Document:

Exhibit 10.4

 

Employee – Restricted Stock

 

WATSON Pharmaceuticals, Inc.

AMENDMENT AND RESTATEMENT OF THE 2001
INCENTIVE AWARD PLAN

NOTICE OF GRANT AND SIGNATURE
PAGE

 

Congratulations, you (“Holder”)
have been granted an award of restricted shares of Common Stock of Watson
Pharmaceuticals, Inc., a Nevada corporation (the “Company”), subject to
the restrictions imposed under this Notice of Grant and Signature Page and
the Award Agreement (the “Restricted Stock” award).  The Restricted Stock award is subject to the
terms and conditions of the Award Agreement, and the Amendment and Restatement
of The 2001 Incentive Award Plan of the Company, as amended from time to time
(the “Plan”), which are attached hereto as Exhibit 1-A and 1-B, respectively,
and of which this Notice of Grant and Signature Page is a part.  By signing this Notice of Grant and Signature
Page and the applicable Exhibits, you represent and warrant to the Company
that you have read the Award Agreement, the Plan and the other Exhibits and
agree to be bound by their terms and conditions.  Capitalized terms not otherwise defined in
this Notice of Grant and Signature Page shall be as defined in the Plan,
the Award Agreement and the Exhibits.

 

Subject to the terms and
conditions of the Award Agreement, the Plan and the Exhibits, the terms and
conditions of this Restricted Stock award are set forth below:

 

	
  Holder’s Name: [First
  Name and Last Name]

  	
   

  	
  Total Number of
  Shares Granted:                   

  
	
   

  	
   

  	
   

  
	
  Date of Grant: [Month,
  Day, Year]

  	
   

  	
   

  

 

Subject
to the terms and restrictions of the Award Agreement, the Plan and the
Exhibits, this Restricted Stock award shall become vested in accordance with
the following schedule: 

 

	
  On
  This Date, or upon Achievement

  of this Performance Target

  	
   

  	
  This Restricted Stock Award Shall Become Vested

  with Respect to the Following Number of Shares on

  each Date Shown, or upon the Achievement of each

  Performance Target Shown (as Applicable)

  
	
  [Month, Day, Year][Performance Target]

  	
   

  	
  [Number]

  
	
  [Month, Day, Year][Performance Target]

  	
   

  	
  [Number]

  
	
  Total Share

  	
   

  	
  [Total]

  

 

NOTE, schedule does not
reflect cumulative vesting.

 

IN WITNESS WHEREOF, the Company has granted this
Restricted Stock award, subject to the terms and conditions set forth herein,
on the date of grant specified above.

 

	
   

  	
  WATSON
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Allen
  Chao, Ph.D.,

  
	
   

  	
  Chairman
  and Chief Executive Officer

  

 

	
  ACCEPTED:

  	
   

  
	
   

  	
  Note:  This document
  constitutes the Company’s offer to enter into an agreement under the terms
  and conditions set forth herein. This offer will expire without further
  notice at 5 o’clock Pacific Time sixty days after the date of grant of
  the Restricted Stock award set forth above, unless this offer is accepted by
  Holder by the delivery of this original Notice of Grant and Signature Page,
  and the applicable Exhibits, executed by Holder to the Company on or prior to
  the offer’s expiration date.

  

                              GRANT
  NO. 0000XXXX

  
	
   

  	
   

  
	
  Holder’s Signature

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Holder’s
  Taxpayer Identification Number

  	
   

  

 

 

EXHIBIT 1-A

 

AWARD AGREEMENT

 

THIS
AWARD AGREEMENT, dated as of the Date of Grant appearing on the Notice of Grant
and Signature Page hereof, is made by and between Watson Pharmaceuticals, Inc.,
a Nevada corporation (the “Company”), and the Employee whose name and signature
appear on the Notice of Grant and Signature Page hereof (“Holder”).

 

WHEREAS,
the Company wishes to grant to Holder shares of its Common Stock, pursuant to
the terms and conditions and restrictions of the Notice of Grant and Signature
Page, this Agreement and the Amendment and Restatement of The 2001 Incentive
Award Plan of Watson Pharmaceuticals, Inc., as amended from time to time
(the terms of which are hereby incorporated by reference and made a part of
this Agreement, the “Plan”); and

 

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

 

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

 

ARTICLE I

ISSUANCE OF RESTRICTED
STOCK

 

Section 1.1 - Issuance of Restricted Stock.  In consideration of the recitals, Holder’s
agreement to remain in the employ of the Company or a Subsidiary, and for other
good and valuable consideration, the Company agrees to issue to Holder the shares
of Common Stock specified in the Notice of Grant and Signature Page (the “Restricted
Stock”) upon the terms and conditions set forth in this Agreement.

 

Section 1.2 - Consideration to the Company.  As partial consideration for the issuance of
the Restricted Stock by the Company, Holder agrees to render faithful and
efficient services to the Company or a Subsidiary, with such duties and
responsibilities as the Company shall from time to time prescribe.  Nothing in this Agreement or in the Plan
shall confer upon Holder any right to continue in the employ of the Company or
any Subsidiary, or as a director of the Company, or shall interfere with or
restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge Holder at any time for any reason
whatsoever, with or without cause, except to the extent expressly provided
otherwise in a written employment agreement between Holder and the Company and
any Subsidiary.

 

Section 1.3 - Adjustments in Restricted Stock.  The Administrator may adjust the Restricted
Stock in accordance with the provisions of Section 12.3 of the Plan.

 

1

 

ARTICLE II

RESTRICTIONS

 

Section 2.1 - Forfeiture of Restricted Stock.  In the
event of Holder’s Termination of Employment, the Restricted Stock (including,
without limitation, any cash, securities or other property subject to Section 2.5)
as of the date of the Termination of Employment shall thereupon be forfeited and
surrendered by Holder and transferred and delivered by Holder to the Company
for no consideration (the “Forfeiture Restriction”).  For purposes of this Agreement, the “Restrictions”
shall mean the Forfeiture Restriction and the restrictions on sale or other
transfer of the Restricted Stock and other restrictions as set forth in this Article II.

 

Section 2.2 - Transferability
of the Restricted Stock; Escrow.

 

(a)                                  Except as provided
herein, Holder (and Holder’s legal representative) shall not sell, exchange,
transfer, alienate, hypothecate, pledge, encumber or assign the Restricted
Stock subject to the Forfeiture Restriction, or any interest or right with
respect thereto.  Neither the Restricted Stock subject to the Forfeiture
Restriction nor any interest or right therein or part thereof shall be liable
for the debts, contracts, or engagements of Holder or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy) and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that, this Section 2.2(a) shall
not prevent transfers subject to the consent of the Administrator, pursuant to
a DRO.

 

(b)                                 Holder hereby
authorizes and directs the Secretary of the Company, or such other person
designated by the Company, to transfer the Restricted Stock upon forfeiture and
surrender pursuant to the Forfeiture Restriction pursuant to Section 2.1
from Holder (or Holder’s legal representative) to the Company.

 

(c)                                  To ensure the
availability for delivery of Holder’s Restricted Stock upon forfeiture and
surrender of the Restricted Stock by Holder and transfer of the Restricted
Stock to the Company pursuant to the Forfeiture Restriction under Section 2.1,
Holder hereby appoints the Secretary of the Company, or any other person
designated by the Company as escrow agent, as Holder’s attorney-in-fact to
assign and transfer unto the Company, such Restricted Stock pursuant to the Forfeiture
Restriction and shall, upon execution of this Agreement, execute, deliver and deposit
with the Secretary of the Company, or such other person designated by the
Company, the share certificate(s) representing the Restricted Stock (or such
account or other evidence representing the issuance of the Restricted Stock to Holder),
together with the Assignment Separate from Certificate duly endorsed in blank,
attached as Exhibit ”1-C” hereto, and the Joint Escrow Instructions of the
Company and Holder attached as Exhibit ”1-D” hereto.  The Restricted Stock and Assignment Separate
from Certificate shall be held by the Secretary (or other escrow agent) in
escrow, pursuant to Joint Escrow Instructions, until the Restricted Stock is
transferred to the Company pursuant to the Forfeiture Restriction as provided
in Section 2.1, until such Restricted Stock (or portion thereof) is no
longer subject to the Restrictions, or until such time as this Agreement no
longer is in effect.  At such time as the
Restrictions lapse as to some or all of the Restricted Stock, the Secretary (or
other escrow agent) shall promptly deliver to Holder (or Holder’s legal
representative) the certificate or certificates (or such account or other
evidence) representing the Restricted Stock that is no longer subject to the
Restrictions in the Secretary’s (or other escrow agent’s) possession belonging
to Holder and at such time as there are no longer any Restricted Stock that is
subject to the Restrictions, the Secretary (or other escrow agent) shall
promptly deliver to Holder (or Holder’s legal representative) the certificate
or certificates (or such account or other evidence) representing any

 

2

 

remaining
Restricted Stock in the escrow agent’s possession belonging to Holder, and the
Secretary (or other escrow agent) shall be discharged of all further
obligations hereunder.

 

(d)                                 The Secretary, or other
escrow agent, shall not be liable for any act he or she may do or omit to do
with respect to holding the Restricted Stock in escrow and while acting in good
faith and in the exercise of his judgment.

 

Section 2.3 - Legend.  The share
certificate(s) evidencing the Restricted Stock issued hereunder (or such
account or other evidence representing the Restricted Stock issued hereunder) shall
be endorsed with the following legend (in addition to any legend required under
applicable state securities laws):

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER
AND FORFEITURE RESTRICTIONS HELD BY THE ISSUER AS SET FORTH IN A NOTICE OF
GRANT AND SIGNATURE PAGE AND AWARD AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE ISSUER.  SUCH TRANSFER RESTRICTIONS AND FORFEITURE
RESTRICTIONS ARE BINDING ON TRANSFEREES OF THIS RESTRICTED STOCK.

 

Section 2.4 - Lapse of Restrictions.

 

(a)                                  As of the date of issuance under Section 1.1,
all of the Restricted Stock shall be subject to the Restrictions.  Subject to Section 2.1 and the terms and
conditions of the Plan, the Restrictions shall lapse as to the number of shares
of Restricted Stock specified in the Notice of Grant and Signature Page, on the
date or dates, or upon satisfaction of the condition or conditions, specified therein.

 

(b)                                 Upon the lapse of the Restrictions on the
Restricted Stock (or portion thereof), the Company and the escrow agent shall
cause new certificates to be issued with respect to such Restricted Stock and
delivered to Holder or his legal representative, free from the legend provided
for in Section 2.3 and of any of the other Restrictions.  At such time, the Company shall also deliver
all other securities and property held in escrow pursuant to Sections 2.2
and 2.5 in respect of the number of shares of Common Stock as to which the
Restrictions have then lapsed. 
Notwithstanding the foregoing, no such new certificate shall be
delivered to Holder or his legal representative unless and until Holder or his legal
representative shall have paid to the Company in cash the full amount of all
federal, state and local withholding and employment taxes applicable to the
taxable income and wages of Holder resulting from the award of the Restricted
Stock or the lapse of the Restrictions, or Holder has otherwise provided for
the tax withholding required with respect to the issuance, vesting or payment
pursuant to this Restricted Stock award in accordance with Section 3.7.

 

Section 2.5 - Restrictions on Distributions, etc.  In the event that any dividend or other
distribution (including ordinary cash dividends, and whether in the form of
Common Stock, other securities, or other property), or other distribution by
reason of any recapitalization, reclassification, stock split, reverse stock
split, reorganization, merger, consolidation, split-off, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company, or
exchange of Common Stock or other securities of the Company, or issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar transaction or event, is paid, issued, exchanged or
distributed in respect of Restricted Stock, such new or additional or different
shares or securities or property (including cash) which are attributable to Holder
in his capacity as the owner of the Restricted Stock then subject to
Restrictions, shall be considered to be Restricted Stock and shall be subject
to all of the Restrictions, unless the Administrator shall, in its discretion,
otherwise provide.

 

3

 

ARTICLE III

OTHER
PROVISIONS

 

Section 3.1 - Administration.  The Administrator shall have the power to
interpret the Plan and this Agreement, and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith, to interpret, amend or revoke any such rules and to amend this
Agreement provided that the rights or obligations of Holder are not affected
adversely.  All actions taken and all
interpretations and determinations made by the Administrator in good faith
shall be final and binding upon Holder, the Company and all other interested
persons.  No member of the Administrator
shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Plan or the Restricted Stock award.

 

Section 3.2 - Conditions to Issuance of Stock
Certificates.  The Restricted Stock
may be either previously authorized but unissued shares or issued shares which
have then been reacquired by the Company. 
Such shares shall be fully paid and nonassessable.  The Company shall not be required to issue or
deliver any certificate or certificates (or any account or other evidence
representing issuance) for shares of Common Stock or other cash, stock or other
property pursuant to this Agreement prior to fulfillment of all of the
following conditions:

 

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

 

(b)                                 The completion of any registration or other
qualification of such shares under any state or federal law or under rulings or
regulations of the Securities and Exchange Commission or of any other
governmental regulatory body, if applicable, or the receipt of further
representations from Holder as to investment intent or completion of other
actions necessary to perfect exemptions, as the Administrator shall, in its
absolute discretion, deem necessary or advisable; and

 

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

 

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

 

(e)                                  The receipt by the Company of payment of any
applicable withholding tax in accordance with Section 3.7.

 

Section 3.3 - Rights as Stockholder.  Except as otherwise provided herein
(including in Section 2.5), upon the delivery of Restricted Stock to the
Secretary or such other escrow holder as the Administrator may appoint, Holder
shall have all the rights of a stockholder with respect to the Restricted
Stock, including the right to vote the Restricted Stock and the right to
receive all dividends or other distributions paid or made with respect to the
Restricted Stock, subject to Section 2.5.

 

Section 3.4 - Notices.  Any notice to be given under the terms of
this Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to Holder shall be addressed to him at
the address given beneath his signature hereto. 
By a notice given pursuant to this Section 3.4, either party may
hereafter designate a different address for notices to be given to him.  Any notice which is required to be given to
the Holder shall, if Holder is then deceased, be given to Holder’s personal
representative if such representative has previously informed the Company of
his status and

 

4

 

address by written notice
under this Section 3.4.  Any notice
shall be deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal
Service.

 

Section 3.5 - Titles and Construction.  Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of this
Agreement.  This Agreement shall be
administered, interpreted and enforced under the internal laws of the State of
California, without regard to conflicts of laws thereof.

 

Section 3.6 - Conformity to Securities Laws.  Holder acknowledges that the Plan and this
Agreement are intended to conform to the extent necessary with all provisions
of all applicable federal and state laws, rules and regulations
(including, but not limited to the Securities Act and the Exchange Act and any
and all regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation the applicable exemptive conditions of
Rule 16b-3) and to such approvals by any listing, regulatory or other
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. 
Notwithstanding anything herein to the contrary, the Plan shall be
administered, and the Restricted Stock are granted, only in such a manner as to
conform to such laws, rules and regulations.  To the extent permitted by applicable law,
the Plan, this Agreement and the Restricted Stock shall be deemed amended to
the extent necessary to conform to such laws, rules and regulations.

 

Section 3.7 - Tax Withholding.  The Company shall be entitled to require
payment in cash or deduction from the shares of Common Stock issued under this
Restricted Stock award or other compensation payable to Holder of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting or payment pursuant to this Restricted Stock award.  Except as otherwise provided by the
Administrator in its discretion, in satisfaction of the foregoing requirement,
the Company shall withhold shares of Common Stock issued under this Restricted Stock
award and Holder hereby elects to transfer and deliver to the Company such
shares of Common Stock having a Fair Market Value equal to the sums required to
be withheld.  Notwithstanding any other
provision of the Plan and this Agreement, the shares of Common Stock which may
be withheld with respect to the issuance, vesting or payment under this
Restricted Stock award in order to satisfy Holder’s federal and state income
taxes and payroll tax liabilities with respect to the issuance, vesting or
payment under this Restricted Stock award shall be limited to the number of
shares which have a Fair Market Value on the date of withholding equal to the
aggregate amount of such liabilities based on the minimum statutory withholding
rates for federal and state income tax and payroll tax purposes that are
applicable to such supplemental taxable income.

 

ARTICLE IV

DEFINITIONS

 

Whenever
the following terms are used in this Agreement, they shall have the meaning
specified below.  The masculine pronoun
shall include the feminine and neuter, and the singular the plural, where the
context so indicates.  All capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in the Plan.

 

5

 

EXHIBIT 1-B

 

AMENDMENT AND RESTATEMENT OF 2001
INCENTIVE AWARD PLAN 

 

 

EXHIBIT 1-C

 

ASSIGNMENT
SEPARATE FROM CERTIFICATE

 

The
undersigned,                                           , hereby assigns and
transfers to Watson Pharmaceuticals, Inc., a Nevada corporation, (the “Company”),
or its assignee,                                                
(                     )
shares of the Common Stock, par value $0.0033 per share, of the Company,
standing in my name on the books of said corporation represented by Certificate
No.            herewith (or
represented by Account No.           
with                              )
and do hereby irrevocably constitute and appoint                                  
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.

 

This
Assignment may be used only in accordance with the Notice of Grant and
Signature Page and Award Agreement between the Company and                                                
dated as of                                  ,
            .

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Name

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
				

 

 

INSTRUCTIONS:  Please do
not fill in any blanks other than the signature line.  The purpose of this assignment is to enable
the Company to transfer the shares of Restricted Stock subject to forfeiture
and surrender under the Forfeiture Restriction of, or subject to tax
withholding under, the Notice of Grant and Signature Page and Award Agreement.

 

 

EXHIBIT 1-D

 

JOINT ESCROW INSTRUCTIONS

 

[                                 ,
2005]

 

Watson
Pharmaceuticals, Inc.

311
Bonnie Circle

Corona,
CA 92880

Attn:  Corporate Controller

 

Re:                               Joint Escrow
Instructions

 

Dear                              :

 

As
Escrow Agent for both Watson Pharmaceuticals, Inc., a Nevada corporation
(the “Company”), and the undersigned Holder of Restricted Stock of the Company
(“Holder”), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain  Notice of Grant and Signature Page and
Award Agreement, dated as of                                     
(the “Agreement”), between the Company and                                    ,
in accordance with the following instructions:

 

1.                                       In the event of the
forfeiture and surrender of the shares of Restricted Stock by Holder pursuant
to the Forfeiture Restriction, or tax withholding, the Company shall give you a
written notice specifying the number of shares of Restricted Stock or other
securities to be transferred and delivered to the Company.  Holder and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice
in accordance with the terms of said notice.

 

2.                                       At the closing, you are
directed (a) to date the stock assignments necessary for the transfer in
question, (b) to fill in the number of shares being transferred and (c) to
deliver the same, together with the certificate (or the account or other
evidence) representing evidencing the shares of stock to be transferred, to the
Company.

 

3.                                       Holder irrevocably
authorizes the Company to deposit with you any certificates evidencing shares
of stock to be held by you hereunder and any additions and substitutions to
said shares as defined in the Agreement. 
Holder does hereby irrevocably constitute and appoint you as Holder’s
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including, but not limited to, the filing with any applicable state authority
of any required applications for consent to, or notice of transfer of, the
securities.  Subject to the provisions of
this paragraph 3 and the Agreement, Holder shall exercise all rights and
privileges of a stockholder of the Company while the stock is held by you.

 

4.                                       You will deliver to Holder
a certificate or certificates representing so many shares of stock or other
securities as are not then subject to the Restrictions, or tax withholding.

 

5.                                       If at the time of
termination of this escrow you should have in your possession any documents,
securities, or other property belonging to Holder, you shall deliver all of the
same to Holder and shall be discharged of all further obligations hereunder.

 

 

6.                                       Your duties hereunder
may be altered, amended, modified or revoked only by a writing signed by all of
the parties hereto.

 

7.                                       You shall be obligated
only for the performance of such duties as are specifically set forth herein
and may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed by you to be genuine and to have been signed or
presented by the proper party or parties. 
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Holder while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.

 

8.                                       You are hereby
expressly authorized to disregard any and all warnings given by any of the
parties hereto or by any other person or corporation, excepting only orders or
process of courts of law, and are hereby expressly authorized to comply with
and obey orders, judgments or decrees of any court.  In case you obey or comply with any such
order, judgment or decree, you shall not be liable to any of the parties hereto
or to any other person, firm or corporation by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.

 

9.                                       You shall not be liable
in any respect on account of the identity, authorities or rights of the parties
executing or delivering or purporting to execute or deliver the Agreement or
any documents or papers deposited or called for hereunder.

 

10.                                 You shall not be liable
for the expiration of any rights under any applicable state, federal or local
statute of limitations or similar statute or regulation with respect to these
Joint Escrow Instructions or any documents deposited with you.

 

11.                                 You shall be entitled
to employ such legal counsel and other experts as you may deem necessary
properly to advise you in connection with your obligations hereunder, may rely
upon the advice of such counsel and may pay such counsel reasonable
compensation therefor.

 

12.                                 Your responsibilities
as Escrow Agent hereunder shall terminate if you shall cease to be an officer
or agent of the Company or if you shall resign by written notice to each
party.  In the event of any such
termination, the Company shall appoint a successor Escrow Agent.

 

13.                                 If you reasonably
require other or further instruments in connection with these Joint Escrow
Instructions or obligations in respect hereto, the necessary parties hereto
shall join in furnishing such instruments.

 

14.                                 It is understood and
agreed that should any dispute arise with respect to the delivery and/or
ownership or right of possession of the securities held by you hereunder, you
are authorized and directed to retain in your possession without liability to
anyone all or any part of said securities until such disputes shall have been
settled either by mutual written agreement of the parties concerned or by a
final order, decree or judgment of a court of competent jurisdiction after the
time for appeal has expired and no appeal has been perfected, but you shall be
under no duty whatsoever to institute or defend any such proceedings.

 

 

15.                                 Any notice required or
permitted hereunder shall be given in writing and shall be deemed effectively
given upon personal delivery or upon deposit in the United States Post Office,
by registered or certified mail with postage and fees prepaid, addressed to
each of the other parties thereunto entitled at the following addresses or at
such other addresses as a party may designate by ten (10) days’ advance
written notice to each of the other parties hereto.

 

	
  If to the Company to:

  	
   

  	
  Watson
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  311
  Bonnie Circle

  
	
   

  	
   

  	
  Corona,
  CA  92880

  
	
   

  	
   

  	
  Attention:  Corporate Secretary

  
	
   

  	
   

  	
   

  
	
  If
  to Holder to:

  	
   

  	
  [Name]

  
	
   

  	
   

  	
  [Address]

  
	
   

  	
   

  	
   

  
	
  If
  to the Escrow Agent to:

  	
   

  	
  Watson
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  311
  Bonnie Circle

  
	
   

  	
   

  	
  Corona,
  CA  92880

  
	
   

  	
   

  	
  Attention:  Corporate Controller

  

 

16.                                 By signing these Joint
Escrow Instructions, you become a party hereto only for the purpose of said
Joint Escrow Instructions; you do not become a party to the Agreement.

 

17.                                 This instrument shall
be binding upon and inure to the benefit of the parties hereto, and their
respective successors and permitted assigns.

 

18.                                 These Joint Escrow Instructions
shall be governed by, and construed and enforced in accordance with, the laws
of the State of California (without giving effect to the conflicts of law
principles thereof).

 

	
   

  	
  WATSON PHARMACEUTICALS, INC.,

  
	
   

  	
  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOLDER

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ESCROW AGENT

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Name]

  
	
   

  	
   

  
	
   

  	
  [Title]Exhibit 10.5

 

Employee - Option

 

WATSON Pharmaceuticals, Inc.

AMENDMENT AND RESTATEMENT OF THE 2001
INCENTIVE AWARD PLAN

NOTICE OF GRANT AND SIGNATURE
PAGE

 

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

 

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

 

	
  Type of Option:
  Incentive Stock Option 

  	
   

  	
  Non-Qualified
  Stock Option 

  
	
   

  	
   

  	
   

  
	
  Holder’s Name: [First
  Name and Last Name]

  	
   

  	
  Total Number of
  Option Shares:

  
	
   

  	
   

  	
   

  
	
  Date of Grant: [Month,
  Day, Year]

  	
   

  	
  Purchase Price
  Per Share: $

  

 

Subject
to the terms of the Award Agreement and the Plan, this Option shall become
exercisable in accordance with the following schedule: 

 

	
   

  	
   

  	
  This
  Option Shall be Exercisable With Respect to

  
	
   

  	
   

  	
  the
  Following Number of Shares in Each Period

  
	
  On and After This Date

  	
   

  	
  Becoming
  Fully Vested on the Date Shown.

  
	
  Month,
  Day, Year

  	
   

  	
  Number

  
	
  Month,
  Day, Year

  	
   

  	
  Number

  
	
  Month,
  Day, Year

  	
   

  	
  Number

  
	
  Month,
  Day, Year

  	
   

  	
  Number

  
	
  Total Shares

  	
   

  	
  Total

  

 

NOTE, schedule does not
reflect cumulative vesting.

 

IN WITNESS WHEREOF, the Company has granted this
Option, subject to the terms set forth herein, on the date of grant specified
above.

 

	
   

  	
  WATSON
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Allen
  Chao, Ph.D.,

  
	
   

  	
  Chairman
  and Chief Executive Officer

  

 

	
  ACCEPTED:

  	
   

  
	
   

  	
  Note:  This document constitutes
  the Company’s offer to enter into an agreement under the terms set forth
  herein. This offer will expire without further notice at 5 o’clock Pacific
  Time sixty days  after the date of grant of the Option set forth
  above, unless this offer is accepted by Holder by the delivery of this original Notice of Grant and Signature Page,
  executed by Holder to the Company on or prior to the offer’s expiration date.

  

  

                              GRANT
  NO. 0000XXXX

  
	
   

  	
   

  
	
  Holder’s Signature

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Holder’s
  Taxpayer Identification Number

  	
   

  

 

 

EXHIBIT 1-A

 

AWARD AGREEMENT

 

THIS
AWARD AGREEMENT, dated as of the Date of Grant appearing on the Notice of Grant
and Signature Page hereof, is made by and between Watson Pharmaceuticals, Inc.,
a Nevada corporation (the “Company”), and the Employee whose name and signature
appear on the Notice of Grant and Signature Page hereof (“Holder”).

 

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

 

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

 

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

 

ARTICLE I

GRANT OF OPTION

 

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

 

Section 1.2
- Consideration to Company.  In
consideration of the granting of this Option by the Company, Holder agrees to
render faithful and efficient services to the Company or a Subsidiary, with
such duties and responsibilities as the Company shall from time to time
prescribe, for a period of at least one (1) year from the date this Option
is granted.  Nothing in this Agreement or
in the Plan shall confer upon Holder any right to continue in the employ or
engagement of the Company or any Subsidiary, or shall interfere with or
restrict in any way the rights of the Company and its Subsidiaries, which are
hereby expressly reserved, to discharge or terminate the engagement with Holder
at any time for any reason whatsoever, with or without Cause.

 

ARTICLE II

PERIOD OF EXERCISABILITY

 

Section 2.1
- Exercisability.  Subject to Section 2.2,
Section 4.5 and the terms of any written agreement between the Company and
Holder relating to the exercisability of the Option, the Option shall become
exercisable as set forth in the Notice of Grant and Signature Page hereto.  No portion of the Option which is
unexercisable at Termination of Employment shall thereafter become
exercisable.  Each such installment which
becomes exercisable pursuant to this Section 2.1 shall remain exercisable
until it becomes unexercisable under Section 2.2 or the Plan.

 

1

 

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

 

(a)                                  The
expiration of ten (10) years from the date the Option was granted;

 

(b)                                 Except
in the case of Holder’s disability (within the meaning of Section 22(e)(3) of
the Code) or as set forth in Sections 2.2(d) and (e), the expiration of
three (3) months from the date of Holder’s Termination of Employment,
unless Holder dies within said three month period;

 

(c)                                  In
the case of Holder’s disability (within the meaning of Section 22(e)(3) of
the Code), the expiration of one (1) year from the date of Holder’s
Termination of Employment by reason of Holder’s disability;

 

(d)                                 The
expiration of one (1) year from the date of Holder’s death; or

 

(e)                                  Upon Holder’s Termination of Employment by the Company or a
Subsidiary of the Company for Cause, at the discretion of the Administrator
effective upon written notice to Holder.

 

Section 2.3
– Special Tax Consequences.  Holder
acknowledges that, to the extent that the aggregate Fair Market Value of stock
with respect to which “incentive stock options” (within the meaning of Section 422
of the Code, but without regard to Section 422(d) of the Code),
including the Option, are exercisable for the first time by Holder during any
calendar year under the Plan and all other incentive stock option plans of the
Company, any Subsidiary and any parent corporation thereof (within the meaning
of Section 422 of the Code)) exceeds $100,000, such options shall not be
treated as “incentive stock options” to the extent required by Section 422
of the Code.  Holder further acknowledges
that the rule set forth in the preceding sentence shall be applied by
taking options into account in the order in which they were granted.  For purposes of these rules, the Fair Market
Value of stock shall be determined as of the time the option with respect to
such stock is granted.

 

ARTICLE III

EXERCISE OF OPTION

 

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

 

Section 3.2
- Partial Exercise.  Any
exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part as to whole shares only at
any time prior to the time when the Option or portion thereof becomes
unexercisable under Section 2.2 or the Plan.

 

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

 

(a)                                  A
written notice complying with the applicable rules established by the Administrator
stating that the Option, or a portion thereof, is exercised.  The notice shall be signed by Holder or other
person then entitled to exercise the Option or such portion; and

 

2

 

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

 

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

 

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

 

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

 

(c) 
Full payment to the Company (or other employer corporation) of all amounts
which, under federal, state or local tax law, it is required to withhold upon
exercise of the Option.  With the consent
of the Administrator (which consent may be withheld in its sole and absolute
discretion), all or part of such payment may be made in the form of (i) shares
of the Company’s Common Stock owned by Holder, duly
endorsed for transfer, with a Fair Market Value equal to the sums required to
be withheld, or (ii) shares of the Company’s Common Stock issuable to Holder upon exercise of the Option with a Fair Market Value
equal to the sums required to be withheld; provided, that the number of
shares of Common Stock which may be withheld with respect to the issuance,
vesting, exercise or payment of the Option (or which may be repurchased from Holder
within six months after such shares of Common Stock were acquired by Holder from
the Company) in order to satisfy Holder’s federal and state income and payroll
tax liabilities with respect to the issuance, vesting, exercise or payment of the
Option shall be limited to the number of shares which have a Fair Market Value
on the date of withholding or repurchase equal to the aggregate amount of such
liabilities based on the minimum statutory withholding rates for federal and
state tax income and payroll tax purposes that are applicable to such
supplemental taxable income; and

 

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

 

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

 

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

 

(b) 
The completion of any registration or other qualification of such shares under
any state or federal law or under rulings or regulations of the Securities and
Exchange Commission or of any other

 

3

 

governmental regulatory body,
which the Administrator shall, in its absolute discretion, deem necessary or
advisable; and

 

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

 

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

 

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

 

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

 

ARTICLE IV

OTHER PROVISIONS

 

Section 4.1
– Administration.  The Administrator
shall have the power to interpret the Plan and this Agreement, and to adopt
such rules for the administration, interpretation and application of the
Plan as are consistent therewith, to interpret, amend or revoke any such rules and
to amend this Agreement provided that the rights or obligations of Holder are
not affected adversely.  All actions
taken and all interpretations and determinations made by the Administrator in
good faith shall be final and binding upon Holder, the Company and all other
interested persons.  No member of the Administrator
shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Plan or the Option.

 

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

 

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

 

Section 4.3
– Notices.  Any notice to be given
under the terms of this Agreement to the Company shall be addressed to the
Company in care of its Secretary, and any notice to be given to Holder shall be
addressed to him at the address given beneath his signature hereto.  By a notice given pursuant to this

 

4

 

Section 4.3, either
party may hereafter designate a different address for notices to be given to
him.  Any notice which is required to be
given to Holder shall, if Holder is then deceased, be given to Holder’s
personal representative if such representative has previously informed the
Company of his status and address by written notice under this Section 4.3.  Any notice shall be deemed duly given when
enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.

 

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

 

Section 4.5
- Conformity to Securities Laws.  Holder
acknowledges that the Plan is intended to conform to the extent necessary with
all provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including without limitation Rule 16b-3.  Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Option is granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations.  To the extent permitted by
applicable law, the Plan and this Agreement shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.

 

ARTICLE V

DEFINITIONS

 

Whenever
the following terms are used in this Agreement, they shall have the meaning
specified below.  The masculine pronoun
shall include the feminine and neuter, and the singular the plural, where the
context so indicates.  All capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in the Plan.

 

“Cause” shall mean (i) ”Cause”, as defined
in the employment agreement, if any, between the Company or a Subsidiary of the
Company and Holder, as in effect from time to time, or (ii) in the absence
of such an employment agreement, as determined by the Administrator in its sole
discretion, (A) Holder’s conviction of, or no contest plea to, a felony or
a misdemeanor involving moral turpitude, or (B) Holder’s gross negligence
or misconduct, or material violation of the Company’s policies (including
without limitation the Company’s policy on insider trading), or a material
breach of Holder’s duties or loyalty to the Company, or (C) Holder’s
fraud, embezzlement or criminal conduct that is damaging to the Company, or (D) Holder’s
willful or continued failure to substantially perform his or her duties to the
Company.

 

5

 

EXHIBIT 1-B

 

AMENDMENT AND RESTATEMENT OF THE 2001
INCENTIVE AWARD PLAN

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