necessary.

 

Stock Option

 

In addition to the above, the
Company will recommend to the Board of Directors that you receive an option to
purchase 240,000 shares of BroadVision common stock at a fair market value to
be determined at the next meeting of the option committee (the “Option”).  The Option will be an incentive stock option
to the extent permitted by law, with any remaining portion to be a nonstatutory
stock option.  The Option will be
subject to the following four year vesting schedule:  twenty-five percent (25%) of the shares subject to the Option
will vest on the first anniversary of the Start Date and the balance of the
shares subject to the Option will vest over the remaining three years on an
equal monthly basis (2.083% of the original grant amount per month), subject to
the condition that your “Continuous Service” (as defined in the applicable
stock option plan) with the Company is not terminated or interrupted prior to
each vesting date.  The Option will be
governed in all respects by the terms and conditions of the applicable
BroadVision stock option plan and stock option agreement between you and the
Company.

 

Change of Control

 

The Compensation Committee and
Board of Directors will cover you under the new Change of Control Severance
Benefit Plan (“Change of Control Plan”) that is currently under review and
pending approval.  A draft of the Change

 

 

of Control Plan has been
provided for your review and is attached hereto as Exhibit A.  The terms of this draft Change of Control
Plan will apply to you, except that your Accelerated Vesting Percentage in the
event of a Change in Control (as defined therein) will be fifty percent
(50%).  If the terms included in the
final approved Change in Control Plan are more favorable than those in the
draft plan, you will receive the more favorable terms.

 

Involuntary
Termination Without Cause

 

In the event your employment
with BroadVision is terminated due to an Involuntary Termination Without Cause
(as defined below), you will be eligible for a cash severance benefit (the
“Severance Payment”) as follows:

 

If you have completed less than
3 full months of employment, then the Severance Payment will equal three (3)
months of your base salary.

 

If you have completed more than
3 months of employment, then the Severance Payment will equal three (3) months
of your base salary plus an additional one-half (0.5) month of your base salary
for each additional full month of employment over three (3) months of
employment; provided, however, that the Severance Payment shall not exceed an
amount equal to nine (9) months of your base salary regardless of your length
of service with the Company.

 

Your right to receive the
Severance Payment is expressly conditioned upon your execution of a complete
release of claims in favor of the Company, in a form acceptable to the
Company.  Provided you sign such a
release and allow it to become effective, you will receive the Severance
Payment in a lump sum within ten (10) days after you sign the release and
return it to the Company.  The Severance
Payment will be subject to standard payroll deductions and withholdings.  If you are terminated with Cause, you will
not receive any severance benefits. 
Similarly, if you resign your employment, you will not be entitled to
any severance benefits, except those benefits you may be entitled to under the
Company’s Change of Control Plan.    Additionally, you will not be entitled to the Severance Payment
if you are receiving severance benefits in connection with your termination
under the Change of Control Plan.

 

For purposes of this Agreement,
Involuntary Termination Without
Cause shall mean your dismissal or discharge by the Company for
reasons other than Cause.  For this
purpose, “Cause” means the occurrence of any one or more of the following:  (i) your conviction of, or plea of no
contest with respect to, any crime involving fraud, dishonesty or moral
turpitude; (ii) your attempted commission of or participation in a fraud or act
of dishonesty against BroadVision that results in (or might have reasonably
resulted in) material harm to the business of BroadVision; (iii) your
intentional, material violation of any contract or agreement between you and
the Company or any statutory duty you owe to BroadVision; (iv) your conduct
that constitutes gross misconduct, insubordination, incompetence or habitual
neglect of duties and that results in (or might have reasonably resulted in)
material harm to the business of BroadVision; and (v) persistent unsatisfactory
performance of your job duties; provided, however, that the action or
conduct described in clauses (iii), (iv) and (v) above will constitute “Cause”
only if such action or conduct has not been cured by you following
BroadVision’s written notice thereof and thirty (30) days to cure the same
(unless such action or conduct cannot be cured).  It is agreed that both you and the Company will discuss, share
and monitor any performance issues during this thirty-day window, if
applicable.

 

Other Provisions

 

As a BroadVision employee, you
will be required to sign an acknowledgment that you have read and understand
the Company rules as described in the Company handbook and intend to abide by
these rules and regulations.  You will
be expected to sign and comply with BroadVision’s Proprietary Information and
Inventions Agreement.  You will also be
required to submit a Form I-9 and satisfactory documentation regarding your
identification and right to work in the United States no later than three (3)
days after your employment begins.

 

In your work for BroadVision,
you will be expected not to use or disclose any confidential information,
including trade secrets, of any former employer or other person to whom you
have an obligation of confidentiality. 
Rather, you will be expected to use only that information which is
generally known and used by persons with training and experience comparable to
your own, which is common knowledge in the industry or otherwise legally in the
public domain, or which is otherwise provided or developed by BroadVision.  During our discussions about your proposed
job duties, you assured us that you would be able to perform those duties
within the guidelines just described.

 

You agree that you will not
bring onto BroadVision premises any unpublished documents or property belonging
to any former employer or other person to whom you have an obligation of
confidentiality.

 

You shall receive
indemnification as a Corporate Officer of BroadVision to the maximum extent
extended to the other officers of BroadVision. 
You will be required to enter into an indemnification agreement
(“Indemnification Agreement”) with BroadVision, a standard form of which has
been provided to you.  Under the terms
of this Indemnification Agreement, BroadVision agrees to advance any expenses
for which indemnification is available to the extent allowed by applicable law.  You agree to negotiate in good faith an
execution of this Indemnification Agreement within five (5) days of your
execution of this letter agreement.

 

You may terminate your
employment with BroadVision at any time, with or without cause, simply by
notifying BroadVision.  Likewise,
BroadVision may terminate your employment at any time, with or without cause or

 

2

 

advance notice.  BroadVision requests that in the event of
your resignation, you provide notice of your resignation at least two (2) weeks
in advance.

 

This Agreement, together with
your stock option agreement(s), your Proprietary Information and Inventions
Agreement, and your Indemnification Agreement, form the complete and exclusive
statement of your employment agreement with BroadVision.  It supersedes any other agreements or
promises made to you by anyone, whether oral or written, and it can only be
modified in a written agreement signed by a duly authorized officer of
BroadVision.

 

Bill, thank you for your
continued interest in BroadVision.  I
look forward to your favorable reply and to a productive and exciting working
relationship.

 

If you wish to accept
employment at BroadVision under the terms set out above and the                      Exhibit, please sign and
date this letter, and return it to our Human Resources department by March 5,
2003.

Sincerely,

 

	
  Pehong Chen

  	
   

  	
   

  	
   

  
	
  President
  & Chief Executive Officer

  	
   

  	
   

  	
   

  
	
  Approved and Accepted by:

  	
   

  	
   

  	
   

  
	
  /s/ William
  E. Meyer

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Date

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Social
  Security Number

  	
   

  	
   

  	
   

  

 

3

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