Document:

Exhibit
10.31

CONTRIBUTION
AGREEMENT

between

DUKE REALTY
LIMITED PARTNERSHIP ET AL.

and

LAFAYETTE REAL
ESTATE LLC

and

BELCREST REALTY
CORPORATION

as of December 6,
2006

 

  
  
  

 

Table of Contents

	
  ARTICLE 1.  

  	
  Background

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2. 

  	
  Agreement to Contribute; Description of Property;
  Defined Terms

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3. 

  	
  Contribution Subject to Leases

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4.

  	
  Reserved

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5.  

  	
  Form of Contribution

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6. 

  	
  Closing

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7.  

  	
  Reserved

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8.  

  	
  Conditions to Closing

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9.  

  	
  Default

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10.  

  	
  Entire Agreement Herein

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11.

  	
  Damage or Destruction; Condemnation

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12.  

  	
  Representations and Warranties of Duke

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14.  

  	
  Apportionment of Rents, Taxes and Other Charges

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15.

  	
  Broker

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE 16.

  	
  Mutual Indemnification

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE 17.  

  	
  Taxes

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE 18.  

  	
  Reserved

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE 19.

  	
  Recording

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE 20.  

  	
  Notices

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE 21.

  	
  Captions; Exhibits

  	
  25

  
	
   

  	
   

  	
   

  

 

 i
 

 

	
  ARTICLE 22. 
  

  	
  Successors and Assigns

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 23.  

  	
  Closing Costs

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 24.

  	
  Governing Law

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 25.  

  	
  Multiple Counterparts

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 26.  

  	
  Representations and Warranties of Company

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 26.  

  	
  Representations and Warranties of Belcrest

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 27.

  	
  Post-Closing Obligations

  	
  27

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

Exhibits

	
  Exhibit
  A

  	
   

  	
  Reserved

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Operating Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Description of Mark Center 1801/1901

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  Description of Mark Center 2001

  
	
   

  	
   

  	
   

  
	
  Exhibit E-1

  	
   

  	
  Mark Center II Description

  
	
   

  	
   

  	
   

  
	
  Exhibit E-2

  	
   

  	
  Mark Center II Description

  
	
   

  	
   

  	
   

  
	
  Exhibit E-3

  	
   

  	
  Mark Center II Description

  
	
   

  	
   

  	
   

  
	
  Exhibit E-4

  	
   

  	
  Mark Center II Description

  
	
   

  	
   

  	
   

  
	
  Exhibit E-5

  	
   

  	
  Mark Center II Description

  
	
   

  	
   

  	
   

  
	
  Exhibit E-6

  	
   

  	
  Mark Center II Description

  
	
   

  	
   

  	
   

  
	
  Exhibit E-7

  	
   

  	
  Mark Center II Description

  
	
   

  	
   

  	
   

  
	
  Exhibit E-8

  	
   

  	
  Mark Center II Description

  
	
   

  	
   

  	
   

  
	
  Exhibit E-9

  	
   

  	
  Mark Center II Description

  
	
   

  	
   

  	
   

  
	
  Exhibit F

  	
   

  	
  Personal Property

  
	
   

  	
   

  	
   

  
	
  Exhibit G

  	
   

  	
  Leases

  
	
   

  	
   

  	
   

  
	
  Exhibit H

  	
   

  	
  Assignment of Member Interests

  
	
   

  	
   

  	
   

  
	
  Exhibit I

  	
   

  	
  Personal Property Encumbrances

  
	
   

  	
   

  	
   

  
	
  Exhibit J

  	
   

  	
  Certification of Non-Foreign Status

  
	
   

  	
   

  	
   

  
	
  Exhibit K

  	
   

  	
  Gross Agreed Value of Assets

  
	
   

  	
   

  	
   

  
	
  Exhibit L

  	
   

  	
  Reserved

  
	
   

  	
   

  	
   

  
	
  Exhibit M

  	
   

  	
  Other Property Owned

  
	
   

  	
   

  	
   

  
	
  Exhibit N

  	
   

  	
  Future Development Right of First Offer

  
	
   

  	
   

  	
   

  
	
  Exhibit O

  	
   

  	
  Liabilities

  
	
   

  	
   

  	
   

  
	
  Exhibit P

  	
   

  	
  Rent Roll and Accounts Receivable Aging Report

  
	
   

  	
   

  	
   

  
	
  Exhibit Q

  	
   

  	
  Operating Contracts

  

 ii
 

 

	
  

  	
   

  	
   

  
	
  Exhibit R

  	
   

  	
  Litigation

  
	
   

  	
   

  	
   

  
	
  Exhibit S

  	
   

  	
  Reserved

  
	
   

  	
   

  	
   

  
	
  Exhibit T

  	
   

  	
  Reserved

  
	
   

  	
   

  	
   

  
	
  Exhibit U

  	
   

  	
  Disclosure Items

  
	
   

  	
   

  	
   

  
	
  Exhibit V

  	
   

  	
  Unpaid Balance of Assumed Loans

  
	
   

  	
   

  	
   

  
	
  Exhibit W

  	
   

  	
  Balances of Escrows

  

 

 iii

 

CONTRIBUTION
AGREEMENT

THIS AGREEMENT
(the “Agreement”) made and entered into as of the 6th 
day of December, 2006 (the “Effective Date) by and among Duke Realty
Limited Partnership (“Duke”), an Indiana limited partnership, the Owning
Entities (as defined below), Lafayette Real Estate LLC (the “Company”), a
Delaware limited liability company and Belcrest Realty Corporation (“Belcrest”),
a Delaware corporation.

NOW, THEREFORE, in
consideration of One Dollar ($1.00), the covenants set forth in this Agreement
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1.  Background:

(a)           The Company.  The Company was formed in the State of
Delaware on November 16, 2006 and has qualified to do business in the
Commonwealth of Virginia.  Duke and
Belcrest intend to enter into that certain Operating Agreement (the “Operating
Agreement”) relating to the Company, in the form attached hereto as Exhibit
B.

(b)           The Owning Entities.

(i)            Mark Center Buildings, LLC (“Mark
Center Buildings”) is a Delaware limited liability company, whose sole member
is WTM Master Building, LLC (“WTM Master Building”), the sole member of which
is Duke.  The member interest in Mark
Center Buildings is referred to as the “MC Buildings Member Interest”.

(ii)           Mark Center 1801/1901, LLC (“Mark
Center 1801/1901”) is a Delaware limited liability company, the sole member of
which is Mark Center Buildings.  The
member interest in Mark Center 1801/1901 is referred to as the “1801/1901
Member Interest”.

(iii)          Mark Center 1801/1901 is the owner of
property known and numbered as 1801/1901 N. Beauregard Street, Mark Center,
Alexandria, VA more particularly described in Exhibit C.

 1
 

(iv)          Mark Center 2001, LLC (“Mark Center
2001”) is a Delaware limited liability company, the sole member of which is
Mark Center Buildings.  The member
interest in Mark Center 2001 is referred to as the “2001 Member Interest”.

(v)           Mark Center 2001 is the owner of
property known and numbered as 2001 N. Beauregard Street, Mark Center,
Alexandria, VA more particularly described in Exhibit D.

(vi)          Mark Center Buildings II, LLC (“Mark
Center II”) is a Delaware limited liability company, whose sole member is WTM
Master Building, the sole member of which is Duke.  The member interest in Mark Center Buildings
II, LLC is referred to as the “Mark II Member Interest”.

(vii)         Mark Center II is the owner of nine
parcels of property, which are described in Exhibits E1 through E9.

(viii)        Mark Center 1801/1901, Mark Center 2001
and Mark Center II are collectively referred to as the “Property Owners”.

(ix)           The Property Owners, together with
Mark Center Buildings and WTM Master Building are collectively referred to as
the “Owning Entities”.

ARTICLE 2. Agreement
to Contribute; Description of Property; Defined Terms: (a) Duke agrees to
cause WTM Master Buildings to contribute to the Company, and Belcrest agrees to
cause the Company to accept upon the terms and conditions hereinafter set forth
the MC Buildings Member Interest and the Mark II Member Interest.

(b)           For the purposes of this Agreement,
the following items referred to in clauses (b)(i), (ii), (iii), (iv) and (v)
are hereinafter sometimes referred to as the “Property”:  (i) certain premises described in Exhibits
C, D and E1 through E9, together with all right, title and interest of
Property Owners in and to any land lying in the bed of any street (opened or
proposed) adjacent to or abutting or adjoining such premises, together with all
right, title and interest of Property Owners in and to all rights, privileges,
rights of way and easements appurtenant to such premises, including, without
limitation, all minerals, oil or gas on or under such premises, development
rights, air rights, water rights and any easements, rights of way or other
interests in, on, or under any land, highway, alley, street or right of way
abutting or adjoining such premises (all of the foregoing, the “Real Property”),
(ii) all buildings and other improvements located thereon (the 

 2
 

“Improvements”,
and, together with the Real Property, the “Premises”), (iii) all items of
personal property owned by Property Owners and located on the Premises or used
in connection with the ownership or operation of the Premises, described in Exhibit
F attached hereto and incorporated herein by reference, including, without
implied limitation, whether or not listed on Exhibit F, all furniture,
fixtures, equipment, machines, apparatus, appliances, supplies and personal
property of every nature and description and all replacements thereof owned by
Property Owners and located on the Premises or used in connection therewith,
including the non-exclusive right to use the trade name Mark Center (the “Trade
Name”), but excluding any telephone numbers assigned to the Trade Name
(collectively, the “Personal Property”), (iv) any intangible property now or
hereafter owned by Property Owners and used in the ownership or operation of
the Premises including, without limitation, any plans and specifications,
surveys, catalogs, booklets, manuals, files, logs, records, correspondence,
tenant lists, tenant prospect lists and other mailing lists, sales brochures
and materials, leasing brochures and materials, advertising materials and other
similar items, and all title inspections, studies and reports, market studies
and similar inspections with respect to the sale, management, leasing,
promotion, ownership, maintenance, use, occupancy and operation of the
Premises, permits, licenses, approvals, guaranties, warranties, agreements,
lease agreements, utility agreements or other rights relating to the ownership,
use or operation of the Premises (collectively, the “Intangibles”).  The parties hereto acknowledge and agree that
the cash balances of any accounts standing in the name of the Property Owners
on or before the Closing Date shall remain the property of Duke and shall not
be included in the Property to be contributed under this Agreement.

(c)           The terms listed below shall have the
following meanings throughout this Agreement:

	
  

  	
  Gross Agreed Value: 

  	
  For each Property, the Gross Agreed Value shall be
  the Allocated Amount set forth in Exhibit K plus or minus any
  prorations at Closing, including, but not limited to, prorations of principal
  and interest payments for any Assumed Loans (as defined below) for the month
  of Closing.

  
	
   

  	
   

  	
   

  
	
   

  	
  Net Agreed Value:

  	
  The amount of the Gross Agreed Value minus the
  aggregate amount of all outstanding principal and interest due and owing by
  Property Owners on account of any debt secured directly or indirectly by any
  of the

  

 

 3
 

 

	
  

  	
   

  	
  Properties or any of the Member Interests (as
  hereinafter defined) (the “Assumed Loans”).

  

 

ARTICLE 3. Contribution
Subject to Leases.  At the time of
Closing the Premises will be subject to certain leases (hereinafter called the “Leases”)
described in Exhibit G subject to new leasing activity permitted under this
Agreement.  Prior to Closing, Property Owners
agree to lease the Premises in accordance with Property Owners’ current leasing
plan.  Property Owners shall keep
Belcrest apprised of leasing activity, and prior to entering into any new
leases or lease amendments, Property Owners shall obtain the consent of
Belcrest, which consent shall not be unreasonably withheld, conditioned or
delayed.  No consent shall be required
for any leasing activity of existing Leases that are not in the Property Owner’s
discretion (e.g. exercise of express termination rights, renewal rights on
pre-negotiated terms, expansion rights on pre-negotiated terms etc.).

ARTICLE 4.  Reserved:

ARTICLE 5.  Form of Contribution:  (a) At each Closing, Duke shall cause the
appropriate Owning Entity to contribute the appropriate member interest (the “Member
Interest”) by a good and sufficient Assignment of Member Interests (hereinafter
referred to as the “Assignment of Member Interests”) in substantially the form
attached hereto as Exhibit H, running to the Company pursuant to which
the appropriate Owning Entity shall contribute, assign and deliver to the
Company the legal and beneficial title to and ownership of one hundred percent
(100%) of the Member Interest which Member Interest shall be free and clear of
any liens or other encumbrances, all in accordance with this Agreement.  The Assignment of Member Interests shall be
duly executed, acknowledged and delivered by Duke at Closing.  It shall be a condition of Closing that the
Property shall be free from all liens, encumbrances and encroachments from or
on the Property except (i) real estate taxes and other charges payable
therewith not yet due and payable, (ii) those of record prior to the Initial
Closing or shown on a survey received prior to the Initial Closing but not
objected to by Company and agreed to be removed by Duke prior to the Initial
Closing, (iii) those Leases applicable to the Property, subject to new leasing
activity permitted under this Agreement, and (iv) New Title Matters
(hereinafter defined) which are expressly permitted pursuant to Section
12(a)(vi) of this Agreement.  Duke
covenants and agrees not to take any action and to cause the Owning Entities
not to take any action which would cause or permit a failure of the foregoing condition.

 4
 

(b)           Except as set forth on Exhibit I,
the Personal Property shall be owned by the Owning Entities free of all liens,
charges, encumbrances, rights, restrictions and agreements of any nature.

(c)           Except as provided for in Article 12,
Duke shall not allow Owning Entities to commit any acts which will result in
New Title Matters (hereinafter defined) or New Personal Property Matters
(hereinafter defined) between the date hereof and the Closing, and Duke shall
not commit any acts which will result in a lien or other encumbrance against the
Member Interest between the date hereof and the Closing.

ARTICLE 6.  Closing:

(a)           (i)            The
closing of the contribution of the Mark II Member Interest (the “Initial
Closing”) shall take place at 10:00 a.m. no later than December 4, 2006 (the “Initial
Closing Date”); at the offices of Goulston & Storrs, P.C., or at such other
location as Company shall designate by five (5) business days prior written
notice.  Time is of the essence.

(ii)           The parties hereto acknowledge that
certain consents from lenders (“Existing Lenders”) of the Assumed Loans
(hereinafter defined) and modification of the relevant management agreements
are necessary prior to the contribution of the MC Buildings Member
Interests.  Each such consent and
modification shall be a “Lender Consent” if (A) such consent does not contain
any conditions which are not reasonably satisfactory to Duke or Belcrest
(Belcrest acknowledges and consents that Belcrest will be added as a joint and
several indemnitor and/or guarantor in all instances where Duke is an
indemnitor and/or guarantor on an Assumed Loan) and (B) such consent also
grants consent to all upper tier transfers and pledges of interest which
additional consent is necessary in light of the structure and secured credit
facilities of Belcrest and its owners. 
Accordingly, the closing of the contribution of such interests (the “Phase
II Closing”) and the payment thereof shall occur five (5) business days after
satisfaction of any conditions to such Lender Consent (the “Phase II Closing
Date”); provided, however, if the Lender Consent is not obtained by August 1,
2007, then Duke or Belcrest may terminate this Agreement as to any
contributions of interests that have not then been consummated by notice to the
other of them, provided that said termination notice is received prior to the
receipt of the Lender Consent.

(iii)          For purposes hereof, any reference to “Closing”
shall mean the Initial Closing or each Phase II Closing as applicable.  Any reference to 

 5
 

“Closing Date”
shall mean the Initial Closing Date or each Phase II Closing Date as
applicable.

(b)           At each Closing, Duke shall deliver,
or cause Owning Entity to deliver, the following documents, in the form annexed
hereto or otherwise reasonably satisfactory in form and substance to Belcrest
and Belcrest’s counsel, properly executed and acknowledged as required:

(i)                                     The
Assignment of Membership Interests;

(ii)                                  An
original counterpart of the Operating Agreement executed by Duke (for the
Initial Closing);

(iii)                               Lender’s
Consent with respect to the Properties which are encumbered by an Assumed Loan.

(iv)                              A
certification of non-foreign status in the form attached hereto as Exhibit
J;

(v)                                 Evidence
satisfactory to the Company and to the Company’s title insurance company (the “Title
Company”) that all necessary approvals and/or consents by any other person(s)
have been delivered and such other evidence satisfactory to Company and the
Title Company of Duke’s authority and the authority of the signatory on behalf
of any constituent person of Duke to convey the Member Interest pursuant to
this Agreement;

(vi)                              Affidavits
sufficient for the Title Company to delete any exceptions for parties in
possession (other than tenants under the Leases, as tenants only), mechanics’
or materialmen’s liens from, and to include a non-imputation endorsement to,
the owner’s title insurance policy (the “Title Insurance”), and such other
affidavits relating to the Title Insurance as the Title Company may reasonably
request;

(vii)                           A
certificate restating as of the relevant Closing Date all of Duke’s and Owning
Entities’ representations and warranties 

 6
 

contained herein
updated to reflect the then existing state of facts;

(viii)                        An opinion
of Duke’s and Owning Entities’ in-house counsel to the effect that Owning
Entities are duly formed, validly existing and in good standing, that all
requisite action has been taken to authorize the transaction contemplated
hereby, and that this Agreement and all documents delivered at the Closing have
been duly executed and delivered;

(ix)                                An
original of a closing statement setting forth the Gross Agreed Value, and
setting forth the closing adjustments and prorations which affected the
calculation of the Gross Agreed Value and the Net Agreed Value (the “Closing
Statement”);

(x)                                   Original
tenant notification letters for each tenant under a Lease in a form to be
drafted by Company [if necessary] and reasonably satisfactory to Duke, original
notification letters to all parties to operating and other agreements [if
necessary];

(xi)                                A
Designation of Person Responsible for Tax Reporting under Internal Revenue Code
Section 6045 designating Duke as the party responsible for making the returns
required under Internal Revenue Code Section 6045;

(xii)                             The
original Owning Entities formation documentation including all amendments
thereto or, if not available to Duke, a certified copy;

(xiii)                          A
balance sheet of the Company as of the day of the Closing (the “Balance Sheet”);

(xiv)                         Such
other instruments as Company may reasonably request consistent with the terms
of this Agreement;

(xv)                            An
executed assignment of membership interest in Mark Center TMP, LLC and related
documents as described in Section 7.4(b)(ii) of the Operating Agreement; and

(xvi)                         An
executed Future Development Right of First Offer in the form of Exhibit N.

 7
 

(c)           Attached as Exhibit K is the
Gross Agreed Value of each Owning Entity’s assets which values (minus the
Closing prorations other than closing costs) will be the Company’s initial
basis in such assets for federal income tax purposes.

(d)           At each Closing, Belcrest shall
deliver, or cause to be delivered, the following payment and documents,
reasonably satisfactory in form and substance to Duke and Duke’s counsel
properly executed and acknowledged as required:

(i)                                     Distribution
of cash in accordance with Section 4.1 of the Operating Agreement;

(ii)                                  An
original counterpart of the Assignment of Member Interests;

(iii)                               An
original counterpart of the Closing Statement;

(iv)                              An
original counterpart of the Operating Agreement executed by Belcrest (for the
Initial Closing);

(v)                                 An
opinion of Belcrest’s counsel to the effect that Company is duly formed,
validly existing and in good standing, that all requisite action has been taken
to authorize the transaction contemplated hereby, and that this Agreement and
all documents delivered at the Closing have been duly executed and delivered;
and

(vi)                              A
certificate restating as of the relevant Closing Date all of Belcrest’s
representations and warranties contained herein updated to reflect the then
existing state of facts;

(vii)                           An
executed assignment of membership interest in Mark Center TMP, LLC and related
documents as described in Section 7.4(b)(ii) of the Operating Agreement; and

(viii)                        Executed
Future Development Right of First Offer in the form of Exhibit N.

(e)           While it is not a condition of
Closing, Duke shall request Existing Lenders to execute a written statement, in
a form provided to Duke by Belcrest, 

 8
 

certifying to Company as
the date of such statement, (i) that the Loan Documents (to be identified by
Lender) are unmodified and in full force and effect (or, if there have been
modifications, that the Loan Documents are in full force and effect as modified
and setting forth such modifications); (ii) the unpaid principal balance of the
Assumed Loan; (iii) the date to which interest in respect of the principal
indebtedness has been paid; (iv) the amount of any such escrows, reserves or
impounds then being held by or on behalf of Lender; (v) that to the best of
Lender’s knowledge, Borrower is not in default under the Assumed Loans (or, if
Borrower is in default, describing such default in reasonable detail); and (vi)
any additional facts reasonably requested by Belcrest.

(f)            Each Closing shall not be deemed to
be completed until all documents and payments as aforesaid have been properly
delivered (and recorded where appropriate) to the satisfaction of all parties.

ARTICLE
7.  Reserved:

ARTICLE 8.  Conditions to Closing:

(a)           Without limiting any of the other
conditions to Company’s obligations to close set forth in this Agreement, the
obligations of Company under this Agreement are subject to the satisfaction at
the time of each Closing for the applicable Properties and Owning Entities of
each of the following conditions (any one of which may be waived in whole or in
part by Company at or prior to Closing):

(i)                                     All
of the representations by Duke set forth in this Agreement or any Exhibit
attached hereto shall be true and correct in all material respects as of the
Closing and the updating certificates thereto set forth no changes or
conditions which in the judgment of Belcrest constitute a material adverse
change relating to any of the Property or to any Owning Entity;

(ii)                                  Subject
to the provisions of Article 11 hereof, the Property shall be in substantially
the same condition it now is, reasonable use and wear excepted;

(iii)                               Duke
shall have performed, observed, and complied or shall have caused Owning
Entities to have performed, observed and complied with all covenants and
agreements required by 

 9
 

this Agreement to
be performed by Duke at or prior to Closing;

(iv)                              There
shall have been no pledge of Duke’s Interest in WTM Master Building or WTM
Master Buildings in the Owning Entities and no pledge by Mark Center Buildings
of the 1801/1901 Member Interest or the 2001 Member Interest;

(v)                                 There
shall not have been instituted and be pending any litigation (1) brought by any
tenants alleging defaults by Property Owners under any Leases at the
Properties, (2) alleging material defects (defects which cost more than $25,000
to fix) in the physical condition of the Improvements or (3) that would impair
any Owning Entity’s right to convey the Member Interest in accordance with the
terms of this Agreement;

(vi)                              There
shall be no outstanding notices of violation with respect to any Property or
Owning Entities’ operation thereof from any governmental authorities and the
Property shall be in compliance with all applicable laws;

(vii)                           The
assets of Property Owners shall consist of the following (unless agreed
otherwise by the parties hereto in writing):

(A)                              The
Property;

(B)                                All
operating licenses, occupancy permits, and other licenses or permits and
authorizations from governmental entities related to the Owning Entities and
the Property;

(C)                                The
Leases;

(D)                               All
Security Deposits;

(E)                                 All
utility deposits, if any; and

(F)                                 All
deposits and escrows required by the Assumed Loans.

(viii)                        The
Liabilities of the Owning Entities shall consist of the following (unless
agreed otherwise by the parties hereto in writing), and no others:

 

 10

 

(A)                              Real
Estate and Personal Property Taxes not yet due and payable;

(B)                                The
liability to tenants for Security Deposits;

(C)                                The
obligations under Leases, and Operating Contracts and trade accounts payable
incurred in the ordinary course of business and certified to by Duke at
Closing, the latter of which, if not prorated hereunder, shall be promptly paid
by Duke after the Closing; and

(D)                               The
Assumed Loans.

(b)           Upon learning of a failure of a condition in this Article 8, or any
other condition in this Agreement, Belcrest shall promptly notify Duke thereof,
and Duke shall have thirty (30) days to cure said failure, and the Closing Date
shall be extended to allow said thirty (30) day period to run in full.  If such failure cannot be cured within such
thirty (30) day period, then, provided that Duke shall have commenced to cure
such failure within such thirty (30) day period and thereafter shall diligently
and continuously prosecuted such cure, the aforesaid thirty (30) day period
shall be extended for an additional sixty (60) days.  If on the Closing Date (as may be extended
hereby) the conditions of this Article 8 have not been satisfied, then, at
Company’s option, Company and Belcrest shall not be obligated to close the
transactions contemplated hereby.  In such
case, if Duke is not in breach or default of any of their representations,
warranties, covenants or obligations hereunder, after expiration of all
applicable notice and cure periods, all obligations of the parties hereto shall
cease and this Agreement shall be terminated and the parties shall be without
further recourse or remedy hereunder.  If
Duke is in breach of any of their representations, warranties, covenants or
obligations hereunder, after expiration of all applicable notice and cure
periods, then Company shall have the rights and remedies set forth in Article 9
below.

ARTICLE 9.  Default:  (a) In the event of a material breach or
default by Duke of any of its representations, warranties, covenants or
obligations hereunder, which is not cured within thirty (30) days after notice
to Duke thereof (which thirty (30) day period is to run concurrently with the
thirty (30) day period set forth in Section 8(b) above and the applicable
Closing shall be extended to allow the full cure period to run), Belcrest shall
have the right to elect one of the following rights and remedies, as its sole
and exclusive remedy with respect to any such breach or default known to
Belcrest prior to Initial Closing (it being acknowledged that if Belcrest knows
of any such breach or default and fails to notify Duke thereof prior to
Closing, Belcrest shall be considered to have elected the option set forth in
Subsection (ii) below):

 11
  
  
 

(i)            Terminate this Agreement by notice
to Duke, and all obligations of the parties under this Agreement shall
terminate and Belcrest shall be entitled to immediate payment from Duke of all
out-of-pocket costs incurred by Belcrest in connection with the
Agreement and the transactions contemplated hereby (provided that after the
Initial Closing occurs, the out-of-pocket costs shall be measured from the most
recent Closing to the date of said termination), subject to a maximum
reimbursement not to exceed $500,000.00.

(ii)           Waive the breach or default as a
condition of Closing (subject to any written agreement between the parties to
address said breach or default) and proceed to Closing.

(iii)          Seek specific performance.

(b)           In the event of a material breach or
default by Company or Belcrest of any of its representations, warranties,
covenants or obligations hereunder which is not cured within thirty (30) days
after notice to Belcrest thereof, Duke shall have the right to elect one of the
following rights and remedies, as its sole and exclusive remedy:

(i)            Terminate this Agreement by notice to
Belcrest, and all obligations of the parties under this Agreement shall
terminate and Duke shall be entitled to immediate payment from Belcrest of all
out-of-pocket costs incurred by Duke in connection with the
Agreement and the transactions contemplated hereby, (provided that after the
Initial Closing occurs, the out-of-pocket costs shall be measured from the most
recent Closing to the date of said termination) subject to a maximum
reimbursement not to exceed $500,000.00.

(ii)           Waive the breach or
default and proceed to Closing in accordance with the provisions of this
Agreement (subject to any written agreement between the parties to address said
breach or default).

(iii)          Seek specific
performance.

ARTICLE 10.  Entire Agreement Herein:  The parties understand and agree that their
entire agreement is contained herein and that no warranties, guarantees, 

 12
  
  
 

statements, or
representations shall be valid or binding on a party unless set forth in this
Agreement.  It is further understood and
agreed that all prior understandings and agreements heretofore had between the
parties are merged in this Agreement which alone fully and completely expresses
their agreement and that the same is entered into after full investigation,
neither party relying on any statement or representation not embodied in this
Agreement.  This Agreement may be
changed, modified, altered or terminated only by a written agreement signed by
the parties hereto.

ARTICLE 11.  Damage or Destruction; Condemnation:  (a) The risk of loss, damage or destruction
to the Property by fire or other casualty or the taking of all or part of the
Property by condemnation or eminent domain or by an agreement in lieu thereof
until the Closing is assumed by Duke.

(b)           In the event of any damage or destruction of the Property, then, as
long as (i) the damage or destruction was insured, (ii) there is no loss of
rent (i.e. the tenants are not entitled to an abatement of rent, or if tenants
are entitled to an abatement of rent, such abatement is covered through rent
loss insurance proceeds or a binding, unconditional agreement by Duke in form
and substance satisfactory to Belcrest to cover such abatement), and (iii) Duke
pays to the Company any applicable deductible, then the Company and Belcrest
shall proceed to Closing. If the conditions of subsection (b) above are not
satisfied, then Belcrest may elect to proceed to Closing to include the
affected Property, or terminate this Agreement as to the affected Property.

(c)           If all or part of
the Property is taken by condemnation, eminent domain or by agreement in lieu
thereof, or any proceeding to acquire, take or condemn all or part of the
Property is threatened or commenced (collectively, a “Taking”), which (i)
allows a tenant to terminate its lease (and said tenant does not agree to waive
its termination right) or (ii) materially impacts access or parking for the
applicable Property (collectively, a “Material Taking”), the Company may either
(1) terminate this Agreement as it relates to the affected Property and proceed
to Closing on the remaining Properties with an appropriate reduction in the
Gross Agreed Value for any terminated Property or (2) proceed to Closing in
accordance with the terms hereof, without reduction in the Gross Agreed
Value.  If Owning Entity has received
payments from the condemning authority and if Company elects to proceed to
Closing, Owning Entity shall credit the amount of said payment against the
Gross Agreed Value at the Closing.  If a
Taking is not a Material Taking and the Owning Entity has not received payments
from the condemning authority, then the parties shall proceed to Closing in
accordance with the terms hereof, without reduction in the Gross Agreed Value.
If payments have 

 13
  
  
 

been received, a credit for same shall be applied at Closing except to
the extent used by Property Owner for repair of any damage to the Property
caused by the Taking.

(d)           Duke shall
immediately notify Company of any damage or destruction to the Property or any
notice received by Owning Entity or Duke or information or awareness acquired by
Duke regarding the threatening of or commencement of condemnation or similar
proceedings.

(e)           If any Property is terminated from
this Agreement pursuant to this Article 11, the Closing shall be delayed to
allow Duke to transfer the Property from the Property Owner to an entity owned
solely by Duke, together with an assignment of all insurance or Taking
proceeds, if necessary.

ARTICLE 12.  Representations and Warranties of Duke:  (a) Subject to the disclosures contained in Exhibit
U attached hereto and made a part hereof (the “Disclosure Items”), matters
contained in the due diligence materials delivered to Belcrest or located in
the electronic data room created by Duke (the “Data Room”) and made available
to Belcrest and any matters of public record where the Property is located,
Duke hereby represents and warrants to Company as of the date of this Agreement
and as of the Closing Date as follows:

(i)                                     Each
Owning Entity is a limited liability company duly and validly organized and
existing and governed by the laws of the State of Delaware and registered to do
business in the State of Virginia, if so required.  Furthermore, since its inception, each Owning
Entity has been, and is as of the date hereof, a disregarded entity for Federal
income tax purposes.

(ii)                                  A
true and complete copy of the operating agreement and all other organizational
documentation for each Owning Entity along with all amendments thereto and
modifications thereof has been certified by Duke and delivered to Company, and
the same is in full force and effect and has not been, and will not be,
subsequently modified, supplemented or amended, except as expressly required
hereby.

(iii)                               Each
Owning Entity has filed all requisite assumed name and other certificates with
respect to such Owning Entity in all appropriate governmental offices,
including, but not limited to, all appropriate governmental offices in the
Commonwealth of Virginia.

 14
  
  
 

(iv)                              Each
Owning Entity has the legal right and all necessary power and authority to
carry on its business as it is now being conducted and to own, maintain, lease
and operate all of the properties and assets, including, without limiting the
foregoing, the Property now owned and operated by it.  No Owning Entity does engage in or has
engaged in any business other than the ownership, maintenance, leasing and
operation of the Property and activities related thereto.  Except as set forth in Exhibit M, no
Owning Entity (1) does own, lease or have nor has owned, leased or had any
tangible property other than the Property or (2) has or ever has had any direct
or indirect ownership interest in any other real or personal property, firm,
corporation, joint venture, partnership, business entity or other
enterprise.  No Owning Entity has qualified
to do business in any jurisdiction other than the Commonwealth of Virginia and
the State of Delaware.

(v)                                 The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby do not, and will not, violate any
provisions of the organizational documents or operating agreement and will not
violate any provision of, or cause a default under, or result in the
acceleration of any obligation under, any agreement to which any Owning Entity,
or Duke, is a party or by which any Owning Entity, Duke or its operations is
bound, or any law, statute, rule, ordinance, regulation or requirement by which
any Owning Entity, Duke or the operations of any Owning Entity may be bound or
affected; do not, and will not, require the consent or approval of any court,
administrative or governmental authority; and do not, and will not, result in
the creation or imposition of any lien upon, or give to any person or entity
any interest or right (including any right of termination or cancellation) in
or with respect to, any agreement to which any Owning Entity or Duke is a party
or any Owning Entity or Duke is bound, or, in or with respect to the business
or operations of any Owning Entity.

(vi)                              The
Property Owners are the sole owners of the Property and hold good and indefeasible
title to all of the Property subject only to the encumbrances as were set forth
in the title policies issued in the name of each Property Owner and heretofore
made available in the Data Room.  There
are no liens, encumbrances and encroachments from or on the Property (“New
Title Matters”) except those as were in existence on the effective date of each
title policy and survey of the Property issued in the name of each Property
Owner except (1) 

 15
  
  
 

real estate taxes
and other charges payable therewith not yet due and payable, (2) normal and
customary easements (e.g. utilities, access etc.) that do not materially impair
the marketability of the Property or its use and enjoyment and (3) the Assumed
Loans.

(vii)                           The
Property Owners are the sole owners of the Personal Property and hold good and
indefeasible title to all of the Personal Property.  There are no liens, charges, encumbrances,
rights, restrictions and agreements of any nature affecting the Personal
Property (“New Personal Property Matters”) except as were in existence on the
effective date of each title policy issued in the name of each Property Owner
except (1) personal property taxes and other charges payable therewith not yet
due and payable, and (2) the Assumed Loans.

(viii)                        The facts
set forth in Article I of this Agreement relating to the Owning Entities and to
Duke are true, correct and complete and the Member Interests are free and clear
of all liens, charges, encumbrances, rights, restrictions and agreements of any
nature.

(ix)                                Reserved.

(x)                                   There
are no outstanding warrants, options, rights, agreements, calls or other
commitments to which any of the Property, or any Owning Entity is a party or by
which it is bound relating to or providing for the sale, conveyance, transfer,
gift, pledge, mortgage or other disposition, encumbrance or granting of, or
permitting any person or other entity to acquire any interest in any Owning
Entity or the Property, respectively.

(xi)                                Except
as expressly disclosed in Exhibit O, (1) to Duke’s knowledge, there
is no litigation or governmental proceeding pending or threatened with respect
to the Property, or with respect to any Owning Entity which impairs the ability
of Duke and the Owning Entity to perform its obligations under this Agreement
and (2) no Owning Entity has any present liabilities or, to Duke’s knowledge,
contingent liabilities, including, without limitation, liabilities with respect
to (A) injury or damage to any person or property, whether or not reserved
against, arising out of or relating to the ownership, maintenance, use or
operation of the Property or activities now being or heretofore conducted by
any Owning Entity except for any personal injury or property damage action for
which there is 

 16
  
  
 

adequate insurance
coverage, (B) penalties, levies, fines, judgments or assessments (except for
real estate and personal property taxes and front-foot assessments not yet due
and payable), and (C) indebtedness for borrowed money except for the Assumed
Loans.  As used herein, the term “liabilities”
shall include, without limitation, a state of facts which has occurred prior to
the date hereof and which results in or gives rise to a claim subsequent to the
date hereof.

(xii)                             To
Duke’s knowledge, there are no outstanding judgments, claims, orders, or
assessments against any Owning Entity which have not been fully paid or
satisfied as of the date hereof, except for real estate and personal property
taxes not yet due and payable.

(xiii)                          This
Agreement and all documents that are to be executed by Duke and delivered to
Company at the Closing are, or at the time of the Closing will be, duly
authorized, executed and delivered by Duke, and all consents required under
Duke’s organizational documents or by law have been obtained.  All necessary third party consents and approvals
to the transactions contemplated hereby have been obtained, other than the
consent of Existing Lenders.  This
Agreement and all such documents are, or at the Closing will be, legal, valid
and binding obligations of each of the Owning Entities and Duke, and do not
violate any material provisions of any agreement or judicial order to an Owning
Entity, Duke or the Property is subject.

(xiv)                         To Duke’s
knowledge, there are no condemnation, zoning, environmental or other land use
regulation proceedings affecting the Property, either instituted or planned to
be instituted, that would detrimentally affect the use, occupancy and operation
of the Property or the value of the Property.

(xv)                            Except
as set forth on Exhibit P (“Rent Roll”), there are no Leases or other
occupancy arrangements or claims to possession affecting the Property and, to
Duke’s knowledge, each of the Leases listed on the Rent Roll is in full force
and effect.  To Duke’s knowledge, (1)
there is no monetary default or other material default on the part of Landlord
or Tenant under any of said Leases except as disclosed on the Rent Roll and (2)
no act or omission has occurred which with the passage of time or the giving of
notice or both could create such a 

 17
  
  
 

default.  The information regarding the Leases set
forth on the Rent Roll is materially true, correct and complete.  A true, correct and complete copy of each
Lease in Duke’s possession or control has heretofore been made available to the
Company either by delivery or in the Data Room. 
To Duke’s knowledge, the information furnished to the Owning Entities by
tenants in the estoppel certificates made available to Company in the Data Room
or otherwise is true and correct on the date hereof as though such estoppels
were dated the date hereof, subject to changes reflected in the Rent Roll.

(xvi)                         There is
no employment contract or collective bargaining agreement in force which
affects the Property.

(xvii)                      No Owning
Entity has any employees.

(xviii)                   Except as set
forth on Exhibit Q there are no management, service, supply and
maintenance agreements, equipment leases, or other contracts and agreements to
which any Owning Entity is party with respect to or affecting the Property as
of the date of this Agreement (herein collectively referred to as the “Operating
Contracts”).

(xix)                           To Duke’s
knowledge, the Properties are not in violation of any material requirement of
any laws and regulations; all licenses, permits, consents, orders,
authorizations or other approvals (collectively, the “Licenses”) required for
the ownership, use or operation of the Property have been duly and validly
issued by the appropriate authority and are in full force and effect; and no
Owning Entity has received any written notice of proceedings relating to the
revocation or modification of any such License which would have a material
adverse effect on the Property.

(xx)                              Duke
has delivered or made available in the Data Room to Company true and complete
copies of all reports prepared for Duke or in Duke’s possession or control
related to hazardous waste, hazardous materials, hazardous substances, oil,
radon, urea-formaldehyde, lead paint or asbestos.  To Duke’s knowledge, except as set forth in
such reports delivered to Company, the Property is not in violation of any
applicable environmental laws and the Property does not have any aboveground or
underground storage tanks located thereon. 
For purposes hereof the terms “hazardous waste”, “hazardous substances”,
“hazardous materials” and “oil” shall mean and include 

 18
  
  
 

any material defined
as such under any federal, state or local law, rule, regulation or order or
regulation relating to the protection of human health and the environment or
hazardous or toxic substances or wastes, pollutants or contaminants.

(xxi)                           Except
as set forth in Exhibit R hereto, there is not now pending nor, to Duke’s best
knowledge has there been threatened, any action, suit or proceeding against or
affecting any Owning Entity, Duke or the Property before or by any federal or
state court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling, decision
or finding, upon consummation of the sale contemplated hereby to Company or
otherwise, may reasonably be expected to have a material adverse effect on the
business or prospects of or on the condition or operations of the Property, any
Owning Entity, and/or Duke would interfere with Duke’s ability to consummate
the transactions by this Agreement.  Exhibit
R attached hereto is a complete list of all pending litigation affecting the
Owning Entities, the Property or the Owning Entities’ operation thereof.

(xxii)                        Neither
Duke nor any Owning Entity is a “foreign person” as defined by the Internal
Revenue Code (“IRC”), Section 1445 and Duke’s Taxpayer or Employer I.D. Number
is 35-1898425.

(xxiii)                     With respect
to Assumed Loans to which certain Property will be subject at Closing (1) that
the Loan Documents (the “Loan Documents”) heretofore made available to Belcrest
in the Data Room; (2) the unpaid principal balance of the Assumed Loans is, on
the date hereof, as set forth in Exhibit V and on the date of the
Closing with respect to the Property encumbered by the Assumed Loan will be as
set forth in a certificate from Duke delivered at such Closing, the (“Loan
Certificate”) from Duke delivered at such Closing; (3) interest due and payable
to date in respect of the principal indebtedness has been paid; (4) the amount
of any escrows, reserves or impounds then being held by or on behalf of Lender
are, on the date hereof as set forth in Exhibit W and at relevant Closing will
be as set forth from in the Loan Certificate and (5) to Duke’s best knowledge
Borrower is not in default in paying the Assumed Loans or in performing or
observing any of the covenants or agreements of the Assumed Loans.

 

 19
  
  

 

(xxiv)                    From the time
of its formation, each Owning Entity has maintained general liability and
umbrella liability insurance coverage in the aggregate amount of at least Fifty
Million Dollars ($50,000,000).  Evidence
of such insurance coverage has been delivered by Duke to Company.

(b)           Duke shall indemnify and defend
Company and Belcrest against and hold Company and Belcrest harmless from any
and all losses, costs, damages, liabilities and expenses (including, without
limitation, reasonable counsel fees) arising out of any (i) claims, actions,
suits or proceedings that may be made, asserted or commenced under or in
connection with the Member Interest, the Leases or any other matter relating to
the Property if the same results from any breach of Duke’s obligations prior to
Closing, or (ii) any breach by Duke of its representations and warranties
hereunder, to the extent of the actual costs incurred by Company as a result of
such breach.  Any action by Belcrest or
Company for breach of any representation or warranty or claim under the
indemnity contained herein must be commenced within three hundred sixty-five
(365) days of each Closing or forever be barred except as hereinafter
explicitly set forth.  Duke shall not be
liable for any breach of a representation or warranty discovered by Belcrest
prior to Closing unless such liability is specifically affirmed by Duke in
writing herein or by separate instrument at or prior to Closing.  This subsection (b) shall expressly survive
each Closing subject to the applicable limitations on survivability.

(c)           Except as expressly set forth herein
or called for herein or called for in any of the instruments attached as
exhibits hereto, DUKE AND THE OWNING ENTITIES MAKE NO WARRANTIES OR
REPRESENTATIONS of any kind or
character, express or implied, with respect to (i) the quality, nature,
adequacy and physical condition and aspects of the Property, including, but not
limited to, the structural elements, seismic aspects of the Property,
foundation, roof, appurtenances, access, landscaping, parking facilities and
the electrical, mechanical, HVAC, plumbing, sewage, and utility systems,
facilities and appliances, the square footage within the improvements on the
Property and within each tenant space therein, (ii) the quality, nature, adequacy,
and physical condition of soils, geology and any groundwater, (iii) the
existence, quality, nature, adequacy and physical condition of utilities
serving the Property, (iv) the development potential of the Property, and the
Property’s use, habitability, merchantability, or fitness, suitability, value
or adequacy of the Property for any particular purpose, (v) the zoning or other
legal status of the Property or any other public or private restrictions on use
of the Property, (vi) the compliance of the Property or its operation with any
applicable codes, laws, regulations, statutes, ordinances, 

 20
 

covenants, conditions and restrictions of any governmental or
quasi-governmental entity or of any other person or entity, (vii) the presence
of hazardous materials on, under or about the Property or the adjoining or
neighboring property, (viii) the quality of any labor and materials used in any
improvements on the Property, (ix) the condition of title to the Property, (x)
the Leases, Operating Contracts, or other documents or agreements affecting the
Property, (xi) the value, economics of the operation or income potential of the
Property, or (xii) any other fact or condition which may affect the Property,
including without limitation, the physical condition, value, economics of
operation or income potential of the Property. 
Notwithstanding anything contained herein to the contrary, this
Subsection (c) shall survive the Closing or any termination of this Agreement.

(d)           For purposes of this
Agreement and any document delivered at Closing, whenever the phrase “to the
best of Seller’s knowledge” or the “knowledge” of Duke or any Owning Entity or
words of similar import are used, they shall be deemed to mean and are limited
to the current actual knowledge only of Howard Feinsand, Nicholas Anthony, Jeff
Behm, Peter Scholz, Battista Orsino and Kathy Knizner, at the times indicated
only, and not any implied, imputed or constructive knowledge of such
individual(s) or of Duke or any Owning Entity, and their employees, and representative,
and without any independent investigation or inquiry having been made or any
implied duty to investigate, make any inquiries or review the due diligence
materials.  Furthermore, it is understood
and agreed that such individual(s) shall have no personal liability in any
manner whatsoever hereunder or otherwise related to the transactions
contemplated hereby.

ARTICLE 13.  Limitation of Liability.
Notwithstanding anything to the contrary contained herein, after the Closing:
(a) the maximum aggregate liability of Duke, and the maximum aggregate amount
which may be awarded to and collected by Belcrest and the Company (including,
without limitation, for any breach of any representation, warranty and/or
covenant by Duke) under this Agreement or any documents executed pursuant
hereto or in connection herewith, (collectively, the “Other
Documents”), shall under no circumstances whatsoever exceed ten
percent (10%) of Gross Agreed Value and (b) no claim by Belcrest or the Company
alleging a breach by Duke of any representation, warranty and/or covenant of
Duke contained herein or in any of the Other Documents may be made, and Duke
shall not be liable for any judgment in any action based upon any such claim,
unless and until such claim, either alone or together with any other claims by
Belcrest or the Company alleging a breach by Seller of any such representation,
warranty and/or covenant is for an aggregate amount in excess of Fifty Thousand
Dollars ($50,000) (the “Floor Amount”),
in which event Duke’s liability respecting any final judgment concerning such
claim or claims shall be for 

 21
 

the
entire amount thereof, subject to the limitation set forth in clause (a) above;
provided, however, that if any such final judgment is for an amount that is
less than or equal to the Floor Amount, then Duke shall have no liability with
respect thereto.  This provision shall
expressly survive the Closing or the termination of this Agreement.

ARTICLE 14.  Apportionment of Rents, Taxes and Other
Charges:  (a) All normal and customarily
proratable items of the Property and the Owning Entities, including without
limitation, real estate and personal property taxes and assessments, utility
bills, collected rents and other income, and Operating Contract payments (under
Operating Contracts assumed by Company) and any other expenses of the operation
and maintenance of the Property, shall be prorated as of the Closing Date, Duke
being charged and credited for all of the same relating to the period up to the
Closing Date and Company being charged and credited for all of the same
relating to the period on and after the Closing Date.  Real estate taxes shall be prorated on the
basis of the amount due and payable for the year of Closing.  No proration shall be made in relation to
delinquent rents existing, if any, as of the Closing Date.  In adjusting for uncollected rents, no
adjustment shall be made in Duke’s favor for rents which have accrued and are
unpaid as of Closing, but Company shall pay Duke such accrued and unpaid rents,
as and when collected by Company, it being agreed that Company shall not be
deemed to have collected any such arrearages attributable to the period prior
to Closing until such time as the tenant is current in the payment of all rents
accruing in the month of and after the Closing. 
Company agrees to bill tenants of the Property for all past due rents
and to take any additional reasonable actions requested by Duke to collect
rents that are accrued but unpaid as of the Closing, provided that Company
shall not be obligated to incur any out-of-pocket third party
expense in connection with such actions and Company shall not be obligated to
take any action to terminate a tenancy. Prepaid insurance premiums will be
prorated and Belcrest and Company will be added as additional insureds.  Company shall
receive the Security Deposits, with interest thereon required by the Leases or
by law (if not transferred separately in kind). 
If interest is due on a Security Deposit only if the tenant is in
possession for a stated period of time which has not elapsed as of Closing, the
credit shall be given as if the tenant will be in possession for the required
period and there shall be no post closing adjustment.  The provisions of this Article 14 shall
survive the Closing.  There will be a
readjustment, if necessary.  The parties
will readjust as promptly as possible when the relevant facts are available.

(b)           For Properties subject to Existing
Loans, Duke will receive a credit from the Company equal to the balance of any
escrow accounts being held by the 

 22
 

Existing Lenders
on the day of the Closing.  The balances
on the date hereof are set forth in Exhibit W.

(c)           A detailed statement shall be
prepared at the Closing setting forth the manner of computation of the
aforesaid pro-ration adjustments.

ARTICLE 15.  Broker:  Each party represents hereby to the other
that it dealt with no broker other than Banc America Securities, LLC (the “Broker)
in the consummation of this Agreement and each party indemnifies the other from
any claim arising from the failure of such representation by the indemnifying
party.  Any compensation due to Broker
shall be the sole responsibility of, and be timely paid by, Duke.  This Article 15 shall expressly survive
Closing.

ARTICLE 16.  Mutual Indemnification .  The transfer of Member Interests contributed
hereunder is intended to be effective at the times of the Closings pursuant to
this Agreement.  Subject to specific
provisions hereof, any debts, taxes, or claims of third parties arising out of
Owning Entities’ ownership and possession of the Properties and the conduct of
any business conducted by Owning Entities in connection with the Property
and/or Owning Entities prior to the Closing (even though such claims, taxes or
suits may be levied or be instituted thereafter) and any liabilities of the
Owning Entities not disclosed on the Balance Sheet shall remain Duke’s
exclusive responsibility and, subject to all of the indemnification limitations
which are included in Article 13 above, Duke indemnifies and saves harmless Company
with respect to any loss or expense which Owning Entities or Company shall
sustain because of any such debts or claims. 
Any debts, taxes or claims of third parties arising out of Owning
Entities’ ownership and possession of the Property or the conduct of any
business conducted by Owning Entities after the Closing Date (not specifically
caused by the breach of any of Duke’s representations, warranties or covenants
contained herein) and the accrual of the Company’s right to the Property as the
new Member of Owning Entity are to be the exclusive responsibility of the
Company.  The Company shall and hereby
does indemnify and save harmless Duke with respect to any loss or expense which
Duke shall have sustained because of any such debts or claims.  The provisions hereof shall survive the
Closing indefinitely.

ARTICLE 17.  Taxes.

(a)           Duke represents and warrants that
each of the Owning Entities has filed all material tax returns required to be
filed prior to the Closing Date and has paid all taxes it owes with respect to
all taxable periods ending on or before the Closing Date. Duke shall indemnify
the Company for any liability with respect to 

 23
 

taxes (including
interest and penalties thereon) owed by any Owning Entity for any taxable
period ending on or before the Closing.

(b)           Duke shall prepare or cause to be
prepared, and file or cause to be filed, all Tax Returns required to be filed
by the Owning Entities for all taxable periods ending on or before the Closing
Date.

(c)           Duke shall defend any audit or other
proceedings involving taxes for any taxable period of any Owning Entities
ending on or before the Closing Date.

(d)           The parties agree to report the
contributions of the entire Member Interest of each of the Owning Entities to
the Company as transactions in which gain, if any, is recognized for federal
income tax purposes.  Duke represents and
warrants that immediately following the contribution, the tax basis of the
Properties to the Company will equal the Gross Agreed Value minus the Closing
prorations other than closing costs.

The provisions of
this Article 17 shall survive the Closing.

ARTICLE 18.  Reserved:

ARTICLE 19.  Recording:  It is agreed hereby that this Agreement shall
not be filed for recording with any governmental body.

ARTICLE 20.  Notices:  Any notice or communication which may be or
is required to be given pursuant to the terms of this Agreement shall be in
writing and shall be sent to the respective party at the address set forth
below, postage prepaid, by Certified Mail, Return Receipt Requested, or by a
nationally recognized overnight courier service that provides tracing and proof
or receipt of items mailed, or to such other address as either party may
designate by notice similarly sent. 
Notices shall be effective upon receipt.

	
  

  	
  To Duke:

  	
  Duke Realty Corporation

  
	
   

  	
   

  	
  600 East 96th Street - Suite 100

  
	
   

  	
   

  	
  Indianapolis,  IN 
  46240

  
	
   

  	
   

  	
  Attn:       Jeffrey D. Behm

  
	
   

  	
   

  	
  Telephone:  (317) 808-6066

  
	
   

  	
   

  	
  Telecopy:    (317) 808-6794

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
  Duke Realty Corporation

  

 

 24
 

 

	
  

  	
   

  	
  3950 Shackleford Road,
  Suite 300

  
	
   

  	
   

  	
  Duluth, GA  30096

  
	
   

  	
   

  	
  Attn:       Howard Feinsand

  
	
   

  	
   

  	
  Telephone:  (770) 717-3267

  
	
   

  	
   

  	
  Telecopy:    (770) 717-3314

  
	
   

  	
   

  	
   

  
	
   

  	
  With an additional copy
  to:

  	
  Alston & Bird LLP

  
	
   

  	
   

  	
  1201 West Peachtree Street

  
	
   

  	
   

  	
  Atlanta, Georgia  30309-3424

  
	
   

  	
   

  	
  Attn:  Jay G. Farris, Jr.

  
	
   

  	
   

  	
  Telephone:  (404) 881-7896

  
	
   

  	
   

  	
  Telecopy:  (404) 253-8587

  
	
   

  	
   

  	
   

  
	
   

  	
  To Company:

  	
  Eaton Vance Management

  
	
   

  	
   

  	
  255 State Street

  
	
   

  	
   

  	
  Boston, MA  02109

  
	
   

  	
   

  	
  Attn:  General Counsel

  
	
   

  	
   

  	
  Telephone:  617-598-8180

  
	
   

  	
   

  	
  Telecopy:  617-598-0432

  
	
   

  	
   

  	
   

  
	
   

  	
  With copy to:

  	
  Eaton Vance Management

  
	
   

  	
   

  	
  255 State Street

  
	
   

  	
   

  	
  Boston, MA  02109

  
	
   

  	
   

  	
  Attn:  Director of Asset Management

  
	
   

  	
   

  	
  Real Estate Group

  
	
   

  	
   

  	
  Telephone:  617-598-8681

  
	
   

  	
   

  	
  Telecopy:  617-542-7410

  
	
   

  	
   

  	
   

  
	
   

  	
  With an additional copy
  to:

  	
  Goulston & Storrs,
  P.C.

  
	
   

  	
   

  	
  400 Atlantic Avenue

  
	
   

  	
   

  	
  Boston, MA  02110-3333

  
	
   

  	
   

  	
  Attn:  Eli Rubenstein

  
	
   

  	
   

  	
  Telephone:  (617) 574-6446

  
	
   

  	
   

  	
  Telecopy:  (617) 574-7629

  

 

ARTICLE 21.  Captions; Exhibits:  The captions in this Agreement are inserted
only for the purpose of convenient reference and in no way define, limit or
prescribe the scope or intent of this Agreement or any part hereof.  All Exhibits and Schedules attached to this
Agreement are made a part hereof and incorporated herein.

 25
 

ARTICLE 22.  Successors and Assigns:  This Agreement shall be binding upon the
parties hereto and their respective successors and assigns.

ARTICLE 23.  Closing Costs:  Each of Duke and Belcrest shall be
responsible for its own legal expenses, financial analysis costs and due
diligence expenses.  All other closing
costs shall be borne by the Company.

ARTICLE 24.  Governing Law:  The laws of Virginia shall govern the
validity, construction, enforcement and interpretation of this Agreement.

ARTICLE 25.  Multiple Counterparts:  This Agreement may be executed in any number
of identical counterparts.  If so
executed, each of such counterparts shall constitute this Agreement.  In proving this Agreement, it shall not be necessary
to produce or account for more than one such counterpart.

ARTICLE 26.  Representations and Warranties of Company:  Company hereby represents and warrants to
Duke as of the date hereof and as of the Closing Date as follows:

(a)           This Agreement and all documents
executed by Company that are to be delivered to Duke at the Closing are, or at
the time of Closing will be, duly authorized, executed and delivered by
Company.  This Agreement and such
documents are, or at the Closing will be, legal, valid, and binding obligations
of Company, and do not, and, at the time of Closing will not, violate any
provisions of any agreement or judicial order to which Company is a party or to
which it is subject.

(b)           There are no proceedings pending or,
to Company’s knowledge, threatened against it in any court or before any
governmental authority or any tribunal which, if adversely determined, would
have a material adverse effect on its ability to accept the membership
interests to be conveyed or to carry out its obligations under this Agreement.

(c)           Company shall indemnify and defend
Duke against and hold Duke harmless from any and all losses, costs, damages,
liabilities and expenses (including, without limitation, reasonable counsel
fees) arising out of any breach by Company of its representations and
warranties hereunder.

ARTICLE 27.  Representations and Warranties of Belcrest:  Belcrest hereby represents and warrants to
Duke as of the date hereof and as of the Closing Date as follows:

 26
 

(a)           Belcrest is a corporation duly and
validly organized and existing and governed by the laws of the State of Delaware.

(b)           This Agreement and all documents
executed by Belcrest that are to be delivered to Duke at the Closing are, or at
the time of Closing will be, duly authorized, executed and delivered by
Belcrest.  This Agreement and such
documents are, or at the Closing will be, legal, valid, and binding obligations
of Belcrest, and do not, and, at the time of Closing will not, violate any
provisions of any agreement or judicial order to which Company is a party or to
which it is subject.

(c)           There are no proceedings pending or,
to Belcrest’s knowledge, threatened against it in any court or before any
governmental authority or any tribunal which, if adversely determined, would
have a material adverse effect on its ability to carry out its obligations
under this Agreement.

(d)           Belcrest shall indemnify and defend
Duke against and hold Duke harmless from any and all losses, costs, damages,
liabilities and expenses (including, without limitation, reasonable counsel
fees) arising out of any breach by Company of its representations and
warranties hereunder.

ARTICLE 28.  Post-Closing Obligations:  (a) 
After each Closing, each of Company and Duke shall cooperate with one
another at reasonable times and on reasonable conditions and shall execute and
deliver such instruments and documents as may be necessary in order fully to
carry out the intent and purposes of the transactions contemplated hereby.  Except for such instruments and documents as
the parties were originally obligated to deliver by the terms of this
Agreement, such cooperation shall be without additional cost or liability.

(b)  In addition to the foregoing, upon the
request of Company, Duke shall make its records pertaining to the Property
available to Company for inspection, copying and audit by Company’s designated
accountants at Company’s sole cost and expense in order to allow its
accountants to prepare financial statements in compliance with any or all of
(a) the rules of the Securities and Exchange Commission (the “Commission”); and
(b) any registration statement, report or disclosure statement filed with the
Commission by, or on behalf of, Company; provided, however, that in any such
event (s), Company shall reimburse Duke for all third party out-of-pocket costs
and expenses that Duke incurs in order to comply with the foregoing
requirements.

 27
 

(c)           The provisions of this Article 28
shall survive the Closing.

 

 28

IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as an instrument as of
the day and date first written above.

	
  

  	
  DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited
  partnership

  
	
   

  	
   

  
	
   

  	
  By:    Duke Realty Corporation, its
  sole general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Howard L. Feinsand

  
	
   

  	
   

  	
  Name:Howard L. Feinsand

  
	
   

  	
   

  	
  Title: Executive
  Vice President, General Counsel and Corporate Secretary

  

 

	
  

  	
  WTM MASTER BUILDING, LLC, a Delaware limited
  liability company

  
	
   

  	
   

  
	
   

  	
  By:   Duke Realty Limited Partnership, its
  sole member

  
	
   

  	
   

  
	
   

  	
  By:  

  	
  Duke Realty Corporation, its sole general partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Howard L. Feinsand

  
	
   

  	
   

  	
  Name: Howard L. Feinsand

  
	
   

  	
   

  	
  Title: Executive
  Vice President, General Counsel and Corporate Secretary

  
				

 

  
  
  
 

 

	
  

  	
  MARK CENTER BUILDING, LLC, a Delaware limited
  liability company

  
	
   

  	
   

  
	
   

  	
  By:   WTM Master Building, LLC, its sole
  member

  
	
   

  	
   

  
	
   

  	
  By:   Duke
  Realty Limited Partnership, its sole member

  
	
   

  	
   

  
	
   

  	
  By:  

  	
  Duke Realty Corporation, its sole general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
  /s/ Howard L. Feinsand

  
	
   

  	
   

  	
  Name: Howard L. Feinsand

  
	
   

  	
   

  	
  Title: Executive
  Vice President, General Counsel and Corporate Secretary

  
				

 

	
  

  	
  MARK CENTER 1801/1901, LLC, a Delaware limited
  liability company

  
	
   

  	
   

  
	
   

  	
  By:   Mark Center Buildings, LLC, its sole
  member

  
	
   

  	
   

  
	
   

  	
  By:   WTM
  Master Building, LLC, its sole member

  
	
   

  	
   

  
	
   

  	
  By:   Duke
  Realty Limited Partnership, its sole member

  
	
   

  	
   

  
	
   

  	
  By:  

  	
  Duke Realty Corporation, its sole general partner

  
	
   

  	
   

  
	
   

  	
  By:  

  	
  /s/ Howard L. Feinsand

  
	
   

  	
   

  	
  Name: Howard L. Feinsand

  
	
   

  	
   

  	
  Title: Executive
  Vice President, General Counsel and Corporate

  
	
   

  	
   

  	
  Secretary

  
				

 

  
  
  
 

 

	
  

  	
  MARK CENTER 2001, LLC, a Delaware limited liability
  company

  
	
   

  	
   

  
	
   

  	
  By:   Mark Center Buildings, LLC, its sole
  member

  
	
   

  	
   

  
	
   

  	
  By:   WTM
  Master Building, LLC, its sole member

  
	
   

  	
   

  
	
   

  	
  By:   Duke
  Realty Limited Partnership, its sole member

  
	
   

  	
   

  
	
   

  	
  By:  

  	
  Duke Realty Corporation, its sole general partner

  
	
   

  	
   

  
	
   

  	
  By:  

  	
  /s/ Howard L. Feinsand

  
	
   

  	
   

  	
  Name: Howard L. Feinsand

  
	
   

  	
   

  	
  Title: Executive
  Vice President, General Counsel and Corporate

  
	
   

  	
   

  	
  Secretary

  
				

 

	
  

  	
  MARK CENTER BUILDINGS II, LLC, a Delaware limited
  liability company

  
	
   

  	
   

  
	
   

  	
  By:   WTM Master Building, LLC, its sole
  member

  
	
   

  	
   

  
	
   

  	
  By:   Duke
  Realty Limited Partnership, its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Duke Realty Corporation, its sole general partner

  
	
   

  	
   

  
	
   

  	
  By:  

  	
  /s/ Howard L. Feinsand

  
	
   

  	
   

  	
  Name: Howard L. Feinsand

  
	
   

  	
   

  	
  Title: Executive
  Vice President, General Counsel and Corporate Secretary

  
				

 

  
  
  
 

 

	
  

  	
  BELCREST REALTY CORPORATION, a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William R. Cross

  
	
   

  	
   

  	
  Name: William R. Cross

  
	
   

  	
   

  	
  Title: President

  

 

	
  

  	
  LAFAYETTE REAL ESTATE, LLC, a Delaware limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William R. Cross

  
	
   

  	
   

  	
  Name: William R. Cross

  
	
   

  	
   

  	
  Title: ManagerExhibit 10.6

WATSON PHARMACEUTICALS, INC.

KEY EMPLOYEE AGREEMENT

This
Key Employee Agreement (“Agreement”) is entered into as of December 11, 2006
(the “Effective Date”), by and between Thomas Giordano (“Executive”) and Watson
Pharmaceuticals, Inc. (the “Company”), a Nevada corporation.

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

WHEREAS, Executive wishes to be employed by the
Company and provide personal services to the Company in return for certain
compensation and benefits, including the benefits provided under this
Agreement;

NOW, THEREFORE, in consideration of the mutual
promises and covenants contained herein, it is hereby agreed by and between the
parties hereto as follows:

1.             EMPLOYMENT
BY THE COMPANY.  Subject
to terms set forth herein, the Company agrees to employ Executive in the
position of Senior Vice President and Chief Information Officer, and Executive
hereby accepts employment effective as of the Effective Date.  In this position, Executive shall perform
such duties as are assigned from time to time by the Chief Executive Officer (“CEO”)
of the Company or a designee of the CEO (the “Designated Officer”); provided
that, a Designated Officer shall be either the Chief Operating Officer, President,
Chief Administrative Officer who reports to the CEO, or the President of the
Generics Division of the Company. During his employment with the Company,
Executive will devote his best efforts and substantially all of his business
time and attention (except for vacation periods as set forth herein and
reasonable periods of illness or other incapacity permitted by the Company’s
general employment policies) to the business of the Company.  Executive shall abide by the general
employment policies and procedures of the Company, except that wherever the
terms of this Agreement may differ from or are in conflict with the Company’s
general employment policies or procedures, this Agreement shall control.

2.                                      COMPENSATION.

2.1          Salary. For services
to be rendered hereunder, Executive shall receive a base salary as set forth in
Section 1 of the Compensation and Severance Terms Schedule, attached hereto as
Exhibit A.  Executive will be considered annually
for adjustments in base salary in accordance with Company policy and the terms
of this Agreement and subject to review and approval by the CEO and/or the
Designated Officer, as appropriate.

2.2          Bonus.  Executive shall be eligible to participate in
the Company’s bonus plan at the executive level throughout the duration of
Executive’s employment with the Company. 
The Company shall have the sole discretion to determine whether
Executive is entitled to any such bonus and to determine the amount of the
bonus.  The amount of Executive’s bonus
may be determined in part based on Executive’s performance with respect to
certain goals

 1
 

established by the Company and attainment by the
Company of its planned financial objectives for the bonus period.  Notwithstanding the foregoing, no bonus is
guaranteed to Executive.  Any bonus is
subject to the approval of the CEO and/or the Designated Officer, as
appropriate.  The Company retains the
authority to review, grant, deny or revise any bonus in its sole
discretion.  To be eligible to receive a
bonus, Executive must remain in employment with the Company throughout the
entire fiscal year or as otherwise required by the applicable bonus plan as
adopted by the Company from time to time. 
The target level of such bonus is set forth in Section 2 of Exhibit A
attached hereto.

2.3          Long Term Incentive Awards.  Subject to the approval of
the Board of Directors (the “Board”) of the Company or the Compensation
Committee of the Board, as appropriate, Executive shall receive the long term
incentive awards (if any) set forth in Section 3 of Exhibit A, and such additional
long term incentive awards as may from time to time be granted, pursuant to the
terms and conditions set forth in the applicable award agreement and plan
documents, copies of which will be made available upon Executive’s
request.  For the purposes of this
Agreement, all long term incentive awards (e.g., stock
options, restricted stock and restricted stock units) granted to Executive by the
Company hereunder, or granted in the future, shall be referred to hereinafter
as the “Awards.”

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

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

3.             PROPRIETARY INFORMATION AND INVENTIONS.

Executive agrees
to execute and abide by the Employee Proprietary Information and Inventions
Agreement attached hereto as Exhibit C and made a part hereof by this
reference.

4.             OUTSIDE ACTIVITIES.

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

4.2          Investments and Interests.
During his employment by the Company, Executive agrees not to acquire, assume
or participate in, directly or indirectly, any position, investment or interest
known by him to be adverse to or in conflict with the interest of the

 2
 

Company, its business or
prospects, financial or otherwise. By way of clarification, nothing contained
in this Agreement shall prevent Executive from holding, for investment purposes
only, no more than one percent (1%) of the capital stock of any
publicly traded company.

4.3          Non-Competition.  During his employment by the Company, except
on behalf of the Company, Executive will not directly or indirectly, whether as
an officer, director, stockholder, partner, proprietor, associate,
representative, consultant, or in any capacity whatsoever engage in, become
financially interested in, be employed by or have any business connection with
any other person, corporation, firm, partnership or other entity whatsoever
known by him to compete directly with the Company, anywhere in the world, in
any line of business engaged in (or planned to be engaged in) by the Company.

5.             OTHER
AGREEMENTS.

Executive represents and
warrants that his employment by the Company will not conflict with and will not
be constrained by any prior agreement or relationship with any third
party.  Executive represents and warrants
that he will not disclose to the Company or use on behalf of the Company any
confidential information governed by any agreement with any third party except
in accordance with an agreement between the Company and any such third
party.  During Executive’s employment by
the Company, Executive may use, in the performance of his duties, all
information generally known and used by persons with training and experience
comparable to his own and all information which is common knowledge in the
industry or otherwise legally in the public domain.

6.                                      TERMINATION OF EMPLOYMENT.

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

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

(a)           Definition of “Cause.”  For purposes of this Agreement, “Cause” shall
mean (i) Executive’s conviction of any felony; (ii) Executive’s gross
misconduct, material violation of Company policy, or material breach of
Executive’s duties to the Company, which Executive fails to correct within
thirty (30) days after Executive is given written notice by the CEO or the
Designated Officer; or (iii) other events or matters relating to your job
performance or conduct that would ordinarily cause an employer to seriously
consider the termination of an employee’s employment.

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

 3
 

6.4          Executive’s Voluntary
Resignation.  Executive
may terminate his employment with the Company at any time, with or without Good
Reason, and with or without notice.  In
the event Executive voluntarily terminates his employment other than for Good
Reason, he will not be entitled to severance pay, pay in lieu of notice or any
other such compensation.

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

(a)           Definition of “Good Reason.”  For purposes of this Agreement, “Good Reason”
shall mean any one of the following events which occurs on or after the
Effective Date:  (i) after a Change of Control
(as defined in Section 7.1), any reduction of the Executive’s then existing
annual base salary, except to the extent the annual base salary of all other
executive officers at levels similar to Executive is similarly reduced
(provided such reduction does not exceed fifteen percent (15%) of Executive’s
then existing annual base salary); (ii) after a Change of Control, any material
reduction in the package of benefits and incentives, taken as a whole, provided
to the Executive (except that employee contributions may be raised to the
extent of any cost increases imposed by third parties) or any action by the
Company which would materially and adversely affect the Executive’s
participation or reduce the Executive’s benefits under any such plans, except
to the extent that such benefits and incentives of all other executive officers
at levels similar to Executive are similarly reduced; (iii) after a Change of
Control, any material diminution of the Executive’s duties, and
responsibilities, taken as a whole, excluding for this purpose an isolated,
insubstantial or inadvertent action not taken in bad faith which is remedied by
the Company immediately after notice thereof is given by the Executive; (iv) a
requirement that the Executive relocate to a work site that would increase the
Executive’s one-way commute distance by more than thirty-five (35) miles from
his then principal residence, unless the Executive accepts such relocation
opportunity; (v) any material breach by the Company of its obligations under
this Agreement; or (vi) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company.

6.6          Termination for Death or Disability.  Executive’s employment with the Company will
be terminated in the event of Executive’s death, or any illness, disability or
other incapacity in such a manner that Executive is physically rendered unable
regularly to perform his duties hereunder for a period in excess of one hundred
eighty (180) consecutive days or more than one hundred eighty (180) days in any
consecutive twelve (12) month period. 
The determination regarding whether Executive is physically unable
regularly to perform his duties shall be made by the Board.  Executive’s inability to be physically
present on the Company’s premises shall not constitute a presumption that
Executive is unable to perform such duties. 
In the event that Executive’s employment with the Company is terminated
for death or disability as described in this Section 6.6, Executive or
Executive’s heirs, successors, and assigns shall not receive any compensation
or benefits other than payment of accrued salary and PTO and such other
benefits as expressly required in such event by applicable law or the terms of
applicable benefit plans.

 4
 

6.7          Cessation.  If Executive violates any provision of
Section 8 of this Agreement or the Employee Proprietary Information and
Inventions Agreement and Executive fails to correct such violation within ten
(10) days after Executive is given written notice by the CEO or the Designated
Officer, then any severance payments or other benefits being provided to
Executive will cease immediately, and Executive will not be entitled to any
further compensation from the Company.

7.             CHANGE OF CONTROL.

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

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

(b)           a liquidation or
dissolution of the Company;

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

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

(e)           in the event that
the individuals who, as of the Effective Date, are members of the Board (the “Incumbent
Board”), cease for any reason to constitute at least fifty percent (50%) of the
Board.  (If the election, or nomination
for election by the Company’s shareholders, of any new member of the Board is
approved by a vote of at least fifty percent 

 5
 

(50%) of the Incumbent
Board, such new member of the Board shall be considered as a member of the
Incumbent Board.)

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

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

(a)         All determinations required to be made
under this Section 7.3, including whether and when any Gross-Up Payment is
required and the amount of such Gross-Up Payment, and the assumptions to be
utilized in arriving at such determinations, shall be made by the Accountants
(as defined below), which shall provide Executive and the Company with detailed
supporting calculations with respect to such Gross-Up Payment within thirty
(30) days of the receipt of notice from Executive or the Company that Executive
has received or will receive a Payment. 
For the purposes of this Section 7.3, the “Accountants” shall mean the
Company’s independent certified public accounting firm serving immediately
prior to the Change of Control (or other change in ownership or effective
control, or change in ownership of a substantial portion of the assets, of a
corporation, as defined in Section 280G of the Code) with respect to which such
determination is being made.  In the
event that the Accountants are also serving as the accountants, auditors or
consultants for the individual, entity or group effecting the Change of Control
(or other change in ownership or effective control, or change in ownership of a
substantial portion of the assets, of a corporation, as defined in Section 280G
of the Code), the Company shall appoint another nationally recognized
independent certified public accounting firm, reasonably acceptable to
Executive, to make the determinations required hereunder (which accounting firm
shall then be referred to as the “Accountants” hereunder).  All fees and expenses of the Accountants
shall be borne solely by the Company.

 6
 

(b)           For the purposes of determining
whether any of the Payments will be subject to the Excise Tax and the amount of
such Excise Tax, such Payments will be treated as “parachute payments” within
the meaning of section 280G of the Code, and all “parachute payments” in excess
of the “base amount” (as defined under Section 280G(b)(3) of the Code) of
Executive shall be treated as subject to the Excise Tax, unless and except to
the extent that, in the opinion of the Accountants, such Payments (in whole or
in part) either do not constitute “parachute payments” or represent reasonable
compensation for services actually rendered (within the meaning of section
280G(b)(4) of the Code) in excess of the “base amount,” or such “parachute
payments” are otherwise not subject to such Excise Tax.

(c)           For purposes of determining the
amount of the Gross-Up Payment, Executive shall be deemed to pay federal income
taxes at the highest applicable marginal rate of federal income taxation for
the calendar year in which the Gross-Up Payment is to be made and to pay any
applicable state and local income taxes at the highest applicable marginal rate
of taxation for the calendar year in which the Gross-Up Payment is to be made,
net of the maximum reduction in federal income taxes which could be obtained
from the deduction of such state or local taxes if paid in such year
(determined without regard to limitations on deductions based upon the amount
of Executive’s adjusted gross income); and to have otherwise allowable
deductions for federal, state and local income tax purposes at least equal to
those disallowed because of the inclusion of the Gross-Up Payment in Executive’s
adjusted gross income.

(d)           Any determination by the Accountants
shall be binding upon the Company and Executive.  As a result of uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accountants hereunder, it is possible that the Gross-Up Payment made will have
been an amount less than the Company should have paid pursuant to this Section 7.3
(the “Underpayment”).  In the event that
the Company exhausts its remedies pursuant to Section 7.3(f) and Executive is
required to make a payment of any Excise Tax, the Underpayment shall be
promptly paid by the Company to or for Executive’s benefit.

(e)           Executive shall notify the Company in
writing of any claim by the Internal Revenue Service or other taxing authority
that, if successful, would require the payment by the Company of a Gross-Up
Payment.  Such notification shall be
given as soon as practicable after Executive is informed in writing of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. 
Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which Executive gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes, interest
and/or penalties with respect to such claim is due).  If the Company notifies Executive in writing
prior to the expiration of such period that the Company desires to contest such
claim, Executive shall:  (i) give the
Company any information reasonably requested by the Company relating to such
claim; (ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, engaging legal representation with respect to such claim by
an attorney selected by the Company and reasonably acceptable to Executive;
(iii) cooperate with the Company in good faith in order to effectively contest
such claim; and (iv) permit the Company to participate in any proceedings
relating to such claims; provided, however,
that the Company shall bear and pay directly all costs

 7
 

and expenses, including attorneys’ fees (including additional interest
and penalties) incurred in connection with such contest and shall indemnify
Executive for and hold Executive harmless from, on an after-tax basis, any
Excise Tax or income, employment or other taxes (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of all related costs and expenses.

(f)            Without limiting the foregoing
provisions of this Section 7.3, the Company shall control all proceedings taken
in connection with such contest and, at the Company’s sole option, may pursue
or forgo any and all administrative appeals, proceedings, hearings and
conferences with the Internal Revenue Service or other taxing authority in
respect of such claim and may, at the Company’s sole option, either direct
Executive to pay the amount claimed and sue for a refund or contest the claim
in any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company
directs Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to Executive, on an interest-free basis, and
shall indemnify Executive for and hold Executive harmless from, on an after-tax
basis, any Excise Tax or income, employment or other taxes (including interest
or penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance (including as a
result of any forgiveness by the Company of such advance); provided,
further, that any extension of the statute of limitations relating
to the payment of taxes, interest and penalties for the taxable year of
Executive with respect to which such contested amount is claimed to be due
shall be limited solely to such contested amount.  Furthermore, the Company’s control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

(g)           The Gross-Up Payments provided for in
this Section 7.3 shall be paid to Executive as soon as practicable after the
Accountants have determined the amount of such payments, but not earlier than
the date the severance benefits are due to Executive under Section 4.4 of the
Compensation and Severance Terms Schedule, attached hereto as Exhibit A and in
no event later than the later of (i) the end of the calendar year following the
date of termination and (ii) the third calendar month following the date of
termination, as permitted under Code Section 409(A); provided,
however, that if the amounts of such Gross-Up Payments cannot be
finally determined by the Accountants before the end of this period, the
Company shall pay to Executive as of the last day of the period described above
an estimate, as determined in good faith by the Company, of the amount of such
Gross-Up Payments.  In the event that the
amount of the estimated payments exceeds the amount subsequently determined by
the Accountants to have been due to the Executive, such excess shall constitute
a loan by the Company to Executive, payable not later than 30 days after such
determination and demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).

 8
 

8.             NONSOLICITATION.  While employed by
the Company, and for one (1) year following the termination of Executive’s
employment with the Company, Executive agrees not to solicit, attempt to
solicit, induce, or otherwise cause any employee or independent contractor of
the Company to terminate his or her employment or contractual relationship in
order to become an employee or independent contractor to or for Executive or
any other person or entity.

9.             RELEASE.  In exchange for the
severance compensation and benefits provided under this Agreement to which
Executive would not otherwise be entitled, Executive shall enter into and
execute a release substantially in the form attached hereto as Exhibit B, as
may be revised and updated as determined to be appropriate by the Company (the “Release”).  Unless the Release is executed by Executive
following termination of employment, delivered to the Company within twenty-one
(21) days after the Release has been provided to Executive (or forty-five (45)
days following Executive’s receipt of the informational package required in the
event of a group termination), and not revoked, Executive shall not receive any
severance benefits provided under this Agreement, any vesting acceleration of
Executive’s Awards as provided in this Agreement shall not apply, and Executive’s
Awards in such event shall vest or, in the case of stock options, be
exercisable following the date of Executive’s termination only to the extent
provided under their original terms in accordance with the applicable plan and Award
agreements.

10.          GENERAL
PROVISIONS.

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

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

10.3        Waiver.  If either party should waive any breach of
any provisions of this Agreement, he or it shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provision of
this Agreement.

10.4        Entire Agreement.  This Agreement, together with the Employee
Proprietary Information and Inventions Agreement, constitute the final,
complete, and exclusive embodiment of the entire agreement between Executive
and the Company regarding the subject matter hereof and supersede any prior
agreement, promise, representation, or statement, written or otherwise, between
Executive and the Company or any of its affiliates with regard to this subject
matter. Without limiting the generality of the foregoing, this Agreement
supersedes any and all  agreements,
written or otherwise, between Executive and Andrx Corporation concerning

 9
 

Executive’s
employment.  This Agreement is entered
into without reliance on any promise, representation, statement or agreement
other than those expressly contained or incorporated herein, and it cannot be
modified or amended except in a writing signed by Executive and a duly
authorized officer of the Company.

10.5        Counterparts.  This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.

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

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

10.8        Attorneys’ Fees.  If either party hereto brings any action to enforce
his or its rights hereunder, the prevailing party in any such action shall be
entitled to recover his or its reasonable attorneys’ fees and costs incurred in
connection with such action.

10.9        Arbitration.  To provide a mechanism for rapid and
economical dispute resolution, Executive and the Company agree that any and all
disputes, claims, or causes of action, in law or equity, arising from or
relating to this Agreement (including the Release) or its enforcement,
performance, breach, or interpretation, will be resolved, to the fullest extent
permitted by law, by final, binding, and confidential arbitration held in
Orange County, California and conducted by Judicial Arbitration & Mediation
Services/Endispute (“JAMS”), under its then-existing Rules and Procedures.  Nothing in this Section 10.9 or in this
Agreement is intended to prevent either Executive or the Company from obtaining
injunctive relief in court to prevent irreparable harm pending the conclusion
of any such arbitration.

10.10      Remedies.  Executive’s duties under
Section 8 and the Employee Proprietary Information and Inventions Agreement
shall survive termination of Executive’s employment with the Company.  Executive acknowledges that a remedy at law
for any breach or threatened breach by Executive of the provisions of these
sections and the Employee Proprietary Information and Inventions Agreement
would be inadequate, and that such a breach would cause irreparable harm to the
Company; and Executive therefore agrees that the Company shall be entitled to
injunctive relief in case of any such breach or threatened breach.

10.11      Governing Law.  All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of
the State of California as applied to contracts made and to be performed
entirely within California.

 

 10

IN WITNESS WHEREOF,
the parties have executed this Agreement effective as of the Effective Date
above written.

WATSON PHARMACEUTICALS, INC.

	
  By:

  	
   

  	
  /s/ Allen Chao

  	
   

  
	
   

  	
   

  	
  Name: Allen Chao

  
	
   

  	
   

  	
  Title: Chairman, President and Chief Executive
  Officer

  

 

EXECUTIVE:

	
  /s/ Thomas Giordano

  	
   

  
	
  Name: Thomas Giordano

  

 

 11
 

EXHIBIT A

COMPENSATION
AND SEVERANCE TERMS SCHEDULE

1.             BASE SALARY

For services to be rendered under this Agreement,
Executive shall receive an initial base salary at an annualized rate of
$345,000, payable in accordance with the Company’s standard payroll practices,
and subject to adjustments as set forth in the Agreement.  Additionally, Executive shall be eligible to
receive a car allowance of $8,400 per year, payable in accordance with the
Company’s standard practices.

2.             BONUS

Executive’s annual bonus, if granted, shall be at a target level of not
less than 40% of Executive’s then current base salary.  Executive’s annual bonus shall be based on
the attainment of certain goals and initiatives approved by the CEO and, as
applicable, the Compensation Committee.

Additionally, for calendar year 2007, Executive shall be eligible for
an additional special performance bonus of up to $70,000.  Such special performance bonus shall be based
on Executive’s achievement of certain specific goals during the 2007 calendar
year as set by the CEO and the Compensation Committee.

3.             LONG TERM
INCENTIVE AWARDS

As of the date of approval by the Compensation Committee (“Approval
Date”), Executive shall receive a stock option grant (“Option”) to purchase
22,500 shares of Company common stock (“Shares”), with an exercise price equal
to the closing price of the Company common stock immediately prior to the
Approval Date.  The Shares subject to the
Option shall vest ratably over a four year period in annual equal installments
upon each anniversary date of the date of grant.  All other terms of such options shall be as
set forth in the Plan or in the accompanying option agreements evidencing such
options.

As of the Approval Date, Executive shall be awarded 7,500 Shares of
Restricted Stock in the Company.  The
Shares of Restricted Stock shall vest as follows:

·                  50%
of the Shares shall vest on the second anniversary of the Approval Date

·                  the
remaining 50% of the Shares shall vest on the fourth anniversary of the
Approval Date.

 12
 

The terms of such foregoing Awards shall be set forth
in the applicable award agreements and shall otherwise be subject to the terms
and conditions of the applicable plan documents.

4.             SEVERANCE BENEFITS

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

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

(b)           Continued group health insurance
benefits (e.g., medical, dental, vision, etc.) for Executive and Executive’s
eligible dependents for a period of up to eighteen (18) months under COBRA;
provided, however, that in any event the Company’s obligation to provide any
health benefits pursuant to this sentence ends when Executive becomes eligible
for subsidized health insurance with a new employer or other third party (and
Executive agrees to promptly notify the Company in writing of any such event of
eligibility).  To satisfy its obligations
hereunder, the Company, at its election, shall either (i) arrange commercial
health care coverage for Executive and Executive’s eligible dependents
(which is (x) comparable to the health benefits provided to Executive and
his eligible dependents immediately prior to commencement of such commercial
health care coverage, (y) subject to change if such coverage is no longer
available, and (z) mutually agreeable to the Company and Executive), or (ii)
provide Executive and his eligible dependents continued coverage under the
Company’s health plans.

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

4.2          Executive’s Resignation for Good Reason.  If Executive terminates his employment with
the Company for Good Reason in the absence of a Change of Control, the Company
shall provide to Executive, within thirty (30) days after the Effective Date of
the Release attached hereto as Exhibit B (as “Effective Date” is defined in the
Release), as the only severance compensation and benefits, the same severance
compensation and benefits provided in Section 4.1 hereof.

4.3          Change of Control Termination.  In the event of a Change of Control
Termination or if the Executive resigns for Good Reason within ninety (90) days
prior to

 13
 

or twenty-four (24) months following a Change of
Control, the Company shall provide to Executive, within thirty (30) days after
the Effective Date of the Release attached hereto as Exhibit B (as “Effective
Date” is defined in the Release), as the only severance compensation and
benefits, (a) the same severance compensation and benefits provided in Section
4.1 hereof and, (b) any unvested Awards held by Executive shall have their
vesting accelerated in full so as to become one hundred percent (100%) vested
and, in the case of stock options, immediately exercisable in full, as of the
date of such termination.

4.4          Delayed Payments.  Notwithstanding
anything in this Section 4 to the contrary, if the Company determines in good
faith that any payment or benefit under this Section 4, that is payable to
Executive on account of a termination of employment with the Company,
constitutes a “deferral of compensation” under Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) (as set forth in IRS Notice
2005-1, or successor Temporary or Final Treasury Regulations), and that
Executive is a “specified employee” within the meaning of  Code Section 409A(a)(2)(B)(i), then
the Company shall delay commencement of any such payment or benefit until six
months after the Effective Date of the Release attached hereto as Exhibit B (as
“Effective Date” is defined in the Release) (the “409A Suspension Period”).  With respect to any benefits to be provided
by the Company (such as continued health care benefits, if any), Executive
shall pay for such benefits directly during the 409A Suspension Period.  Within 15 calendar days after the end of the
409A Suspension Period, the Company shall pay to Executive a lump sum payment
in cash equal to any payments and benefits (including interest on any such
payments and benefits, at an interest rate of not less the prime interest rate,
as published in the Wall Street Journal, for the 409A Suspension Period)  that the Company would otherwise have been
required to provide under this Section 4 but for the imposition of the 409A
Suspension Period.  Thereafter, Executive
shall receive any remaining payments and benefits due under this Section 4 in
accordance with the terms of this Section 4 (as if there had not been any
suspension period).

 14
 

EXHIBIT B

RELEASE AGREEMENT

I understand that
my position with Watson Pharmaceuticals, Inc. (the “Company”) terminated
effective                              (the “Separation Date”).  The Company has agreed that if I choose to
sign this Release, the Company will, within thirty (30) days after the
Effective Date of this Release,  pay me
certain severance benefits (minus the standard withholdings and deductions)
pursuant to the terms of the Key Employee Agreement (the “Agreement”) entered
into as of                          ,
2006, between myself and the Company, and any agreements incorporated therein
by reference.  I understand that I am not
entitled to such severance benefits unless I sign this Release.  I further understand that, regardless of whether
I sign this Release, the Company will pay me all of my accrued salary and paid
time off through the Separation Date, to which I am entitled by law.

In consideration
for the severance benefits I am receiving under the Agreement, I hereby release
the Company and its officers, directors, agents, attorneys, employees,
shareholders, parents, subsidiaries, and affiliates (“Releasees”) from any and
all claims, liabilities, demands, causes of action, attorneys’ fees, damages,
or obligations of every kind and nature, whether they are now known or unknown,
arising at any time prior to the date I sign this Release.  This general release includes, but is not
limited to:  all federal and state
statutory and common law claims, claims related to my employment or the termination
of my employment or related to breach of contract, tort, wrongful termination,
discrimination, harassment, defamation, fraud, wages or benefits, or claims for
any form of equity or compensation. 
Notwithstanding the release in the preceding sentence, I am not
releasing any right of indemnification I may have for any liabilities and costs
of defense (including without limitation reasonable attorneys’ fees) arising
from my actions within the course and scope of my employment with the Company.

In releasing
claims unknown to me at present, I am waiving all rights and benefits under
Section 1542 of the California Civil Code, and any law or legal principle of
similar effect in any jurisdiction:  “A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.”

If I am forty (40)
years of age or older as of the Separation Date, I acknowledge that I am
knowingly and voluntarily waiving and releasing any rights I may have under the
federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”).  I also acknowledge that the consideration
given for the waiver in the above paragraph is in addition to anything of value
to which I was already entitled.  I have
been advised by this writing, as required by the ADEA that:  (a) my waiver and release do not apply to any
claims that may arise after my signing of this Release; (b) I should consult
with an attorney prior to executing this Release; (c) I have twenty-one (21)
days (forty-five (45) days in the event of a group termination) within which to
consider this Release (although I may choose to voluntarily execute this
Release earlier); (d) I have seven (7) days following the execution of this
release to revoke the Release; and (e) this Release will not be effective until
the eighth day after this Release has been signed both by me and by the Company
(“Effective Date”).

I acknowledge that
I remain bound by the Employee Proprietary Information and Invention Agreement
which I signed in connection with my employment (“Invention Agreement”) and
that the provisions of the Invention Agreement shall remain in full force and
effect. In accordance with my existing and continuing obligations under the
Invention Agreement, I have returned to the Company all materials required to
be returned pursuant to the Invention Agreement, as well as any other Company
property in my possession.  In
consideration for the severance benefits I am receiving hereunder, I agree that
I will reasonably cooperate with the Company after the

 15
 

Separation Date to
assure the smooth transition of pending matters and to answer questions which
may arise from time to time regarding my former duties and
responsibilities.  Effective as of the
Separation Date, I resign any and all offices and directorships with the
Company and any of its affiliates, and will execute all documents reasonably
requested by the Company or its affiliates to effectuate such
resignations.  Further, I agree that I
will not hereafter disparage the Company or any of the Releasees, either orally
or in writing, to any person or entity. 
The Company agrees that its officers and directors will not disparage
me, either orally or in writing, to any person or entity.

Agreed:

	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
           Date

  	
   

  	
  [Employee]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
           Date

  	
   

  	
  WATSON PHARMACEUTICALS, INC.

  

 16
 

EXHIBIT C

EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS
AGREEMENT

 

 17

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