EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and
entered into as of January 18, 2002, by and between Advanced Medical Optics,
Inc., a Delaware corporation (the "Company"), and Xxxxx X. Xxxxx ("Executive").
RECITALS
WHEREAS, prior to the date hereof, Executive has been employed
by Allergan, Inc., a Delaware corporation ("Allergan").
WHEREAS, the Company is a wholly owned subsidiary of Allergan.
WHEREAS, the parties anticipate the consummation of the
spinoff transaction approved by the Board of Directors of Allergan by
resolutions approved on January 18, 2002 (the consummation of such transaction
referred to herein as the "Spinoff").
WHEREAS, the Company desires to employ Executive, and
Executive desires to accept employment with the Company, on the terms and
conditions set forth in this Agreement in the event of, and effective upon, the
Spinoff.
NOW, THEREFORE, in consideration of the foregoing recitals and
the respective covenants and agreements of the parties contained herein, the
Company and Executive agree as follows:
ARTICLE 1.
EFFECTIVE DATE;
TERM OF EMPLOYMENT
1.1 Effective Date. This Agreement shall become effective upon the
Spinoff, and the "Effective Date" shall be the date on which the Spinoff occurs.
This Agreement shall govern the terms of Executive's employment hereunder on and
after the Effective Date. In the event the Spinoff does not occur on or before
December 31, 2002, this Agreement shall terminate and shall be of no force and
effect.
1.2 Term of Employment. Subject to extension in accordance with Section
1.3, the term of this Agreement shall commence on the Effective Date and shall
continue until the third anniversary of the Effective Date (the "Initial Term"),
unless terminated earlier in accordance with Article 5 of this Agreement. Upon
expiration of the Term (as defined below), Executive shall resign from all
positions with the Company and Executive's employment with the Company shall
terminate.
1.3 Extension of Term. The term of this Agreement shall be
automatically extended by one (1) year from the expiration of the Initial Term
and on each subsequent anniversary of the Effective Date, unless either party
elects not to so extend the term of the Agreement by notifying the other party,
in writing, of such election not less than six (6) months prior to the last day
of the
Term as then in effect. Any extension shall become effective immediately as of
the day following the date which is six (6) months prior to the last day of the
Term as then in effect. For purposes of this Agreement, the "Term" shall mean
the period commencing on the Effective Date and ending on the last day of the
Initial Term or, if applicable, the last day of the latest one-year extension of
this Agreement in accordance with this Section 1.3.
1.4 Termination of Prior Agreements. Effective as of the Effective
Date, Executive shall resign from his employment with Allergan and from any and
all positions with Allergan. Effective as of the Effective Date, the agreements
set forth in EXHIBIT A (the "Prior Agreements") and the rights and obligations
of Executive and any other party or parties thereunder shall terminate.
Executive agrees to execute and deliver to Allergan such amendments to the
agreements listed on EXHIBIT A as Allergan reasonably determines necessary to
terminate the Prior Agreements and release any and all of the obligations of
Allergan and its affiliates under the Prior Agreements effective as of the
Effective Date.
ARTICLE 2.
EMPLOYMENT; DUTIES
2.1 Employment. During the Term, the Company shall employ Executive,
and Executive shall accept employment with the Company, upon the terms and
subject to the conditions set forth in this Agreement.
2.2 Position. Executive shall be employed as President and Chief
Executive Officer of the Company, and shall, during the Term, serve in such
position or in such other position or positions as the Board of Directors of the
Company (the "Board") may reasonably request from time to time. Executive shall
report directly to the Board. Upon the termination of Executive's employment
hereunder in accordance with Article 5, Executive shall immediately resign from
all positions with the Company.
2.3 Duties. During the Term, Executive shall devote his full business
time, attention and energies to the business of the Company and use his best
efforts to promote the interest of the Company. Executive shall perform such
duties, services and responsibilities incident to the Executive's positions
which are reasonably consistent with such positions and shall act in accordance
with the policies and directives of the Company as determined from time to time.
2.4 Directorship; Termination of Directorship.
(a) During the Term, Executive shall serve as a member of the
Board (a "Director"), subject to election and reelection by the Company's
stockholders in accordance with the Company's Certificate of Incorporation and
Bylaws. Executive shall devote such time to the business of the Company as is
necessary for the fulfillment of Executive's duties as a Director. During the
Term, Executive shall not be paid a fee for serving as a Director. The Company
shall reimburse Executive for reasonable expenses incurred in connection with
his service as a Director.
(b) During the Term, the Company shall nominate Executive as a
Director, shall recommend that Executive be appointed, elected or reelected as a
Director each time Executive's class of Directors is subject to reelection, and
shall include Executive on the
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management slate of candidates for election as Directors recommended to the
Company's stockholders for each annual meeting of the Company's stockholders
held during the Term and at which Directors in the same class as Executive are
elected.
(c) Upon the expiration of the Term (or upon the Date of
Termination as defined in Section 5.1(h), below), Executive shall immediately
resign as a Director.
2.5 Other Activities. Except with the prior written approval of the
Board, which the Board may grant or withhold in its sole and absolute
discretion, Executive shall not, during the Term, be actively engaged in any
other business activity, including, but not limited to, activity as a
consultant, agent, partner, officer or director, or provide business services of
any nature directly or indirectly to a corporation or other business enterprise;
provided, however, that so long as the activities do not interfere with
Executive's duties and responsibilities hereunder, Executive may participate in
other business activities for non-profit institutions from time to time.
Notwithstanding the foregoing, it shall not be a breach of this Agreement for
Executive to serve on civic or charitable boards or committees, or to invest his
personal assets in other businesses or ventures to the extent that such other
activities, businesses or ventures do not materially interfere with the
performance of his duties under this Agreement. None of the foregoing shall in
any way modify Executive's responsibilities hereunder, including without
limitation Executive's responsibilities under Article 10.
ARTICLE 3.
SALARY, BONUS AND STOCK OPTIONS
3.1 Base Salary. During the Term, the Company shall pay Executive a
base salary ("Base Salary") at an annual rate of $450,000, subject to change as
provided in this Section 3.1, and payable in accordance with the Company's
executive compensation practices. Such annual rate shall be reviewed by the
Board or its designee at least annually and may be increased or reduced in such
amounts as the Board or its designee deems appropriate in its sole discretion;
provided, however, that during the Term the Base Salary shall not be less than
$450,000.
3.2 Bonus Programs. Executive shall be eligible to participate in such
annual bonus plans or programs as are generally available from time to time to
similarly situated executive employees of the Company, subject to and in
accordance with the terms, conditions and overall administration of such bonus
plans or programs. Nothing herein is intended or shall be construed to require
the institution or continuation of any bonus plan or program, or to entitle
Executive to receive any bonus.
3.3 Stock Options or Other Equity-Based Awards. Executive shall be
eligible to receive awards under the stock option or other equity award plans or
programs as are generally available from time to time to similarly situated
executive employees of the Company, subject to and in accordance with the terms,
conditions and overall administration of such plans or programs. Nothing herein
is intended or shall be construed to require the institution or continuation of
any stock option or other equity award plan or program, or to entitle Executive
to receive any stock option or other equity award.
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3.4 Withholding. The Company shall deduct or withhold from the
compensation and benefits payable to Executive hereunder any and all sums
required for federal income and employment and other taxes and all state or
local income and other taxes now applicable or that may be enacted and become
applicable during the Term.
ARTICLE 4.
EMPLOYEE BENEFITS
4.1 Employee Benefits. During the Term, Executive shall be entitled to
participate in or receive such benefits and perquisites as are provided
generally from time to time to similarly situated executive employees of the
Company, subject to and in accordance with the terms, conditions and overall
administration of the benefit plans pertaining to such benefits. Nothing herein
is intended or shall be construed to require the institution or continuation of
any plan or benefits. The Company may, in its sole discretion, grant such
additional benefits to Executive from time to time as the Company deems proper
and desirable.
4.2 Office Support. Executive shall be entitled to receive secretarial
and other office support commensurate with Executive's position and consistent
with the general policies and practices of the Company.
4.3 Vacation. During the Term, Executive shall be entitled to paid
vacation at the rate commensurate with Executive's position and consistent with
the general policies and practices of the Company, which, to the extent unused
in any given year, may be carried over to the following year to the extent
permitted by the policies of the Company then in effect.
4.4 Business Expenses.
(a) Reimbursement. The Company shall pay or reimburse
Executive for all reasonable and authorized business expenses incurred by
Executive during the Term.
(b) Business Travel. The Company shall reimburse Executive for
expenses incurred for business-related travel in accordance with the Company's
travel reimbursement policy.
(c) Documentation. As a condition to reimbursement under this
Section 4.4, Executive shall furnish to the Company adequate records and other
documentary evidence required by federal and state statutes and regulations for
the substantiation of each expenditure. Executive acknowledges and agrees that
failure to furnish the required documentation may result in the Company denying
all or part of the expense for which reimbursement is sought.
4.5 Repatriation of Executive. The Company hereby agrees to repatriate
Executive to the United States in 2003 in accordance with the provisions set
forth in EXHIBIT B.
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ARTICLE 5.
TERMINATION OF EMPLOYMENT
5.1 Termination of Employment. During the Term and notwithstanding the
provisions of Article 1, Executive's employment hereunder shall be terminated,
or may be terminated, as the case may be, under the following circumstances:
(a) Termination upon Death. Executive's employment hereunder
shall terminate upon his death.
(b) Termination upon Disability. Executive's employment
hereunder shall terminate upon a Notice of Termination (as defined in subsection
(g) below) to Executive (or Executive's legal representative, if applicable)
citing Executive's physical or mental disability or infirmity which, in the
opinion of a competent physician selected by the Board, renders Executive unable
to perform his duties under this Agreement for more than 120 days during any
180-day period.
(c) Discharge for Cause. The Company may terminate Executive's
employment hereunder for Cause (a "Discharge for Cause") upon at least fifteen
(15) days' written notice in the form of a Notice of Termination. For purposes
of this Agreement, "Cause" shall be limited to only three types of events:
(i) the willful and continued refusal of Executive to comply
with a lawful, written instruction of the Board so long as the
instruction is consistent with the scope and responsibilities of
Executive's position and Executive has failed to end such willful and
continued refusal within fifteen (15) business days of written notice
thereof from the Company;
(ii) willful misconduct by Executive which results in a
material financial loss to the Company (or to any of its affiliated
companies) or material injury to its public reputation (or to the
public reputation of any of its affiliated companies); or
(iii) Executive's conviction of any felony.
Notwithstanding the foregoing, no act or failure to act on Executive's part
shall be deemed "willful" unless done, or omitted to be done, by Executive not
in good faith and without reasonable belief that the action or omission was in
the best interest of the Company.
(d) Discharge Without Cause. The Company may terminate
Executive's employment hereunder other than for Cause (a "Discharge Without
Cause") upon at least sixty (60) days' written notice in the form of a Notice of
Termination. Termination of Executive's employment hereunder due to Executive's
death or Executive's disability shall not be considered a Discharge Without
Cause.
(e) Voluntary Resignation for Good Reason. Executive may
terminate Executive's employment hereunder for Good Reason (a "Voluntary
Resignation for Good Reason") upon at least sixty (60) days' written notice to
the Company in the form of a notice of resignation (the "Notice of
Resignation"). The Notice of Resignation shall set forth the
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circumstances which in Executive's view constitute Good Reason hereunder and
shall be delivered to the Company within sixty (60) days of the occurrence of
the applicable Good Reason event. For purposes of this subsection (e) and
subsection (f), "Good Reason" shall mean:
(i) Executive's overall compensation is reduced or adversely
modified in any material respect, or
(ii) Executive's duties are materially changed.
For purposes of subsection (ii), above, Executive's duties shall be considered
to have been "materially changed" if, without Executive's express written
consent, there is any substantial diminution or adverse modification in
Executive's overall position, responsibilities or reporting relationship, or if,
without Executive's express written consent, Executive's job location is
transferred to a site more than fifty (50) miles away from his or her then
current place of employment (except for a repatriation of Executive to the
United States in 2003). During the period of notice set forth above in this
subsection (e), the Company shall be afforded reasonable opportunity to
establish, to the reasonable satisfaction of Executive, that the Good Reason
circumstances cited in Executive's Notice of Resignation were not present on the
date of such Notice of Resignation, or are no longer present, in which case
Executive's employment hereunder shall not terminate under this subsection (e).
(f) Voluntary Resignation other than for Good Reason.
Executive may terminate Executive's employment hereunder other than for Good
Reason (a "Voluntary Resignation other than for Good Reason") upon at least
sixty (60) days' written notice to the Company in the form of a Notice of
Resignation.
(g) Notice of Termination. Any termination of Executive's
employment by the Company shall be communicated by written Notice of Termination
to Executive. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(h) Date of Termination. "Date of Termination" shall mean (i)
if Executive's employment is terminated by his death, the date of his death,
(ii) if Executive's employment is terminated by reason of his disability, the
date of the Notice of Termination citing the opinion of the physician referred
to in subsection (b), above, (iii) if the Executive's employment is terminated
pursuant to subsections (c) or (d), above, the date specified in the Notice of
Termination, and (iv) if the Executive's employment is terminated under
subsections (e) or (f), above, the date specified in the Notice of Resignation,
or, if no Notice of Resignation is provided, then the date Executive ceased to
provide services to the Company in the reasonable judgment of the Board, which
determination shall be final and conclusive.
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ARTICLE 6.
PAYMENTS UPON TERMINATION OF
EMPLOYMENT; SEVERANCE PAYMENTS
6.1 Termination upon Death. In the event of the termination of
Executive's employment hereunder due to Executive's death, the Company shall pay
to Executive's estate or provide: (i) any unpaid amount of Base Salary earned
through the date of Executive's death, (ii) a lump sum equal to Executive's
bonus at target, pro-rated for the period from the beginning of the bonus plan
year through the date of Executive's death, (iii) a lump sum equal to
Executive's unused accrued vacation time, at his Base Salary rate, through the
date of Executive's death, (iv) his then current Base Salary until the earlier
of (A) twelve (12) months after the date of Executive's death and (B) the last
day of the Term as then in effect, (v) expenses incurred by Executive
reimbursable under Section 4.4, and (vi) continued medical and other welfare
plan coverage for Executive's eligible dependents (if any) for twelve (12)
months upon the same terms as are generally applied from time to time for
similarly situated executive employees.
6.2 Termination upon Disability. In the event of the termination of
Executive's employment hereunder due to Executive's disability, the Company
shall pay or provide to Executive: (i) any unpaid amount of Base Salary earned
through the Date of Termination, (ii) a lump sum equal to Executive's bonus at
target, pro-rated for the period from the beginning of the bonus plan year
through the Date of Termination, (iii) a lump sum equal to Executive's unused
accrued vacation time, at his Base Salary rate, through the Date of Termination,
(iv) his then current Base Salary (payable in accordance with the Company's
executive compensation practices) until Executive begins to receive benefits
under the long term disability insurance provided hereunder (if any), but in no
event following twelve (12) months after the Date of Termination, (v) expenses
incurred by Executive prior to the Date of Termination reimbursable under
Section 4.4, and (vi) continued medical and other welfare plan coverage for
Executive and Executive's eligible dependents (if any) for twelve (12) months
upon the same terms as are generally applied from time to time for similarly
situated executive employees.
6.3 Discharge for Cause. In the event of the termination of Executive's
employment hereunder by a Discharge for Cause, the Company shall pay to
Executive: (i) his Base Salary through the Date of Termination, (ii) a lump sum
equal to Executive's unused accrued vacation time (at his Base Salary rate)
through the Date of Termination, and (iii) expenses incurred by Executive prior
to the Date of Termination reimbursable under Section 4.4.
6.4 Discharge Without Cause. In the event the Executive's employment
hereunder is terminated due to a Discharge Without Cause, the Company shall pay
or provide to Executive: (i) the Severance Payment, (ii) a lump sum equal to
Executive's bonus at target, pro-rated for the period from the beginning of the
bonus plan year through the Date of Termination, (iii) a lump sum equal to
Executive's unused accrued vacation time (at his Base Salary rate) through the
Date of Termination, (iv) expenses incurred by Executive prior to the Date of
Termination reimbursable under Section 4.4, and (v) continued medical and other
welfare plan coverage for Executive and Executive's eligible dependents (if any)
for twelve (12) months upon the same terms as are generally applied from time to
time for similarly situated executive employees.
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6.5 Voluntary Resignation for Good Reason. In the event the Executive's
employment hereunder is terminated due to a Voluntary Resignation for Good
Reason, the Company shall pay or provide to Executive: (i) the Severance
Payment, (ii) a lump sum equal to Executive's bonus at target, pro-rated for the
period from the beginning of the bonus plan year through the Date of
Termination, (iii) a lump sum equal to Executive's unused accrued vacation time
(at his Base Salary rate) through the Date of Termination, (iv) expenses
incurred by Executive prior to the Date of Termination reimbursable under
Section 4.4, and (v) continued medical and other welfare plan coverage for
Executive and Executive's eligible dependents (if any) for twelve (12) months
upon the same terms as are generally applied from time to time for similarly
situated executive employees.
6.6 Voluntary Resignation other than for Good Reason. In the event the
Executive's employment hereunder is terminated due to a Voluntary Resignation
other than for Good Reason, the Company shall pay to Executive: (i) his Base
Salary through the Date of Termination, (ii) a lump sum equal to Executive's
unused accrued vacation time (at his Base Salary rate) through the Date of
Termination, and (iii) expenses incurred by Executive prior to the Date of
Termination reimbursable under Section 4.4.
6.7 Severance Payment. The "Severance Payment" payable to Executive
shall be a lump sum payment equal to three (3) times Executive's Compensation
(as defined in Section 7.2, below), in the event Executive's employment
hereunder is terminated in a Qualifying Termination (as defined in Section 7.3,
below) at any time during the Term.
6.8 Benefits Following a Change in Control. In the event of:
(a) a Change in Control (as defined in Section 7.1, below),
and
(b) the termination of Executive's employment hereunder in a
Qualifying Termination within one hundred twenty (120) days prior to or within
two (2) years after a Change in Control, the Company agrees that all stock
options, restricted stock and other incentive compensation awards of Executive
that are outstanding at the time of the Qualifying Termination and that have not
previously become exercisable, payable or free from restrictions shall
immediately become exerciseable, payable or free from restrictions, as the case
may be, in their entirety, and that the exercise period of any stock option or
other incentive award shall continue for the length of the exercise period
specified in the grant of the award determined without regard to Executive's
termination of employment. Notwithstanding any other provisions in this
Agreement to the contrary, in such event, Executive shall also be entitled to
continue to participate for three years following the Qualifying Termination in
all of the employee benefit programs of the Company (including, but not limited
to, group medical insurance, group dental insurance, group-term life insurance,
disability insurance, automobile allowance, gasoline allowance, and a full
allowance for club dues and tax and financial planning) available to the
Executive before the Qualifying Termination in the same way and at the same
level as immediately prior to the Qualifying Termination at no additional cost
to Executive, except to the extent tax rules require the inclusion of the value
of such benefits in Executive's income. Executive shall also receive executive
outplacement benefits of a type and duration generally provided to executives at
Executive's level.
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6.9 Termination of Obligations. In the event of the termination of
Executive's employment hereunder pursuant to Article 5, the Company shall have
no further obligation to pay Executive any Base Salary, bonus or other
compensation or benefits, except as provided in this Article 6 or Article 8 or,
for benefits due to Executive (and his dependents), under the terms of the
Company's employee benefit plans. The payments under this Agreement are in lieu
of any severance payment that Executive might otherwise be entitled to from the
Company under the Company's applicable severance pay policies. However, if by
the terms of the Company's applicable severance pay policies for a reduction in
force the amount computed under the policy would be greater than the Severance
Payment described in this Agreement, then the Severance Payment shall be such
greater amount.
ARTICLE 7.
DEFINITIONS APPLICABLE TO SEVERANCE PAYMENTS
7.1 Change in Control. For purposes of this Agreement, "Change in
Control" shall mean the occurrence of any of the following transactions after
the Effective Date:
(a) Any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a
"Person"), is or becomes the "beneficial owner," as defined in Rule 13d-3 under
the Exchange Act (a "Beneficial Owner"), directly or indirectly, of securities
of the Company representing (i) 20% or more of the combined voting power of the
Company's then outstanding voting securities, which acquisition is not approved
in advance of the acquisition or within 30 days after the acquisition by a
majority of the Incumbent Board (as defined below), or (ii) 33% or more of the
combined voting power of the Company's then outstanding voting securities,
without regard to whether such acquisition is approved by the Incumbent Board;
(b) Individuals who, as of the Effective Date, constitute the
Board of Directors of the Company (the "Incumbent Board"), cease for any reason
to constitute at least a majority of the Board of Directors, provided that any
person becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, is approved by a vote of
at least a majority of the directors then comprising the Incumbent Board (other
than an election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of the directors of the Company, as such terms are used Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) shall, for the
purposes of this Agreement, be considered as though such person were a member of
the Incumbent Board of the Company;
(c) The consummation of a merger, consolidation or
reorganization involving the Company, other than one which satisfies both of the
following conditions:
(i) a merger, consolidation or reorganization which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of another entity) at
least 55% of the combined voting power of the voting securities of the
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Company or such other entity resulting from the merger, consolidation
or reorganization (the "Surviving Corporation") outstanding immediately
after such merger, consolidation or reorganization and being held in
substantially the same proportion as the ownership in the Company's
voting securities immediately before such merger, consolidation or
reorganization, and
(ii) a merger, consolidation or reorganization in which no
Person is or becomes the Beneficial Owner directly or indirectly, of
securities of the Company representing 20% or more of the combined
voting power of the Company's then outstanding voting securities; or
(d) The stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or other disposition by
the Company of all or substantially all of the Company's assets;
provided, however, that in no event shall the Spinoff constitute a Change in
Control; provided, further, that notwithstanding the preceding provisions of
this Section 7.1, a Change in Control shall not be deemed to have occurred if
the Person described in the preceding provisions of this Section is (1) an
underwriter or underwriting syndicate that has acquired the ownership of any of
the Company's then outstanding voting securities solely in connection with a
public offering of the Company's securities, (2) the Company or any parent or
subsidiary of the Company, or (3) an employee stock ownership plan or other
employee benefit plan maintained by the Company (or any of its affiliated
companies) that is qualified under the provisions of the Internal Revenue Code
of 1986, as amended. In addition, notwithstanding the preceding provisions of
this Section 7.1, a Change in Control shall not be deemed to have occurred if
the Person described in the preceding provisions of this Section 7.1 becomes a
Beneficial Owner of more than the permitted amount of outstanding securities as
a result of the acquisition of voting securities by the Company which, by
reducing the number of voting securities outstanding, increases the proportional
number of shares beneficially owned by such Person, provided, that if a Change
in Control would occur but for the operation of this sentence and such Person
becomes the Beneficial Owner of any additional voting securities (other than
through the exercise of options granted under any stock option plan of the
Company or through a stock dividend or stock split), then a Change in Control
shall occur.
7.2 Compensation. For purposes of this Agreement, Executive's
"Compensation" shall equal the sum of (i) the higher of Executive's current Base
Salary or Executive's highest annual salary rate within the five-year period
ending on Executive's Date of Termination due to a Qualifying Termination, plus
(ii) a Management Bonus Increment. The "Management Bonus Increment" shall equal
the higher of 100% of the target bonus rate in the year Executive's employment
terminates or the average of the two highest of the last five bonuses paid by
the Company to Executive under the management bonus plan or any successor
thereto. For purposes of the foregoing, Executive's salary and bonus while
employed with Allergan prior to the Effective Date hereof shall be taken into
account. In addition, for purposes of this Agreement, "management bonus plan"
refers to the primary bonus plan or program of the Company for determining
Executive's annual bonus, or, with respect to any applicable period of
employment with Allergan, the Management Bonus Plan of Allergan.
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7.3 Qualifying Termination. For purposes of this Agreement, a
"Qualifying Termination" shall mean the termination of Executive's employment
hereunder due to either a Discharge Without Cause or a Voluntary Resignation for
Good Reason.
ARTICLE 8.
EXCISE TAXES
8.1 Indemnification for Excise Tax. In the event that Executive becomes
entitled to receive a Severance Payment hereunder, and such Severance Payment or
any other benefits or payments (including transfers of property), within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor thereto) or the regulations thereunder) that Executive
receives, or is to receive, pursuant to this Agreement or any other agreement,
plan or arrangement with the Company in connection with a Change in Control of
the Company ("Other Benefits") shall be subject to the tax imposed pursuant to
Section 4999 of the Code (or any successor thereto) or any comparable provision
of state law (an "Excise Tax"), the following rules shall apply:
(a) The Company shall pay to Executive, within 30 days after a
Qualifying Termination, an additional amount (the "Gross-Up Payment") such that
the net amount retained by Executive, after deduction of any Excise Tax with
respect to the Severance Payments or the Other Benefits and any federal, state
and local income tax, employment tax and Excise Tax upon such Gross-Up Payment,
is equal to the amount that would have been retained by Executive if such Excise
Tax were not applicable, as determined by the accounting firm (the "Auditors")
serving as the Company's independent auditors immediately prior to the Change in
Control. It is intended that Executive shall not suffer any loss or expense
resulting from the assessment of any Excise Tax or the Company's reimbursement
of Executive for payment of any such Excise Tax.
(b) For purposes of determining whether any of the Severance
Payment or Other Benefits will be subject to an Excise Tax and the amount of
such Excise Tax, (i) any other payment or benefits received or to be received by
Executive in connection with a Change in Control of the Company or Executive's
termination of employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Company, any person whose
actions result in a Change in Control or any person affiliated with the Company
or such person) shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code (or any successor thereto), and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of the Code (or any
successor thereto) shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel selected by the Auditors and acceptable to Executive such
other payments or benefits (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code (or any successor thereto), (ii) the amount of
the Severance Payments and Other Benefits which shall be treated as subject to
the Excise Tax shall be equal to the lesser of (A) the total amount of the
Severance Payments or Other Benefits or (B) the amount of excess parachute
payments within the meaning of Sections 280G(b)(1) and (4) of the Code (or any
successor or successors thereto), after applying clause (i), above, and (iii)
the value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors
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in accordance with the principles of Sections 280G(d)(3) and (4) of the Code (or
any successor or successors thereto).
(c) For purposes of determining the amount of the Gross-Up
Payment, Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of Executive's residence on
the date of Executive's Qualifying Termination, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes.
(d) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of Executive's Qualifying Termination, Executive shall repay to the Company, at
the time that the amount of such reduction in Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such reduction plus interest
on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code (or any successor thereto) (the "Applicable Rate"). In the event that
the Excise Tax is determined to exceed the amount taken into account hereunder
at the time of such Qualifying Termination (including by reason of any payment
the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus interest, determined at the Applicable Rate,
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
ARTICLE 9.
MITIGATION OR OFFSET; INSURANCE
9.1 Mitigation or Offset. Executive shall not be required to seek other
employment or to reduce any amount payable to him under Article 6 or 8 hereof,
and no such amount shall be reduced on account of any compensation received by
Executive from other employment. However, the Company's obligation to pay any
amount under this Agreement shall be reduced by any amount owed by the Executive
to the Company.
9.2 Indemnification; Insurance.
(a) If Executive is a party or is threatened to be made a
party to any threatened, pending or completed claim, action, suit or proceeding,
or appeal therefrom, whether civil, criminal, administrative, investigative or
otherwise, because he is or was an officer of the Company, or at the express
request of the Company is or was serving, for purposes reasonably understood by
him to be for the Company, as a director, officer, partner, employee, agent or
trustee (or in any other capacity of an association, corporation, general or
limited partnership, joint venture, trust or other entity), the Company shall
indemnify Executive against any reasonable expenses (including attorneys' fees
and disbursements), and any judgments, fines and amounts paid in settlement
incurred by him in connection with such claim, action, suit, proceeding or
appeal therefrom to the extent such expenses, judgments, fines and amounts paid
in settlement were not advanced by the Company on his behalf pursuant to Section
9.2(b) below, to the fullest extent permitted under California law. The Company
shall provide Executive with directors and officers liability insurance coverage
at least as favorable to Executive as what the
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Company maintains as of the date hereof or such greater coverage as the Company
may maintain from time to time.
(b) Upon the written request of Executive specifying the
amount of a request advance and the intended use thereof, the Company shall
indemnify Executive for his expenses (including attorneys' fees and
disbursements), judgments, fines and amounts paid in settlement incurred by him
in connection with such claim, action, suit, proceeding or appeal whether civil,
criminal, administrative, investigative or otherwise, in advance of the final
disposition of any such claim, action, suit, proceeding or appeal therefrom to
the fullest extent permitted under California law.
ARTICLE 10.
RESTRICTIVE COVENANTS
10.1 Confidentiality Covenant. Executive hereby agrees that Executive
shall not, directly or indirectly, disclose or make available to any person,
firm, corporation, association or other entity for any reason or purpose
whatsoever, any Confidential Information (as hereinafter defined). For a period
of five (5) years after the termination of this Agreement, Executive agrees
that, upon termination of Executive's employment with the Company, all
Confidential Information in Executive's possession that is in written or other
tangible form (together with all copies or duplicates thereof, including
computer files) shall be returned to the Company and shall not be retained by
Executive or furnished to any third party, in any form except as provided
herein; provided, however, that Executive shall not be obligated to treat as
confidential, or return to the Company copies of any Confidential Information
that (i) was publicly known at the time of disclosure to Executive, (ii) becomes
publicly known or available thereafter other than by any means in violation of
this Agreement or any other duty owed to the Company by any person or entity, or
(iii) is lawfully disclosed to Executive by a third party. As used in this
Agreement, the term "Confidential Information" means: information disclosed to
Executive or known by Executive as a consequence of or through Executive's
relationship with the Company, about the products, research and development
efforts, regulatory efforts, manufacturing processes, customers, employees,
business methods, public relations methods, organization, procedures or
finances, including, without limitation, information of or relating to customer
lists, of the Company and its affiliates.
10.2 Solicitation of Employees. Executive hereby agrees that during the
Term and for two (2) years thereafter, Executive shall not, either on
Executive's own account or jointly with or as a manager, agent, officer,
employee, consultant, partner, joint venturer, owner or stockholder or otherwise
on behalf of any other person, firm or corporation, directly or indirectly
solicit or attempt to solicit away from the Company any of its officers or
employees or offer employment to any person who, on or during the six (6) months
immediately preceding the date of such solicitation or offer, is or was an
officer or employee of the Company; provided, however, that a general
advertisement to which an employee of the Company responds shall in no event be
deemed to result in a breach of this Section 11.2.
10.3 Enforcement.
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(a) The Company and Executive intend that the provisions of
this Article 10 shall be fully enforceable as set forth herein. To the extent
that any court of competent jurisdiction finds that any such provision is
enforceable by reason of its duration or scope, the Company and Executive agree
that it shall be enforced insofar as it may be enforced within the limits of the
law of that jurisdiction, but that the Agreement as a whole shall be unaffected
elsewhere.
(b) The Executive agrees that it would be difficult to
compensate Company fully for damages for any violation of the provisions of this
Agreement, including, without limitation, the provisions of this Article 10.
Accordingly, the Executive specifically agrees that the Company and its
successors and assigns shall be entitled to temporary and permanent injunctive
relief to enforce the provisions of this Agreement. This provision with respect
to injunctive relief shall not, however, diminish the right of the Company to
claim and recover damages in addition to injunctive relief.
(c) If Executive breaches any provision of Article 10, the
rights of Executive (or Executive's estate) to a benefit under the Agreement,
and the rights of a surviving spouse or any other person to a benefit under the
Agreement, shall be forfeited, unless the Board determines that such activity is
not detrimental to the best interests of the Company and its affiliates. Such
forfeiture shall be in addition to any other remedy of the Company under the
Agreement or at law and in equity with respect to such breach. However, if
Executive ceases such activity and notifies the Board of this action,
Executive's (or Executive's estate's) right to receive a benefit, and any right
of a surviving spouse or any other person to a benefit, may be restored within
sixty (60) days of said notification, unless the Board in its sole discretion
determines that the prior activity has caused serious injury to the Company and
its affiliates, which determination shall be final and conclusive.
ARTICLE 11.
GENERAL PROVISIONS
11.1 Release of Claims. Notwithstanding anything else in this
Agreement, the Company's obligation to provide any payments or other benefits to
Executive pursuant to Article 6 or 8 shall be conditioned on Executive's
execution of a general release of claims in the form required by the Company.
11.2 Entire Agreement and Modification. This Agreement constitutes the
entire agreement between the parties relating to the employment of the Executive
by the Company with respect to the Term, and there are no representations,
warranties or commitments, other than those set forth herein and in the Minutes
of the Company's Board, which relate to such subject matter. This Agreement may
be amended or modified only by an instrument in writing executed by all of the
parties hereto.
11.3 Successors.
(a) This Agreement is personal to Executive, and without the
prior written consent of the Company shall not be assignable by Executive other
than by will or the laws of
14
descent and distribution. This Agreement shall inure to the benefit of and be
enforceable by Executive's legal representatives.
(b) The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company.
11.4 No Waiver. No waiver, by conduct or otherwise, by any party of any
term, provision, or condition of this Agreement, shall be deemed or construed as
a further or continuing waiver of any such term, provision, or condition nor as
a waiver of a similar or dissimilar condition or provision at the same time or
at any prior or subsequent time.
11.5 Remedies Not Exclusive. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
except as expressly provided in this Agreement, and each and every remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing in law or in equity or by statute or otherwise. No
failure by any party to exercise, and no delay in exercising, any rights shall
be construed or deemed to be a waiver thereof, nor shall any single or partial
exercise by any party preclude any other or future exercise thereof or the
exercise of any other right.
11.6 Notices. Any notice or communications required or permitted to be
given to the parties hereto shall be delivered personally, sent via facsimile or
via an overnight courier service or be sent by United States registered or
certified mail, postage prepaid and return receipt requested, and addressed or
delivered as follows, or as such other addresses the party addressed may have
substituted by notice pursuant to this Section:
(a) If to the Company: Advanced Medical Optics, Inc.
0000 Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: General Counsel
(b) If to Executive: Xxxxx X. Xxxxx
X.X. Xxx 00000
Xxxxxx, XX 00000
Such notices or communications shall be deemed given upon delivery or, if
earlier, one (1) day after being sent by overnight courier or three (3) days
after being mailed by registered or certified mail, as provided above.
11.7 Governing Law. This Agreement is made and entered into in the
State of California, and shall be governed by the laws of California, without
giving effect to the principles of conflict of laws thereof.
11.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one Agreement.
11.9 Captions. The captions of this Agreement are inserted for
convenience and do not constitute a part hereof.
15
11.10 Severability. In case any one or more of the provisions contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein and there shall be deemed substituted for such invalid,
illegal or unenforceable provision such other provision as will most nearly
accomplish the intent of the parties to the extent permitted by the applicable
law. In case this Agreement, or any one or more of the provisions hereof, shall
be held to be invalid, illegal or unenforceable within any governmental
jurisdiction or subdivision thereof, this Agreement or any such provision
thereof shall not as a consequence thereof be deemed to be invalid, illegal or
unenforceable in any other governmental jurisdiction or subdivision thereof.
11.11 Survival. The representations and warranties contained herein and
the Executive's obligations under Article 10 shall survive termination of the
Term and of the Agreement as provided herein.
11.12 Dispute Resolution.
(a) Any controversy or dispute between the parties involving
the construction, interpretation, application or performance of the terms,
covenants, or conditions of this Agreement or in any way arising under this
Agreement (a "Covered Dispute") shall, on demand by either of the parties by
written notice served on the other party in the manner prescribed in Section 20
hereof, be referenced pursuant to the procedures described in California Code of
Civil Procedure ("CCP") Sections 638, et seq., as they may be amended from time
to time (the "Reference Procedures"), to a retired Judge from the Superior Court
for the County of Los Angeles or the County of Orange for a decision.
(b) The Reference Procedures shall be commenced by either
party by the filing in the Superior Court of the State of California for the
County of Orange of a petition pursuant to CCP Section 638(1) (a "Petition").
Said Petition shall designate as a referee a Judge from the list of retired Los
Angeles County and Orange County Superior Court Judges who have made themselves
available for trial or settlement of civil litigation under said Reference
Procedures. If the parties hereto are unable to agree on the designation of a
particular retired Los Angeles County or Orange County Superior Court Judge or
the designated Judge is unavailable or unable to serve in such capacity, request
shall be made in said Petition that the Presiding or Assistant Presiding Judge
of the Orange County Superior Court appoint as referee a retired Los Angeles
County or Orange County Superior Court Judge from the aforementioned list.
(c) Except as hereafter agreed by the parties, the referee
shall apply the law of California in deciding the issues submitted hereunder.
Unless formal pleadings are waived by agreement among the parties and the
referee, the moving party shall file and serve its complaint within 15 days from
the date a referee is designated as provided herein, and the other party shall
have 15 days thereafter in which to plead to said complaint. Each of the parties
reserves its respective rights to allege and assert in such pleadings all
claims, causes of action, contentions and defenses which it may have arising out
of or relating to the general subject matter of the Covered Dispute that is
being determined pursuant to the Reference Procedures. Reasonable notice of any
motions before the referee shall be given, and all matters shall be set at the
convenience of the referee. Discovery shall be conducted as the parties agree or
as allowed by
16
the referee. Unless waived by each of the parties, a reporter shall be present
at all proceedings before the referee.
(d) It is the parties' intention by this Section 11.12 that
all issues of fact and law and all matters of a legal and equitable nature
related to any Covered Dispute will be submitted for determination by a referee
designated as provided herein. Accordingly, the parties hereby stipulate that a
referee designated as provided herein shall have all powers of a Judge of the
Superior Court including, without limitation, the power to grant equitable and
interlocutory and permanent injunctive relief.
(e) Each of the parties specifically (i) consents to the
exercise of jurisdiction over his or her person by a referee designated as
provided herein with respect to any and all Covered Disputes; and (ii) consents
to the personal jurisdiction of the California courts with respect to any appeal
or review of the decision of any such referee.
(f) Each of the parties acknowledges that the decision by a
referee designated as provided herein shall be a basis for a judgment as
provided in CCP Section 644 and shall be subject to exception and review as
provided in CCP Section 645.
11.13 Attorneys' Fees. If any legal action or other proceeding is
brought for the enforcement of the Agreement, or because of an alleged dispute,
breach or default in connection with any of the provisions of the Agreement, the
successful or prevailing party shall be entitled to recover attorneys' fees and
other expenses and costs incurred in that action or proceeding, in addition to
any other relief that may be granted.
[Remainder of this page intentionally left blank]
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11.14 Executive's Acknowledgment. Executive acknowledges (a) that he
has consulted with or has had the opportunity to consult with independent
counsel of his own choice concerning this Agreement and has been advised to do
so by the Company, and (b) that he has read and understands the Agreement, is
fully aware of its legal effect, and has entered into it freely based on his own
judgment.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
"COMPANY"
Advanced Medical Optics, Inc., a Delaware corporation
By: /s/ XXXXXXX X. XXXXX
--------------------------------------------------
Title: Chairman of the Board
--------------------------------------------
Date: January 18, 2002
"EXECUTIVE"
By: /s/ XXXXX X. XXXXX
--------------------------------------------------
Xxxxx X. Xxxxx
--------------------------------------------------
Signature
Date: January 18, 2002
18
EXHIBIT A
Retention Agreement among the Company, Allergan and Executive dated January 18,
2002
Change in Control Agreement between Allergan and Executive dated January 1, 2000
19
EXHIBIT B
EXPATRIATE BENEFITS DISCONTINUATION
Effective upon your relocation to the United States, your current expatriate
benefits will discontinue. If necessary, an extension on expatriate benefits
will be provided to accommodate your family's transition to California. This
extension will not exceed 8 weeks.
- Goods and Services Allowance
- Foreign Housing Costs
- Company-Provided Automobile in the U.K.
- Home Leave
- U.S. hypothetical tax payroll deductions (actual
U.S./California taxes to be implemented
- Education Assistance
- Language Training
REPATRIATION PROVISIONS:
The following are the details of arrangements related to your repatriation to
California:
- REPATRIATION ALLOWANCE: After your return to the United States, AMO
will pay a tax-free miscellaneous allowance of one month's salary which
is $37,500 to compensate you for miscellaneous expenses incurred during
the move, including home refurbishing expenses.
- HOUSEHOLD GOODS SHIPMENT AND STORAGE: AMO will pay to move your
household goods by ocean freight from the U.K. to California. Covered
moving services include the cost of packing, shipping, insuring (up to
U.S. $9.00 per pound) and unpacking of household goods up to a maximum
of 14,000 pounds (one 40-foot container or whatever is needed to
accommodate your goods).
AMO will consider shipping household goods that are necessary for
living (i.e. linens, kitchenware, clothing, etc.) by airfreight. The
portion of the goods shipped by airfreight should not exceed 500
pounds. In addition, any office contents that are being air-shipped
should be consolidated with personal effects, however, office contents
will be exclusive of the 500-pound personal effect maximum.
AMO will pay for temporary warehousing of the household goods in
California for up to 4 weeks if your permanent living accommodations
are not accessible by the time the goods arrive in California. If you
have stored goods in California during the international assignment,
AMO will pay to remove the goods from storage and to deliver them to
your permanent residence. This also includes unpacking of goods. Air
transport for your dog will also be covered.
- REPATRIATION TRAVEL EXPENSES: AMO will provide one-way business class
airfare for you and your dependents to return to Irvine.
- AUTOMOBILES: AMO will not ship automobiles from the U.K.
- RENTAL CAR: AMO will pay for one rental automobile in California for 30
days while arrangements are made for personal transportation. You will
be responsible for the oil, tolls, and parking.
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- AUTOMOBILE BUYOUT: Because you were eligible for a company car in the
U.K. you will be eligible for the U.S. car buyout of US$8,200.
- TEMPORARY LIVING EXPENSES: Temporary living is defined as the period of
time that you and your dependents are temporarily residing in a hotel
or furnished apartment until you move into your permanent residence, up
to a maximum of 8 weeks. Expenses for this period include:
-Actual hotel rate (including taxes) or furnished apartment rent.
-An automatic per diem allowance to cover meals and incidental expenses
at the rate of US $25 per adult per day and US $12.50 per child (ages
2-12) per day. When you are traveling on AMO business, the per diem
allowance should not be submitted for personal reimbursement.
If you are able to obtain access to your permanent residence prior to
the arrival of your household goods, we will support you in renting a
reasonable amount of furniture so that you may move into your permanent
residence as soon as possible.
In addition to temporary living expenses in the home location, up to 4
days of living expenses will be granted to you and your dependents in
the U.S. before the actual move to California if the household goods
have already been shipped. Living expenses include actual hotel room
and tax charges, and reasonable meals, laundry, phone, and gratuity
expenses.
The employee housing contribution will continue while your home country
residence is leased and you are receiving temporary living expenses.
- RENTAL AGREEMENTS: AMO will reimburse you for any loss incurred in
breaking your unexpired lease in your host location, up to a maximum of
two months. If AMO has advanced the host country housing deposit to
you, you will be responsible upon vacating the housing for forwarding
the housing deposit refund back to AMO within 30 days.
According to the lease agreement, you are not eligible to receive a
refund on the housing deposit. However, if any portion of the deposit
is returned to you, you will be responsible for forwarding the refund
back to AMO within 30 days.
- Home Purchase Assistance - reimbursement for home purchase expenses in
southern California. Eligible expenses are in two categories:
(1) Mortgage procurement points on your first trust deed up to a
maximum of 2% (2 points) or $10,000 maximum;
(2) All other non-recurring closing costs, such as title
insurance, buyer's portion of escrow fees, recording fees,
appraisal and loan application fees, with a maximum of $4,000.
- Upon request an interest-free loan of $500,000 due and payable in five
(5) years. The terms of the loan will be outlined in a Promissory Note
to be executed upon your hire. The loan is callable upon termination of
employment or at the end of its term, whichever is sooner. If, however,
within the first twelve (12) months of employment you terminate from
AMO for any reason, you will have six (6) months to repay the loan.
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RELOCATION EXPENSES
Please submit all relocation expenses through Human Resources at AMO. If you
repatriate before the AMO spin-off, Allergan, Inc. will cover the cost of your
relocation expenses. If you repatriate after the spin-off, AMO will cover the
expenses.
TAX PREPARATION
The Company will pay for the cost of preparing your U.S. and foreign tax returns
(including tax equalization fees) as a result of income generated during your
assignment in the United Kingdom and during the year of your relocation.
The tax equalization obligation for income earned through your repatriation date
will be observed by both you and AMO as administered by AMO's expatriate
accounting firm. You agree to be bound by such determination even if such
determination results in a monetary obligation due and payable to AMO.
Since tax equalization is delayed until after the completed tax year and related
filings of the home and host country tax returns, your hypothetical U.S. income
tax for 2002 is currently unknown to us. Personal events in your life and/or
personal income or losses unknown to us may affect your final hypothetical U.S.
income tax. As a result, the final 2002 and 2003 tax equalization for AMO income
earned up to your relocation date will be settled after the applicable tax
returns have been filed. Any monies AMO owes to you or you owe to AMO will be
settled within 90 days from your receipt of the applicable year's tax
equalization. All tax refunds and foreign tax credits earned as a result of your
United Kingdom assignment prior to the spin-off belong to Allergan. KPMG
services will be provided for any historical or future tax issues related to
your expatriate assignments with Allergan.
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