WATSON PHARMACEUTICALS, INC.

KEY EMPLOYEE AGREEMENT

          This Key Employee Agreement (Agreement) is entered into as of August 15, 2002 (the Effective Date), by and between Charles Ebert, Ph.D. (Executive) and Watson Pharmaceuticals, Inc. (the Company), a Nevada corporation.

          Whereas, the Company and the Executive are parties to that certain Watson Pharmaceuticals, Inc. Key Employee Agreement dated June 30, 1999, as amended by that certain Amendment No. 1 to Watson Pharmaceuticals, Inc. Key Employee Agreement dated November 15, 2000 (collectively the Original Agreement); and

          Whereas, the Company and Executive wish to amend and restate the Original Agreement in accordance with the terms of this Agreement; and

          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, Research & Development, 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 such other officer of the Company or one of its subsidiaries that the CEO in his discretion may from time to time designate (the Designated Officer, who shall hold the title of President, Chief Operating Officer, or higher position of such entity), consistent with the Bylaws of the Company and as may be required by the Companys Board of Directors (the Board).  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 Companys 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 Companys 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,

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attached hereto as Exhibit A.  Executive will be considered annually for increases in base salary in accordance with Company policy and subject to review and approval by the CEO, Designated Officer, or the Compensation Committee of the Board, as appropriate.

                       2.2          Bonus.  Executive shall be eligible to participate in the Companys bonus plan at the executive level throughout the duration of Executives 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 Executives bonus may be determined in part based on Executives performance with respect to certain goals 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, Designated Officer, or the Compensation Committee of the Board, as appropriate.  The Company retains the authority to review, grant, deny or revise any bonus in its sole discretion.  To be eligible to receive a bonus, Executive must remain in employment with the Company throughout the entire fiscal year or as otherwise set forth in the applicable bonus plan.  The target level of such bonus is set forth in Section 2 of Exhibit A attached hereto.

                       2.3          Stock Options.  In addition to any stock options which the Company may have already granted to Executive prior to the Effective Date, subject to approval of the Board or the Compensation Committee of the Board, as appropriate, Executive will receive the stock option grants (if any) set forth in Section 3 of Exhibit A, and such additional grants of stock options as may from time to time be granted, pursuant to the terms and conditions set forth in the applicable stock option agreement and plan documents, copies of which will be made available upon Executives request.  For the purposes of this Agreement, all stock options granted to Executive by the Company prior to the Effective Date, granted hereunder, or granted in the future shall be referred to hereinafter as the Options.

                       2.4          Paid Time Off.  Executive shall be eligible to accrue paid time off (PTO) during the term of this Agreement, in accordance with the Companys 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

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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 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.

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