EXHIBIT 10.1
EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT by and between VALEANT PHARMACEUTICALS INTERNATIONAL, a Delaware
corporation (the "Company"), and Xxxxxx X. Xxxxxxx (the "Executive") is made as
of April 22, 2005, 2005 (the "Effective Date").
WHEREAS, the Board of Directors of the Company (the "Board") has determined that
appropriate steps should be taken to reinforce and encourage the continued
employment and dedication of the Company's key personnel, including the
development of standard severance agreements for certain senior executives;
NOW, THEREFORE, as an inducement for and in consideration of the Executive
remaining in its employ and for the Executive's various agreements as set forth
in this Agreement, the Company agrees that the Executive shall receive the
severance benefits set forth in this Agreement in the event the Executive's
employment with the Company is terminated under the circumstances described
below.
1. Key Definitions. As used herein, the following terms shall have the following
respective meanings:
1.1. Cause means, for purposes of this Agreement: (A) Executive's act of
fraud or embezzlement against the Company or any affiliate thereof or an
unauthorized disclosure of confidential information of the Company, in each case
which is willful and results in material damage to the Company; (B) after
written notice thereof and a reasonable opportunity to cure (if such misconduct
is susceptible to cure by Executive), any material, willful and knowing
violation by Executive of any of his fiduciary duties to the Company or of the
Company's written corporate code of conduct as in effect on the date hereof,
which has, or was intended to have, a material adverse impact on the Company;
(C) Executive's self-dealing with respect to the Company's assets, properties or
business opportunities which in any case is intended to result in the
substantial personal enrichment of Executive (or another person or entity
related to Executive) at the expense of the Company; (D) Executive's conviction
(or a plea of nolo contendere to) of a felony (other than traffic-related
offenses or as a result of vicarious liability); (E) Executive's willful
misconduct that results in material damage to the Company or its reputation and
continues after written notice thereof and a reasonable opportunity to cure (if
such misconduct is susceptible to cure by Executive); (F) Executive's violation
of the restrictions set forth in Sections 9, 10 or 11 of this Agreement. No
action or inaction shall be deemed willful if not demonstrably willful and if
taken or not taken by the Executive in good faith as not being adverse to the
best interests of the Company. Reference in this paragraph to the Company shall
also include direct and indirect subsidiaries or affiliates of the Company, and
materiality and material adverse impact shall be measured based on the action or
inaction and the impact upon the Company taken as a whole. The Company may
suspend, with pay, the Executive upon Executive's indictment for the commission
of a felony as described under clause (D) above. Such suspension may remain
effective until such time as the indictment is either dismissed or a verdict of
not guilty has been entered, or a finding occurs that Cause under this Agreement
has occurred.
1.2. Change in Control means, for purposes of this Agreement, any of the
following events:
1.2.a. the acquisition (other than from the Company), by any
person (as such term is defined in Section 13(c) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the 0000 Xxx)
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of thirty percent (30%) or more of the combined voting power of the
Company's then outstanding voting securities;
1.2.b. the individuals who, as of the date hereof, are members
of the Board (the "Incumbent Board"), cease for any reason to constitute
at least a majority of the Board, unless the election, or nomination for
election by the Company's stockholders, of any new director was approved
by a vote of at least a majority of the Incumbent Board, and such new
director shall, for purposes of this Agreement, be considered as a
member of the Incumbent Board; or
1.2.b.i. the closing of:
1.2.b.ii. a merger or consolidation involving the Company if
the stockholders of the Company, immediately
before such merger or consolidation, do not as a
result of such merger or consolidation, own,
directly or indirectly, more than fifty percent
(50%) of the combined voting power of the then
outstanding voting securities of the corporation
resulting from such merger or consolidation in
substantially the same proportion as their
ownership of the combined voting power of the
voting securities of the Company outstanding
immediately before such merger or consolidation;
or
1.2.b.iii. a complete liquidation or dissolution of the
Company or an agreement for the sale or other
disposition of all or substantially all of the
assets of the Company.
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because thirty
percent (30%) or more of the combined voting power
of the Company's then outstanding securities is
acquired by (i) a trustee or other fiduciary
holding securities under one or more employee
benefit plans maintained by the Company or any of
its subsidiaries or (ii) any corporation which,
immediately prior to such acquisition, is owned
directly or indirectly by the stockholders of the
Company in the same proportion as their ownership
of stock in the Company immediately prior to such
acquisition.
1.3. Change in Control Date means a date during the Term (as defined in
Section 2) on which a Change in Control occurs. Anything in this Agreement to
the contrary notwithstanding, if (a) a Change in Control occurs, and (b) the
Executive's employment with the Company is terminated prior to the date on which
the Change in Control occurs, but in contemplation of such Change in Control,
then for all purposes of this Agreement the "Change in Control Date" shall mean
the date immediately prior to the date of such termination of employment.
1.4. Disability means Executive's inability to substantially perform his
duties and responsibilities hereunder by reason of any physical or mental
incapacity for two or more periods of ninety (90) consecutive days each in any
three hundred and sixty (360) day period, as determined by a physician with no
history of prior dealings with the Company or Executive, as reasonably agreed
upon by the Company and Executive.
1.5. Good Reason means the occurrence of any of the events or conditions
described in Subsections a through f hereof which are not cured by the Company
(if susceptible to cure by the Company) within 20 days after the Company has
received written notice from Executive specifying the particular events or
conditions which constitute Good Reason and the specific cure requested by
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Executive:
1.5.a. the assignment to Executive of duties inconsistent in any
material respect with Executive's position (including status, offices,
and reporting requirements), authority or responsibilities as previously
existing;
1.5.b. a reduction in Executive's annual base salary or level of
eligible (or target) participation in the Company Annual Incentive Plan
(or such bonus plan as may be substituted from time to time);
1.5.c. the Company's requiring Executive to be based at any
place outside either (x) a 30-mile radius from Costa Mesa, California,
or (y) the Company's executive offices, except for reasonably required
travel on the Company's business;
1.5.d. the failure by the Company to (i) continue in effect any
material compensation or benefit plan in which Executive was
participating, including, but not limited to, the Company's deferred
compensation plan and 401(k) plan, any life, insurance, medical, health,
and accident or disability plan and any vacation or automobile program
or policy, if any, in which the Executive participates, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan or program; (ii) continue
the Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable than the
basis previously existing;
1.5.e. the failure of the Company to obtain the agreement from
any successor to the Company to assume and agree to perform this
Agreement.
1.5.f. any other breach by the Company of any material provision
of this Agreement.
Executive's right to terminate the Executive's employment for Good Reason shall
not be affected by Executive's incapacity due to physical or mental illness.
1.6. Measurement Date means the earliest to occur of (i) the Change in
Control Date, (ii) the date of the execution by the Company of the initial
written agreement or instrument providing for the Change in Control or (iii) the
date of the adoption by the Board of Directors of a resolution providing for the
Change in Control.
2. Term of Agreement. This Agreement, and all rights and obligations of the
parties hereunder, shall take effect upon the Effective Date and shall expire
upon the first to occur of (a) the expiration of the Term (as defined below) if
a Change in Control has not occurred during the Term, or (b) the fulfillment by
the Company of all of its obligations under Sections 4 and 5.2 if the
Executive's employment with the Company terminates within 12 months following
the Change in Control Date. "Term" shall mean the period commencing as of the
Effective Date and continuing in effect through December 31, 2010; provided,
however, that on January 1, 2011 and each January 1, thereafter, the Term shall
be automatically extended for one additional year unless, not later than six
months prior to the scheduled expiration of the Term (including any extension
thereof), the Company shall have given the Executive written notice that the
Term will not be extended.
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3. Employment Status; Not an Employment Contract. Executive acknowledges that
this Agreement does not constitute a contract of employment or impose on the
Company any obligation to retain Executive as an employee and that this
Agreement does not prevent Executive from terminating employment at any time;
provided, however, this Agreement does set forth the amounts payable and
benefits to be provided to Executive in the event of a termination of
Executive's employment under the circumstances described hereunder.
4. Compensation Upon Termination Without a Change in Control Having Occurred.
Upon termination of Executive's employment during the Term of Agreement absent a
Change in Control, Executive shall be entitled to the following benefits:
4.1. Termination by the Company for Cause or by Executive Without Good
Reason. If Executive's employment is terminated by the Company for Cause or by
Executive without Good Reason, without a Change in Control having occurred, the
Company shall pay Executive all amounts earned or accrued hereunder through the
termination date, including:
4.1.a. any accrued and unpaid wages;
4.1.b. reimbursement for any and all monies advanced or expenses
incurred in connection with Executive's employment for reasonable and
necessary expenses incurred by Executive on behalf of the Company for
the period ending on the termination date;
4.1.c. any previous compensation which Executive has previously
deferred (including any interest earned or credited thereon), in
accordance with the terms and conditions of the applicable deferred
compensation plans then in effect;
4.1.d. as provided under any benefit or equity plan or program
(the foregoing items in Sections 4.1.a through 4.1.d being collectively
referred to as the "Accrued Compensation").
4.2. Termination by the Company for Disability or By Reason of Death. If
Executive's employment is terminated by the Company for Disability or by reason
of Executive's death, without a Change in Control having occurred, the Company
shall pay Executive (or his beneficiaries, as applicable) the Accrued
Compensation, and provide the following benefits:
4.2.a. to the extent not already paid, an amount equal to the
bonus or incentive award otherwise payable to Executive with respect to
the fiscal year immediately prior to the fiscal year in which
Executive's date of termination of employment (the "Date of
Termination") occurs; provided, however, that any requirement as to
continued service after the end of the performance year shall be deemed
met and the amount shall be payable in a lump sum, calculated as if all
performance target and goals (if applicable) had been fully met by
Executive and the Company at the "target" level, as applicable, for such
fiscal year (a "Prior Year Bonus");
4.2.b. an amount equal to the bonus or incentive award that
Executive would have been entitled to receive in respect of the fiscal
year in which Executive's Date of Termination occurs, had Executive
continued in employment until the end of such fiscal year and met any
other service-related requirements with respect to such award, which
amount shall be payable in a lump
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sum, calculated as if all performance targets and goals (if applicable)
had been fully met at the "target" level by the Company and by
Executive, as applicable, for such fiscal year, multiplied by a fraction
(A) the numerator of which is the number of days in such fiscal year
through termination date and (B) the denominator of which is 365 (a "Pro
Rata Bonus");
4.2.c. Executive's entitlement to any other compensation or
benefits hereunder shall be determined in accordance with the Company's
employee benefit plans and other applicable programs and practices then
in effect.
4.3. Compensation upon Termination Without Cause or for Good Reason. If
the Executive's employment with the Company is terminated by the Company (other
than for Cause, Disability or death) or by the Executive for Good Reason without
a Change in Control having occurred, then the Executive shall be entitled to the
Accrued Compensation as well as to the following benefits:
4.3.a. the Company shall pay to the Executive in a lump sum cash
within 30 days after the Date of Termination the aggregate following
amounts:
4.3.a.i. a Prior Year Bonus, if applicable, and a Pro Rata
Bonus; and
4.3.a.ii. the amount equal to the sum of (x) the Executive's
annual base salary and (y) the lesser of (i) the
average of the bonuses paid under the Annual
Incentive Program for the five prior payouts (or
such shorter period of time during which Executive
was eligible for the Annual Incentive Program at
the participation level applicable upon the
Termination Date) or (ii) the Executive's Target
Bonus (as defined in the Annual Incentive Program)
for the year during which the Date of Termination
occurs.
4.3.b. to the extent not previously paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or which the Executive is
eligible to receive following the Executive's termination of employment
under any plan, program, policy, practice, contract or agreement of the
Company and its affiliated companies, (a "Company Plan") provided,
however, that the Company shall not be required to pay (a) severance
benefits, or (b) any other duplicate benefit under such a Company Plan
(such other amounts and benefits, as are payable hereunder shall be
hereinafter referred to as the "Other Benefits").
5. Change in Control.
5.1. Stock Acceleration. If the Change in Control Date occurs during the
Term, then, effective upon the Change in Control Date, (a) each outstanding
option to purchase shares of Common Stock of the Company held by the Executive
shall become immediately exercisable in full and the shares underlying the
option will no longer be subject to a right of repurchase by the Company and (b)
each outstanding restricted stock award or other unvested equity compensation
rights shall be deemed to be fully vested and will no longer be subject to a
right of repurchase by the Company.
5.2. Notice Requirement. Any termination of employment in connection
with a Change in Control must meet the requirements of Section 14.
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5.3. Termination by the Company for Cause or by Executive Without Good
Reason. If Executive's employment is terminated by the Company for Cause or
Disability or by Executive without Good Reason, after a Change in Control has
occurred, the Company shall pay Executive the applicable Accrued Compensation.
5.4. Termination by the Company for Disability or By Reason of Death. If
Executive's employment is terminated by the Company for Disability or by reason
of Executive's death, after a Change in Control has occurred, the Company shall
pay Executive (or his beneficiaries, as applicable) the Accrued Compensation,
and provide the following benefits:
5.4.a. a Prior Year Bonus, if applicable, and a Pro Rata Bonus;
and
5.4.b. the Other Benefits.
5.5. Compensation upon Termination Without Cause or for Good Reason
following a Change in Control. If the Executive's employment with the Company is
terminated by the Company (other than for Cause, Disability or death) or by the
Executive for Good Reason within 12 months following the Change in Control Date,
then the Executive shall be entitled to the following benefits:
5.5.a. the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:
5.5.a.i. the Accrued Obligations;
5.5.a.ii. a Prior Year Bonus, if applicable, and a Pro Rata
Bonus; and
5.5.a.iii. the amount equal to (a) two multiplied by the sum
of (x) the Executive's annual base salary in
effect as of the Measurement Date and (y) the
higher of (i) the average of the bonuses paid
under the Annual Incentive Program for the five
prior payouts (or such shorter period of time
during which Executive was eligible for the Annual
Incentive Program at the participation level
applicable upon the Change in Control Date) or
(ii) the Executive's Target Bonus (as defined in
the Annual Incentive Program) for the year during
which the Change in Control Date occurs.
5.5.b. for one year after the Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue to provide
medical, dental and life insurance, retirement (including 401(k) match)
benefits, executive health benefits, executive allowance and other
benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them if the Executive's
employment had not been terminated, in accordance with the applicable
medical, dental and life insurance Benefit Plans in effect on the
Measurement Date or, if more favorable to the Executive and the
Executive's family, in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies; provided, however, that (A) if the terms of any benefit plan
do not permit continued participation therein by a former employee, then
an equitable arrangement shall be made by the Company (such as a
substitute or alternative plan) or a cash payment to provide as
substantially equivalent a benefit as is reasonably possible
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and (B) if the Executive becomes reemployed with another employer and is
eligible to receive a health or welfare (e.g., medical insurance)
benefit from such employer on terms at least as favorable to the
Executive and the Executive's family as those being provided by the
Company, then the Company shall no longer be required to provide those
particular benefits to the Executive and the Executive's family; and
5.5.c. the Other Benefits.
5.6. Miscellaneous.
5.6.a. In the event that the Executive dies while employed by
the Company, the Date of Termination shall be the date of the
Executive's death and in the event that the Company determines to
terminate the Executive on account of Cause, the Date of Termination
shall be date determined by the Company, in its sole discretion. In the
event the Company fails to satisfy the requirements of this Agreement
regarding a Notice of Termination, the purported termination of the
Executive's employment pursuant to such Notice of Termination shall not
be effective for purposes of this Agreement.
5.6.b. The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of the
Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting any such fact or
circumstance in enforcing the Executive's or the Company's rights
hereunder
5.6.c. Any Notice of Termination for Good Reason given by the
Executive must be given within 90 days of the occurrence of the event(s)
or circumstance(s) which constitute(s) Good Reason
5.7. Taxes.
5.7.a. If the acceleration of the vesting and exercisability of
stock options or equity awards, together with payments and other
benefits of the Executive (collectively, the "Payment") (i) constitute a
"parachute payment" within the meaning of Section 280G of the Code, or
any comparable successor provisions, and (ii) but for this Section 5.7
would be subject to the excise tax imposed by Section 4999 of the Code,
or any comparable successor provisions (the "Excise Tax"), then such
Payment shall be either (1) provided to Executive in full, or (2)
provided to Executive as to such lesser extent that would result in no
portion of such Payment being subject to the Excise Tax, whichever of
the foregoing amounts, when taking into account applicable federal,
state, local and foreign income and employment taxes, the Excise Tax,
and any other applicable taxes, results in the receipt by Executive, on
an after-tax basis, of the greatest amount of the Payment,
notwithstanding that all or some portion of the Payment may be subject
to the Excise Tax. If a reduction in the Payment is to be made as
provided above, reductions shall occur in the following order unless
Executive elects in writing a different order (provided, however, that
such election shall be subject to Company approval if made on or after
the date that triggers the Payment or a portion thereof):(A) reduction
of cash payments; (B) cancellation of accelerated vesting of options and
other equity awards; and (C) reduction of other benefits paid to
Executive. If acceleration of vesting is to be reduced, such
acceleration of vesting shall be cancelled in the reverse order of date
of grant (i.e., the earliest granted equity award cancelled last) unless
Executive elects in writing a different order for cancellation.
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5.7.b. A national accounting firm with no current significant
business relationship with the Company shall perform the calculations
referenced to in this Section 5.7. If the accounting firm so engaged by
the Company is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Company shall
appoint a nationally recognized accounting firm to make the
determinations required hereunder. The Company shall bear all expenses
with respect to the determinations by such accounting firm required to
be made hereunder. For purposes of making the calculations required by
this Section 5.7, the accounting firm may make reasonable assumptions
and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of the
Code and other applicable legal authority. The Company and Executive
shall furnish to the accounting firm such information and documents as
the accounting firm may reasonably request in order to make such a
determination.
5.7.c. The accounting firm engaged to make the determinations
hereunder shall provide its calculations, together with detailed
supporting documentation, to the Company and Executive within fifteen
(15) calendar days after the date on which Executive's right to a
Payment is triggered (if requested at that time by the Company or
Executive) or such other time as requested by the Company or Executive.
If the accounting firm determines that no Excise Tax is payable with
respect to a Payment, either before or after the application of the
Reduced Amount, it shall furnish the Company and Executive with an
opinion reasonably acceptable to Executive that no Excise Tax will be
imposed with respect to such Payment. Any good faith determinations of
the accounting firm made hereunder shall be final, binding and
conclusive upon the Company and Executive.
6. Outplacement Services. In the event the Executive is terminated by the
Company (other than for Cause, Disability or death), or the Executive terminates
employment for Good Reason, the Company shall provide outplacement services
through one or more outside firms of the Executive's choosing up to an aggregate
of $20,000, with such services to extend until the earlier of (i) 12 months
following the termination of the Executive's employment or (ii) the date the
Executive secures full time employment.
7. Mitigation. The Executive shall not be required to mitigate the amount of any
payment or benefits provided for in this Agreement by seeking other employment
or otherwise. Further, except as provided in Section 5.5.b the amount of any
payment or benefits provided for in this Agreement shall not be reduced by any
compensation earned by the Executive as a result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company or otherwise.
8. Release of Claims bv Executive. The Executive shall not be entitled to any
payments or other benefits hereunder unless the Executive executes and, if
applicable, does not revoke, a full and complete release and separation
agreement in a form substantially similar to the form attached hereto as
Attachment A, except that the Company may revise such form in the Company's
discretion to reflect the requirements of applicable anti-discrimination laws.
9. Confidentiality. Executive agrees as follows:
9.1. That his services to the Company are of a special, unique and
extraordinary character, and that his position places him in a position of
confidence and trust with the Company's customers and employees. Executive also
recognizes that his position with the Company will give him substantial access
to Confidential Information (as that term is defined below), the disclosure of
which to competitors
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of the Company would cause the Company to suffer substantial and irreparable
damage. Executive recognizes, therefore, that it is in the Company's legitimate
business interest to restrict his use of Confidential Information for any
purposes other than the discharge of his employment duties at the Company, and
to limit any potential appropriation of Confidential Information by him for the
benefit of the Company's competitors and to the detriment of the Company.
Accordingly, Executive agrees as follows:
9.1.a. During and after Executive's employment by the Company,
Executive will not disclose to any other person or company, nor use for
his own personal benefit, except as may be necessary in the performance
of his duties as an employee of the Company, any Confidential
Information disclosed to him or of which he becomes aware by reason of
his employment or association with the Company.
9.1.b. The term "Confidential Information" means any and all
data and information relating to the business of the Company (whether or
not it constitutes a trade secret), which is or has been disclosed to
Executive or of which Executive became aware as a consequence of his
employment or relationship with the Company, and which has value to the
Company and is not generally known by its competitors, including but not
limited to information relating to experimental and research work of the
Company, the Company's methods, processes, tools, machinery, formulas,
drawings or appliances, and the financial or business affairs of the
Company relating to services, customers, customer lists, employees or
employees' compensation, projections, plans, development, accounting and
marketing studies or analyses. Confidential Information shall not
include any data or information that has been disclosed voluntarily to
the public by the Company (except where such public disclosure has been
made by Executive or some other person without authorization), or that
has been independently developed and disclosed by others, or that
otherwise enters the public domain through lawful and legitimate means.
Confidential Information shall also not be deemed to be public merely
because individual portions of the information have been separately made
public, but shall be deemed public only if all material features
comprises such information have been made public in combination.
Further, this Section 9.1 shall not be construed to mean that Executive
is precluded from using his/her skills or knowledge in gainful
employment (or self-employment).
9.1.c. Executive agrees that upon the termination of his
employment with the Company, Executive will not take with him or retain
without written authorization any documents, files or other property of
the Company, and Executive will return promptly to the Company any such
documents, files or property in his possession or custody. In connection
with this Agreement, Executive recognizes that all documents, files and
property which Executive has received and will receive from the Company,
including but not limited to customer lists, handbooks, memoranda,
policy manuals, product specifications, and other materials (with the
exception of documents relating to benefits to which Executive might be
entitled following the termination of his employment with the Company),
are for the exclusive use of the Company and employees who are
discharging their responsibilities on behalf of the Company, and that
Executive has no claim or right to the continued use, possession or
custody of such documents, files or property following the termination
of Executive's employment with the Company.
10. Intellectual Property. Executive will communicate to the Company any and all
novel ideas, concepts, inventions, processes, and improvements, patentable or
unpatentable, made or conceived by him, either solely or jointly with others,
from the time of entering the Company's employ until Executive leaves, along the
line of the Company's business, or resulting from or suggested by any work which
Executive may do for the Company, or at its request, and Executive will, at all
times during his employment with the Company and after his termination for any
reason, assist the Company in every proper way (at the Company's expense), to
obtain for the Company's own benefit patents for any or all of these ideas,
concepts, inventions, processes and improvements in the United States and any
and all
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foreign countries, if patentable, by executing and delivering to the Company any
and all applications, assignments, and other instruments, by giving evidence and
testimony, and by executing and delivering to the Company all drawings,
blueprints, notes, and specifications deemed necessary by the Company in order
to apply for and obtain patents in the United States or foreign countries for
such ideas, concepts, inventions, processes and improvements, and Executive does
hereby assign and will assign and convey to the Company his entire right, title
and interest in and to all such ideas, concepts, inventions, processes, and
improvements, and all patent applications and patents thereon. Executive further
agrees to conduct himself as described above after leaving the Company's
employment as to all ideas, concepts, inventions, processes and improvements
conceived or disclosed while with the Company (collectively, "Intellectual
Property").
11. Non-Solicitation.
11.1. Executive further covenants and agrees that during his employment
by the Company and for the period of one (1) year thereafter, Executive will
not, except with the prior written consent of the Board, directly or indirectly,
solicit or hire, or encourage the solicitation or hiring of, or promise
employment or a service contract to any person who is an employee of the
Company, by any employer other than the Company for any position as an employee,
independent contractor, consultant or otherwise; provided, however, that it
shall not be a violation of this provision if any employee of Company responds
to a general advertisement of a position and Executive does not participate in
the recruiting, screening or hiring decision with respect to such an employee.
11.2. Executive covenants and agrees that during his employment by the
Company and for a period of one (1) year thereafter, Executive will not, except
with the prior written consent of the Board, manage, operate, or control as an
officer, partner, principal, consultant or otherwise or use or permit his name
to be used in connection with, the operations of any business or enterprise in
any country or geographic region for which Executive was responsible during the
last year of his employment at the Company to the extent such operations
manufacture, market or sell products competitive to those manufactured, marketed
or sold by the through the efforts of the Executive in such country or
geographic region; it being acknowledged and agreed this provision does not
prohibit or limit the Executive from acting in any capacity at, with or for a
company having operations which are competitive with those of Company, so long
as Executive does not act in any capacity with respect to those competitive
operations in violation of this provision.
12. Enforcement.
12.1. Executive acknowledges and agrees that the type and periods of
restrictions imposed in Sections 9, 10 and 11 of this Agreement are fair and
reasonable, and that such restrictions are intended solely to protect the
legitimate interests of the Company, rather than to prevent Executive from
earning a livelihood. Executive recognizes that the Company competes throughout
the United States, and that Executive's access to Confidential Information makes
it necessary for the Company to restrict Executive's post-employment activities
in any market in which the Company competes, and in which Executive's access to
Confidential Information and other proprietary information could be used to the
detriment of the Company. In the event that any restriction set forth in this
Agreement is determined to be overbroad with respect to scope, time or
geographical coverage, Executive agrees that such a restriction or restrictions
should be modified and narrowed, either by a court or by the Company, so as to
preserve and protect the legitimate interests of the Company as described in
this Agreement, and without negating or impairing any other restrictions or
agreements set forth herein.
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12.2. Because the Executive's services are unique and because the
Executive has access to Confidential Information and Intellectual Property, the
parties hereto agree that money damages would be an inadequate remedy for any
breach of this Agreement or the Executive engaging in conduct constituting
Cause. Therefore, in the event of a breach or threatened breach of this
Agreement or if the Executive engages in any other conduct that constitutes
Cause, the Company or its successors or assigns may, in addition to other rights
and remedies existing in its favor at law or in equity, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce, or prevent any violations of, the provisions hereof
(without posting a bond or other security).
12.3. In addition to the remedies available to the Company under Section
12.2 above, the Company may cancel, rescind, suspend, withhold or otherwise
limit or restrict any unpaid or deferred amounts owed to Executive, or exercise
or vesting in equity awards, under this Agreement or otherwise, if the Executive
engages in any conduct that constitutes Cause. In the event the Executive
engages in conduct that constitutes Cause prior to, or during the six months
after, any payment or delivery pursuant to this Agreement or otherwise or the
vesting or exercise of any equity rights, such payment, delivery, exercise or
vesting may be rescinded by the Company within two years thereafter. In the
event of any such rescission, the Executive shall pay to the Company the amount
of any gain realized or payment received as a result of the rescinded payment,
delivery, exercise or vesting, in such manner and on such terms and conditions
as may be required, and the Company shall be entitled to set-off against the
amount of any such gain any amount owed to the Executive by the Company.
12.4. The Executive understands that the foregoing restrictions may
limit his ability to earn a livelihood in a business similar to the business of
the Company, but he nevertheless believes that he has received and will receive
sufficient consideration and other benefits as an employee of the Company and as
otherwise provided hereunder or as described in the recitals hereto to clearly
justify such restrictions which, in any event (given his education, skills and
ability), the Executive does not believe would prevent him from otherwise
earning a living. The Executive further understands that the Company would not
enter into this Agreement but for the covenants contained in Sections 9, 10, and
11 of this Agreement, and the provisions of Sections 9, 10 and 11 of this
Agreement are reasonable and necessary to preserve the business of the Company.
12.5. Executive agrees that if the Company fails to take action to
remedy any breach by Executive of this Agreement or any portion of the
Agreement, such inaction by the Company shall not operate or be construed as a
waiver of any subsequent breach by Executive of the same or any other provision,
agreement or covenant.
12.6. Executive hereby states that he has read this Agreement in its
entirety, that Executive has been given an opportunity to consider the Agreement
and discuss it with the attorney of his choice, and that Executive enters into
this Agreement voluntarily and intending to be legally bound.
13. Disputes.
13.1. Settlement of Disputes; Arbitration. If any legally actionable
dispute arises under this Agreement or otherwise which cannot be resolved by
mutual discussion between the parties, then the Company and Executive each agree
to resolve that dispute by binding arbitration before an arbitrator experienced
in employment law. Said arbitration will be conducted in accordance with the
rules applicable to employment disputes of the Judicial Arbitration and
Mediation Services ("JAMS") and the law applicable to the claim. The parties
shall have 30 calendar days after notice of such arbitration has been given to
attempt to agree on the selection of an arbitrator from JAMS. In the event the
parties are
Page 11 of 16
unable to agree in such time, JAMS will provide a list of five available
arbitrators and an arbitrator will be selected from such five-member panel
provided by JAMS by the parties alternately striking out one name of a potential
arbitrator until only one name remains. The party entitled to strike an
arbitrator first shall be selected by a toss of a coin. The parties agree that
this agreement to arbitrate includes any such disputes that the Company may have
against Executive, or Executive may have against the Company and/or its related
entities and/or employees, arising out of or relating to this Agreement, or
Executive's employment or Executive's termination including, but not limited to,
any claims of discrimination or harassment in violation of applicable law and
any other aspect of Executive's compensation, employment, or Executive's
termination. The parties further agree that arbitration as provided for in this
Section is the exclusive and binding remedy for any such dispute and will be
used instead of any court action, which is hereby expressly waived, except for
an administrative claim with an administrative agency. The parties agree that
the arbitration provided herein shall be conducted in Orange County, California.
The Company shall pay the cost of any arbitration brought pursuant to this
paragraph, excluding, however, the cost of representation of Executive unless
such cost is awarded in accordance with law or otherwise awarded by the
arbitrators.
14. Successors.
14.1. Successor to Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company expressly to
assume and agree to perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure
of the Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute Good Reason if the Executive elects to terminate employment, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement, by operation of law or otherwise.
14.2. Successor to Executive. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amount would still be payable to
the Executive or the Executive's family hereunder if the Executive had continued
to live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
14.3. Notice Requirement. Any termination of the Executive's employment
by the Company (other than due to the death of the Executive) shall be
communicated by a written notice to the Executive hereto (the "Notice of
Termination"). Any Notice of termination shall: (i) indicate the specific
termination provision (if any) of this Agreement relied upon by the party giving
such notice, (ii) to the extent applicable, set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) specify the
Date of Termination (as defined below). For purposes of this Agreement, the
effective date of an employment termination (the "Date of Termination") shall be
the close of business on the date specified in the Notice of Termination (which
date may not be less than 90 days or more than 120 days after the date of
delivery of such Notice of Termination), except in the case of a termination due
to the Executive's death or on account of the Company terminating the Executive
for Cause, in which case the Date of Termination can be immediate.
14.4. Notice. All notices, instructions and other communications given
hereunder or in
Page 12 of 16
connection herewith shall be in writing. Any such notice, instruction or
communication shall be sent either (i) by registered or certified mail, return
receipt requested, postage prepaid, or (ii) prepaid via a reputable nationwide
overnight courier service, in each case addressed to the Company, at 0000 Xxxxxx
Xxx, Xxxxx Xxxx, XX 00000 and to the Executive at the Executive's principal
residence as currently reflected on the Company's records (or to such other
addresses as either the Company or the Executive may have furnished to the other
in writing in accordance herewith). Any such notice, instruction or
communication shall be deemed to have been delivered five business days after it
is sent by registered or certified mail, return receipt requested, postage
prepaid or one business day after it is sent via a reputable nationwide
overnight courier service. Either party may give any notice, instruction or
other communication hereunder using any other means, but no such notice,
instruction or other communication shall be deemed to have been duly delivered
unless and until it actually is received by the party for whom it is intended.
15. Miscellaneous.
15.1. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15.2. Injunctive Relief. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
15.3. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
State of California, without regard to conflicts of law principles.
15.4. Waivers. No waiver by the Executive at any time of any breach of,
or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
15.5. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.
15.6. Tax Withholding. Any payments provided for hereunder shall be paid
net of any applicable tax withholding required under federal, state or local
law.
15.7. Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties; whether oral or written, by any
officer, employee or representative of any party hereto in respect of the
subject matter contained herein, including any offer letter executed by the
Company and counter-signed by Executive.
15.8. Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive
Page 13 of 16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first set forth above.
VALEANT PHARMACEUTICALS INTERNATIONAL
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Title: President and Chief Executive
Officer
------------------------------
EXECUTIVE
Signed: /s/ Xxxxxx X. Xxxxxxx
----------------------------
Page 14 of 16
ATTACHMENT A
SEVERANCE AGREEMENT AND GENERAL RELEASE
Valeant Pharmaceuticals International (the "Company") has agreed that,
in return for my signing this Release Agreement (the "Agreement"), the Company
will provide me with the severance benefits described in the Executive Severance
Agreement dated as of April 22, 2005 between the Company and me (the "Executive
Agreement"). I understand that I am not entitled to these severance benefits
unless I sign this Agreement. I understand that, regardless of whether I sign
this Agreement, the Company will pay me any accrued salary and vacation to which
I am entitled by law. In consideration for the severance benefits I am receiving
under this Agreement:
(1) I hereby release the Company and its parent, subsidiaries,
predecessors, successors, and affiliates, and their officers, directors,
employees, shareholders, and agents from any and all claims, liabilities, or
obligations of every kind, but only to the extent (a) actually known by me or,
if unknown, are of such a nature that a prudent person acting under similar
circumstances would know of such claims; and (b) arising at any time prior to
and through the date I sign this Agreement. This general release includes, but
is not limited to: all federal and state statutory and common law claims; claims
related to my employment, termination of my employment, breach of contract,
tort, discrimination, harassment, retaliation, fraud, emotional distress,
compensation or benefits; and claims for any form of equity or compensation. In
releasing claims potentially unknown to me at present, I acknowledge that I have
understood and waived all rights and benefits under Section 1542 of the
California Civil Code, and any law or legal principle of similar effect in any
jurisdiction. California Civil Code Section 1542 provides as follows: " 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."
(2) I acknowledge that I am knowingly and voluntarily waiving and
releasing any rights that I may have under the Age Discrimination in Employment
Act of 1967, as amended ("ADEA"), and that the consideration given for the
waiver and release in the preceding paragraph is in addition to anything of
value to which I was already entitled and provided to me in order to obtain a
full release of all claims, including claims for age discrimination. I further
acknowledge that I have been advised by this writing that: (a) my waiver and
release do not apply to any rights or claims that may arise after the execution
date of this Agreement; (b) I have the right to consult with an attorney prior
to executing this Agreement; (c) I have twenty-one (21) days to consider this
Agreement (although I may choose voluntarily to execute this Agreement earlier);
(d) I have seven (7) days following the execution of this Agreement to revoke
the Agreement as to only any claim I may have for age discrimination under the
ADEA by providing written notice to the head of the Company's Human Resources
department which is received by 5:00 p.m. on the seventh day following my
execution of this Agreement (I acknowledge that I do not have a right to
revocation with respect to any other claims); and (e) this Agreement will be
effective upon my execution of it, but that no severance benefits will be owed
to me any sooner than the eighth day following my execution of this Agreement. I
further acknowledge that 90% of the benefits provided to me by this Agreement
are for the release of any potential claim for age discrimination I may have
under the ADEA.
(3) Notwithstanding anything herein to the contrary, I am not releasing:
(a) any claims that relate to my right to enforce this Agreement or the
Executive Agreement, (b) my rights of indemnification and directors and officers
liability insurance coverage (or replacements therefor) to which I was entitled
immediately prior to the date of this Agreement with regard to my service on
behalf of the Company and its affiliates (including, without limitation, under
Section 13(d) of the Executive Employment Agreement); (c) my rights under any
tax-qualified pension or claims for accrued vested benefits under any other
employee benefit plan, policy or arrangement maintained by the Company or under
COBRA; (d) my rights under the provisions of the Executive Agreement which are
intended to survive the termination of my employment; or (e) my rights as a
stockholder.
Page 15 of 16
* * *
This Agreement constitutes the complete, final and exclusive embodiment
of the entire agreement between the Company and me with regard to my release of
all known and unknown claims against the Company. I acknowledge and understand
that certain provisions in my Executive Agreement are intended to and do survive
the termination of my employment and the execution of this Agreement. I am not
relying on any promise or representation, written or oral, that is not expressly
stated herein. This Agreement may only be modified by a written agreement signed
by both me and a duly authorized officer of the Company and approved by the
Company's Board of Directors.
UNDERSTOOD AND AGREED:
/s/ Xxxxxx X. Xxxxxxx April 22, 2005
------------------------------------- ----------------------
Date
/s/ Xxxxxxx X. Xxxxx April 22, 2005
------------------------------------- ----------------------
Valeant Pharmaceuticals International Date
Page 16 of 16
