EXHIBIT 10.1
VALEANT PHARMACEUTICALS INTERNATIONAL
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") originally entered into as of the 24th
day of October, 2002 (the "Original Effective Date") is hereby amended on March
21, 2005 but effective as of the Effective Date, (the "Amended Agreement"), by
and between Valeant Pharmaceuticals International (the "Company") and XXXXXXX X.
XXXXX, an individual (the "Executive") (hereinafter collectively referred to as
"the parties").
PREAMBLE
The Company has employed the Executive as President and Chief Operating
Officer and desires as of the Effective Date to appoint the Executive to serve
as President and Chief Executive Officer, all pursuant to the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term. The initial term of this Agreement shall be for the period
commencing on the "Start Date" (as defined below), and ending on December 31,
2004 (the "Initial Term") to be followed by a renewal term (the "Extension
Term") effective on January 1, 2005 (the "Effective Date") and extending to
December 31, 2005; provided, however, that the term of this Agreement thereafter
shall be automatically extended for successive one (1) year periods thereafter
(each, a "Renewal Period") unless either the Company or Executive shall have
given written notice to the other party at least ninety (90) days prior to the
end of the Term of Agreement (as hereinafter defined), that the Term of
Agreement shall not be so extended. The Initial Term together with each Renewal
Period, if any, are collectively referred to herein as the "Term of Agreement."
For purposes of this Agreement, the term "Start Date" shall mean November 5,
2002. Executive's employment hereunder shall be coterminous with the Term of
Agreement, unless sooner terminated as provided in Section 5 hereof.
2. Employment. During the term of Executive's employment under this
Agreement:
(a) Through the close of the Initial Term, Executive shall be employed as
President and Chief Operating Officer of the Company, provided, however, that as
of the commencement of the Extension Term, he shall be appointed Chief Executive
Officer, at which point he shall be employed as Chief Executive Officer and
President. Executive shall perform the duties, undertake the responsibilities
and exercise the authority customarily performed, undertaken and exercised by
persons situated in a similar executive capacity.
(b) Executive shall report directly to the Company's Chairman until such
time as he is appointed to the office of Chief Executive Officer, after which he
shall report directly to the Board of Directors of the Company (the "Board").
(c) Excluding periods of vacation and sick leave to which Executive is
entitled, Executive agrees to devote reasonable attention and time during usual
business hours to
the business and affairs of the Company to the extent necessary to discharge the
responsibilities of Executive hereunder. Executive may (i) serve on corporate,
civil or charitable boards or committees, (ii) manage personal investments and
(iii) deliver lectures and teach at educational institutions, so long as such
activities do not significantly interfere with the performance of Executive's
responsibilities hereunder.
3. Compensation. During the term of his employment under this Agreement:
(a) Base Salary. During the Initial Term, the Company agrees to pay or
cause to be paid to Executive during the Term of Agreement a base salary at the
rate of $600,000 per annum or such increased amount as the Board may from time
to time determine, with such Base Salary to increase to $755,000 per year as of
the commencement of the Extension Term (hereinafter referred to as the "Base
Salary"). Such Base Salary shall be payable in accordance with the Company's
customary practices applicable to its executives. Such Base Salary shall be
reviewed at least annually by the Board or by the Compensation Committee of the
Board (the "Committee").
(b) Performance Bonus. For each fiscal year of the Company ending during
the Term of Agreement, beginning with the 2003 fiscal year, Executive shall be
eligible to receive a target cash bonus of 100% of the Base Salary (such target
bonus, as may hereafter be increased, the "Target Bonus") with the opportunity
to receive a maximum cash bonus of 200% of the Base Salary, payable in
accordance with the Company's customary practices applicable to bonuses paid to
its executives. For all years during any Extension Term, the Board or the
Committee shall determine the Target Bonus and the minimum and maximum range
applicable to such Target Bonus. Any cash bonus will be based on performance by
Executive and the Company and within the sole discretion of the Board or the
Committee.
(c) Stock Options/Restricted Shares.
(i) Ongoing Grants. On each date that annual stock options are
granted by the Company to its executive management group, so long as Executive
then remains in the employ of the Company, the Company shall consider a grant to
Executive of an option, restricted stock or other equity grants (the "Annual
Grant") to purchase a number of shares of Common Stock to be determined by the
Committee, and such determination will include consideration of stock option
awards and other equity grants for comparable positions within the
pharmaceuticals industry. The grant for the 2004 year shall be 400,000 options.
The terms and conditions of each Annual Grant shall be determined in accordance
with the provisions of the relevant Company Plan. Notwithstanding the foregoing,
each Annual Grant shall vest and be fully exercisable upon a Change in Control
and shall vest as otherwise provided herein upon termination of Executive's
employment.
(ii) Grant Agreements. Each Annual Grant shall be evidenced by
agreements in customary form for grants of equity compensation under the
relevant Company Plan to executive officers of the Company, consistent with the
terms and conditions of this Agreement.
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4. Other Benefits. During the term of Executive's employment under this
Agreement:
(a) Employee Benefits. Executive shall be entitled to participate in all
employee benefit plans, practices and programs maintained by the Company and
made available to employees generally, including, without limitation, all
pension, retirement, profit sharing, savings, medical, hospitalization,
disability, dental, life or travel accident insurance benefit plans. Executive's
participation in such plans, practices and programs shall be on the same basis
and terms as are applicable to employees of the Company generally; provided,
however, the coverage provided to Executive as of the date of this Amended
Agreement with respect to life insurance on Executive's life and long-term
disability shall not be reduced below its current coverage level unless
continued coverage at such level is (a) not available; or (b) economically
impracticable to the Company.
(b) Executive Benefits. Executive shall be entitled to participate in all
executive benefit or incentive compensation plans now maintained or hereafter
established by the Company for the purpose of providing compensation and/or
benefits to comparable executive employees of the Company including, but not
limited to, the Company's 401(k) and deferred compensation plans and any
supplemental retirement, salary continuation, stock option, deferred
compensation, supplemental medical or life insurance or other bonus or incentive
compensation plans. Unless otherwise provided herein, Executive's participation
in such plans shall be on the same basis and terms, as other senior executives
of the Company, but in no event on a basis less favorable in terms of benefit
levels or reward opportunities applicable to Executive as in effect on the date
hereof. No additional compensation provided under any of such plans shall be
deemed to modify or otherwise affect the terms of this Agreement or any of
Executive's entitlements hereunder.
(c) Fringe Benefits and Perquisites. Executive shall be entitled to all
fringe benefits and perquisites (e.g., relocation expenses, temporary housing,
physical examinations, additional reimbursement for uncovered medical expenses,
executive life insurance, tax, financial and legal advisory services, automobile
benefit and club membership), generally made available by the Company to its
senior executives; provided, that, with respect to club memberships, the Company
will retain any equity portion thereof to the extent that such retention is
permitted by the club (or if not so permitted, then to the extent that Executive
receives back from such club any amount paid by the Company, Executive will
receive such amount as a nominee of the Company and remit it to the Company,
less any taxes Executive must pay thereon with respect to which he cannot obtain
a refund).
(d) Business Expenses. Upon submission of proper invoices in accordance
with the Company's normal procedures, Executive shall be entitled to receive
prompt reimbursement of all reasonable out-of-pocket business, entertainment and
travel expenses incurred by him in connection with the performance of his duties
hereunder or for promoting, pursuing or otherwise furthering the business or
interest of the Company.
(e) Office and Facilities. Executive shall be provided with an appropriate
office at the Company's executive offices in Costa Mesa, California, with such
secretarial and
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other support facilities as are commensurate with Executive's status with the
Company, which facilities shall be adequate for the performance of his duties
hereunder.
(f) Vacation and Sick Leave. Executive shall be entitled, without loss of
pay, to absent himself voluntarily from the performance of his employment under
this Agreement, pursuant to the following:
(i) Executive shall be entitled to annual vacation in accordance
with the policies as periodically established by the Board for similarly
situated executives of the Company, which shall in no event be less than four
weeks per year;
(ii) in addition to the aforesaid paid vacations, Executive shall be
entitled, without loss of pay, to absent himself voluntarily from the
performance of his employment for such additional periods of time and for such
valid and legitimate reasons as the Board in its discretion may determine.
Further, the Board shall be entitled to grant to Executive a leave or leaves of
absence with or without pay at such time or times and upon such terms and
conditions as the Board in its discretion may determine; and
(iii) as supplemented by Section 5(b) hereof, Executive shall be
entitled to sick leave (without loss of pay) in accordance with the Company's
policies as in effect from time to time.
5. Termination. Executive's employment hereunder may be terminated under the
following circumstances:
(a) Death. Executive's employment shall be terminated as of the date of
Executive's death and Executive's beneficiaries shall be entitled to the
benefits provided in Section 7(b) hereof.
(b) Disability. The Company may terminate Executive's employment, on
written notice to Executive after having established Executive's Disability and
while Executive remains Disabled, subject to the payment by the Company to
Executive of the benefits provided in Section 7(b) hereof. For purposes of this
Agreement, "Disability" shall mean 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. Executive shall be entitled to the
compensation and benefits provided for under this Agreement for any period prior
to Executive's termination by reason of Disability during which Executive is
unable to work due to a physical or mental infirmity.
(c) Cause. The Company may terminate Executive's employment for "Cause,"
effective as of the date of the Notice of Termination (as defined in Section 6
below) and as evidenced by a resolution adopted in good faith by a majority of
the independent members of the Board, subject to the payment by the Company to
Executive of the benefits provided in Section 7(a) hereof. "Cause" shall mean,
for purposes of this agreement: (A) an act of fraud or embezzlement against the
Company or any affiliate thereof or an unauthorized disclosure of Confidential
Information (as defined in Section 10 below) of the Company, in each case which
is
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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) 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) conviction (or a plea of nolo contendere to) a felony (other
than traffic-related offenses or as a result of vicarious liability); (E)
willful misconduct as an employee of the Company 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); or (F) willful failure, after written notice from the Company
specifying the details of such failure, to attempt to (x) perform Executive's
duties in accordance with Section 2 hereof, or (y) follow the legal and
reasonable written directions of the Board, which failure amounts to gross
neglect in the performance of his duties to the Company. 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 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.
(d) Without Cause. The Company may terminate Executive's employment
without Cause. The Company shall deliver to Executive a Notice of Termination
(as defined in Section 6 below) not less than thirty (30) days prior to the
termination of Executive's employment without Cause and the Company shall have
the option of terminating Executive's duties and responsibilities prior to the
expiration of such thirty-day notice period, subject to the payment by the
Company of the benefits provided in either Section 7(d) or Section 7(e) hereof,
as may be applicable. Notice of non-renewal of the Term of Agreement by the
Company shall constitute a termination by the Company without Cause for purposes
of determining Executive's entitlement to severance and benefits after the end
of the then Term of Agreement or such earlier date as elected by Executive.
(e) Good Reason. Executive may terminate his employment for Good Reason
(as defined below) by delivering to the Company a Notice of Termination (as
defined in Section 6 below) not less than thirty (30) days prior to the
termination of Executive's employment for Good Reason. The Company shall have
the option of terminating Executive's duties and responsibilities prior to the
expiration of such thirty-day notice period, subject to the payment by the
Company of the benefits provided in either Section 7(c) or 7(d) hereof, as may
be applicable. For purposes of this Agreement, Good Reason shall mean the
occurrence of any of the events or conditions described in Subsections (i)
through (v) hereof which are not cured by the Company (if susceptible to cure by
the Company) within twenty (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 Executive; provided,
however, that with respect
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to circumstances described in Subsections (i)(B) or (C), the provisions of
Subsection (vi) shall apply.
(i) Diminution of Responsibility. (A) A diminution in Executive's
title or position as in effect immediately prior thereto; (B) a material
diminution in Executive's status, title, or responsibilities (including
reporting responsibilities) as in effect immediately prior thereto (including,
but not limited to, as Good Reason, the Company's becoming a subsidiary of
another entity and Executive's not being offered a position that is comparable
in scope to the position that he held with the Company immediately prior to the
Company's becoming a subsidiary, provided, however, that Executive's no longer
serving as Chief Executive Officer of a publicly-traded company shall not, in
itself, be deemed to constitute Good Reason); (C) the assignment to Executive of
any duties or responsibilities that are materially inconsistent with such
status, title, position or responsibilities; (D) any removal of Executive from
or failure to reappoint or reelect Executive to the position of President and
Chief Operating Officer, except in connection with the termination of his
employment for Disability, Cause, as a result of his death or by Executive other
than for Good Reason, or except as a result of his appointment as President and
Chief Executive Officer; or (E) any removal of Executive from or failure to
reappoint or reelect Executive (or appointment or election of any other person)
to the position of Chief Executive Officer once Executive is so elected, except
in connection with the termination of his employment for Disability, Cause, as a
result of Executive's death or by Executive other than for Good Reason;
(ii) Salary Reduction. A reduction in Executive's Base Salary;
(iii) Relocation. 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;
(iv) Discontinuation of Material Compensation or Benefit Plan. The
failure by the Company to (A) 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; and (B) provide
Executive with compensation and benefits substantially equal (in terms of
benefit levels and/or reward opportunities) to those provided for under such
plan; or
(v) Company Breach. Any other breach by the Company of any material
provision of this Agreement.
(vi) Special Provisions Relating to Subsections (i)(B) and (i)(C).
In the event that Executive asserts that Good Reason exists for his termination
of employment pursuant to Subsections (i)(B) or (i)(C), so long as Executive's
assertion is made in reasonable good faith and is supported by some reasonable
evidence, then the Company shall be required to show by a preponderance of the
evidence that the Good Reason criteria have not been met.
(f) Without Good Reason. Executive may voluntarily terminate his
employment without Good Reason by delivering to the Company a Notice of
Termination not less than thirty (30) days prior to the termination of
Executive's employment and the Company
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shall have the option of terminating Executive's duties and responsibilities
prior to the expiration of such thirty-day notice period, subject to the payment
by the Company to Executive of the benefits provided in Section 7(a) hereof
through the last day of such notice period. Notice of non-renewal of the Term of
Agreement by Executive shall constitute a termination by Executive without Good
Reason for purposes of determining Executive's entitlement to severance and
benefits after the end of the then Term of Agreement.
6. Notice of Termination. Any purported termination by the Company or by
Executive shall be communicated by written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which indicates a termination date, the specific termination
provision in this Agreement relied upon and sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated. For purposes of this
Agreement, no such purported termination of Executive's employment hereunder
shall be effective without such Notice of Termination.
7. Compensation Upon Termination. Upon termination of Executive's employment
during the Term of Agreement, Executive shall be entitled to the following
benefits:
(a) 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, the Company shall pay Executive all amounts
earned or accrued hereunder through the termination date, including:
(i) any accrued and unpaid Base Salary;
(ii) 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;
(iii) any accrued and unpaid vacation pay;
(iv) 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;
(v) any bonus earned but unpaid in respect of any fiscal year
preceding the termination date; and
(vi) as provided under any benefit or equity plan or program (the
foregoing items in Sections 7(a)(i) through 7(a)(vi) being collectively referred
to as the "Accrued Compensation").
(b) 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, the Company shall pay Executive (or his beneficiaries, as
applicable) the Accrued Compensation, and provide the following benefits:
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(i) 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 termination date occurs, had he continued in employment until the
end of such fiscal year, which amount shall be payable in a lump 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");
(ii) continued coverage under any health, medical, dental or vision
program or policy in which Executive was eligible to participate as of the time
of his employment termination for two (2) years following such termination on
terms no less favorable to Executive and his dependents (including with respect
to payment for the costs thereof) than those in effect immediately prior to such
termination; and
(iii) all restrictions on any outstanding awards granted by the
Company or any subsidiaries of the Company (including restricted stock awards)
granted to Executive shall lapse and such awards shall become fully (100%) and
immediately vested, and all stock options and stock appreciation rights granted
to Executive shall become fully (100%) and immediately exercisable and shall
remain exercisable until the earlier to occur of (x) the second anniversary of
such termination of Executive's employment, or (y) expiration of the original
term of such options.
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.
(c) Termination by the Company Without Cause or by the Executive for Good
Reason, in Each Case After the Commencement of the Extension Term. Except as
provided in section 7(d), if Executive's employment by the Company shall be
terminated by the Company without Cause or by the Executive for Good Reason
after the commencement of an Extension Term, then Executive shall be entitled to
the benefits provided in this Section 7(c)(i)-(v); provided, however, that if
Executive engages in Prohibited Activities, then Executive's eligibility to
continue to receive the benefits provided for in Section 7(c)(iii) below shall
immediately terminate. For the purposes of this Agreement, the term "Prohibited
Activities" means directly or indirectly engaging as an owner, employee,
consultant or agent of any entity that develops, manufactures, markets and/or
distributes (directly or indirectly) prescription or non-prescription
pharmaceuticals or medical devices for treatments in the fields of neurology,
dermatology, oncology or hepatology (each, a "Competitive Business"); provided,
that Prohibited Activities shall not mean Executive's investment in securities
of a publicly-traded company equal to less than five (5%) percent of such
company's outstanding voting securities.
(i) any Accrued Compensation through the end of the notice period
provided for in Section 5(e) hereof;
(ii) the Pro Rata Bonus;
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(iii) the Company shall pay Executive as severance pay, in lieu of
any further Base Salary for the periods subsequent to the termination date an
amount in cash, which amount shall be payable in a lump sum within ten (10) days
after such termination, equal to two (2) times the sum of (A) Executive's Base
Salary at the highest rate in effect at any time within the ninety (90) day
period ending on the date the Notice of Termination is delivered, and (B) the
Bonus Amount. For purposes of this Section 7, the term "Bonus Amount" shall mean
the higher of (x) the average of the cash bonus or incentive compensation,
excluding any signing bonus described in Section 3(c) hereof, received by
Executive for the two fiscal years immediately preceding the termination date,
and (y) the Target Bonus;
(iv) continued coverage under any health, medical, dental or vision
program or policy in which Executive was eligible to participate as of the time
of his employment termination for two (2) years following such termination on
terms no less favorable to Executive and his dependents (including with respect
to payment for the costs thereof) than those in effect immediately prior to such
termination; and
(v) all restrictions on any outstanding awards granted by the
Company or any subsidiaries of the Company (including restricted stock awards)
granted to Executive shall lapse and such awards shall become fully (100%) and
immediately vested, and all stock options and stock appreciation rights granted
to Executive shall become fully (100%) and immediately exercisable and shall
remain exercisable until the earlier to occur of (x) the second anniversary of
such termination of Executive's employment, or (y) expiration of the original
term of such options.
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.
(d) Termination by the Company Without Cause or by Executive for Good
Reason, in Each Case Before the Commencement of the Extension Term or Following
a Change in Control. If (x) Executive's employment by the Company shall be
terminated by the Company without Cause or by Executive for Good Reason within
twelve (12) months following a Change in Control (as defined in Section 8 below)
or in contemplation of a Change in Control, or (y) Executive terminates his
employment with the Company for Good Reason or the Company terminates
Executive's employment without Cause, at any time before the Commencement of the
Extension Term, then in lieu of the amounts due under Section 7(c) above,
Executive shall be entitled to the benefits provided in this Section 7(d);
provided, however, that if Executive engages in Prohibited Activities, then
Executive's eligibility to continue to receive the benefits provided for in
Section 7(d)(iii) below shall immediately terminate.
(i) any Accrued Compensation through the end of the notice period
provided for in Section 5(e) hereof;
(ii) the Pro Rata Bonus;
(iii) the Company shall pay Executive as severance pay and in lieu
of any further Base Salary for periods subsequent to the termination date, an
amount in cash, which
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amount shall be payable in a lump sum payment within ten (10) days following
such termination, equal to three (3) times the sum of (A) Executive's Base
Salary at the highest rate in effect at any time within the ninety (90) day
period ending on the date the Notice of Termination is given, and (B) the Bonus
Amount;
(iv) for twenty-four (24) months, the Company shall at its expense
continue on behalf of Executive and his dependents and beneficiaries the life
insurance, disability, medical, dental and hospitalization benefits which were
being provided to Executive at the time Notice of Termination is given. In the
event that the provisions of any such employee benefit arrangements do not
permit continuing coverage, then the Company shall provide Executive with
substantially equivalent coverage through other sources or pay to Executive on a
monthly basis an amount equivalent to the monthly premiums or cost of such
coverage previously incurred by the Company. The benefits provided in this
Section 7(d)(iv) shall be no less favorable to Executive, in terms of amounts
and deductibles and costs to him, than the coverage provided Executive under the
plans providing such benefits at the time Notice of Termination is given. The
Company's obligation hereunder with respect to the foregoing benefits shall be
limited to the extent that Executive obtains any such benefits pursuant to a
subsequent employer's benefit plans, in which case the Company may reduce the
coverage of any benefits it is required to provide Executive hereunder as long
as the aggregate coverage of the combined benefit plans is no less favorable to
Executive, in terms of amounts and deductibles and costs to him, than the
coverage required to be provided hereunder. This Subsection (iv) shall not be
interpreted so as to limit any benefits to which Executive or his dependents may
be entitled under any of the Company's employee benefit plans, programs or
practices following Executive's termination of employment, including without
limitation, retiree medical and life insurance benefits;
(v) the Company shall pay in twenty-four (24) substantially equal
monthly installments, an amount in cash equal to the excess of (A) the actuarial
equivalent of the aggregate retirement benefit Executive would have been
entitled to receive under the Company's supplemental and excess retirement plans
had (x) Executive remained employed by the Company for an additional two (2)
complete years of credited service, (y) his annual compensation during such
period been equal to his Base Salary (at the rate used for purposes of Section
7(c)(iii)) plus the Bonus Amount, and (z) he been fully (100%) vested in his
benefits under each such retirement plan, over (B) the actuarial equivalent of
the aggregate retirement benefit Executive is actually entitled to receive under
such retirement plans. For purposes of this Subsection (iv), "actuarial
equivalent" shall be determined in accordance with the actuarial assumptions
used for the calculation of benefits under any retirement plan as applied prior
to the termination date in accordance with such plan's past practices (but shall
in any event take into account the value of any subsidized early retirement
benefit); and
(vi) all restrictions on any outstanding awards granted by the
Company or any subsidiaries of the Company (including restricted stock awards)
granted to Executive shall lapse and such awards shall become fully (100%) and
immediately vested, and all stock options and stock appreciation rights granted
to Executive shall become fully (100%) and immediately exercisable and shall
remain exercisable until the earlier to occur of (x) the third anniversary of
such termination of Executive's employment, or (y) expiration of the original
term of such options.
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(e) Retirement. In the event that Executive voluntarily retires from the
Company in accordance with the Company's policies in effect at that time,
Executive shall be entitled to all benefits provided under Section 7(c) or
Section 7(d), as applicable, other than the severance amount under Section
7(c)(iii) or Section 7(d)(iii), respectively, and such amounts as may be payable
pursuant to the terms of the applicable benefit plans in which Executive
participates.
Executive shall not be required to mitigate the amount of any payment
provided for under this Section 7 by seeking other employment or otherwise and
no such payment shall be offset or reduced by the amount of any compensation or
benefits provided to Executive in any subsequent employment.
8. Change in Control. For purposes of this Agreement, a "Change in Control"
shall mean any of the following events:
(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) of thirty percent (30%) or more of
the combined voting power of the Company's then outstanding voting securities;
(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
(c) the closing of:
(i) 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
(ii) 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 pursuant to Section 8(a), 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.
11
9. Federal Excise Tax. In the event that the Executive becomes entitled to
payments and/or benefits which would constitute "parachute payments" within the
meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code"), the provisions of Exhibit A shall apply.
10. Records and Confidential Data.
(a) Executive acknowledges that in connection with the performance of his
duties during the Term of Agreement the Company will make available to
Executive, or Executive will have access to, certain Confidential Information
(as defined below) of the Company and its affiliates. Executive acknowledges and
agrees that any and all Confidential Information learned or obtained by
Executive during the course of his employment by the Company or otherwise,
whether developed by Executive alone or in conjunction with others or otherwise,
shall be and is the property of the Company and its affiliates.
(b) The Confidential Information will be kept confidential by Executive,
will not be used in any manner which is detrimental to the Company, will not be
used other than in connection with Executive's discharge of his duties
hereunder, and will be safeguarded by Executive from unauthorized disclosure.
(c) Following the termination of Executive's employment hereunder, as soon
as possible after the Company's written request, Executive will return to the
Company all written Confidential Information which has been provided to
Executive and Executive will destroy all copies of any analyses, compilations,
studies or other documents prepared by Executive or for Executive's use
containing or reflecting any Confidential Information. Within five (5) business
days of the receipt of such request by Executive, he shall, upon written request
of the Company, deliver to the Company a document certifying that such written
Confidential Information has been returned or destroyed in accordance with this
Section 10(c).
(d) For the purposes of this Agreement, "Confidential Information" shall
mean all confidential and proprietary information of the Company and its
affiliates, including, without limitation, information derived from reports,
investigations, experiments, research, work in progress, drawing, designs,
plans, proposals, codes, marketing and sales programs, client lists, client
mailing lists, supplier lists, financial projections, cost summaries, pricing
formula, marketing studies relating to prospective business opportunities and
all other concepts, ideas, materials, or information prepared or performed for
or by the Company or its affiliates. For purposes of this Agreement, the
Confidential Information shall not include and Executive's obligation's shall
not extend to (i) information which is generally available to the public, (ii)
information obtained by Executive other than pursuant to or in connection with
this employment and (iii) information which is required to be disclosed by law
or legal process.
(e) Executive's obligations under this Section 10 shall survive the
termination of the Term of Agreement.
11. Covenant Not to Solicit.
(a) Covenant Not to Solicit. To protect the Confidential Information and
other trade secrets of the Company, Executive agrees, during the term of this
Agreement and for
12
a period of eighteen (18) months after Executive's cessation of employment with
the Company, not to solicit or participate in or assist in any way in the
solicitation of any employees of the Company. For purposes of this covenant,
"solicit" or "solicitation" means directly or indirectly influencing or
attempting to influence employees of the Company to become employed with any
other person, partnership, firm, corporation or other entity. Executive agrees
that the covenants contained in this Section 11 are reasonable and desirable to
protect the Confidential Information of the Company, provided, that solicitation
through general advertising or the provision of references shall not constitute
a breach of such obligations.
(b) It is the intent and desire of Executive and the Company that the
restrictive provisions of this Section 11 be enforced to the fullest extent
permissible under the laws and public policies as applied in each jurisdiction
in which enforcement is sought. If any particular provision of this Section 11
shall be determined to be invalid or unenforceable, such covenant shall be
amended, without any action on the part of either party hereto, to delete
therefrom the portion so determined to be invalid or unenforceable, such
deletion to apply only with respect to the operation of such covenant in the
particular jurisdiction in which such adjudication is made.
(c) Executive's obligations under this Section 11 shall survive the
termination of the Term of Agreement.
12. Remedies for Breach of Obligations under Sections 10 or 11 hereof.
Executive acknowledges that the Company will suffer irreparable injury, not
readily susceptible of valuation in monetary damages, if Executive breaches his
obligations under Sections 10 or 11 hereof. Accordingly, Executive agrees that
the Company will be entitled, in addition to any other available remedies, to
obtain injunctive relief against any breach or prospective breach by Executive
of his obligations under Sections 10 or 11 hereof in any Federal or state court
sitting in the State of California, or, at the Company's election, in any other
state in which Executive maintains his principal residence or his principal
place of business as provided for in Section 13(h) below. Executive hereby
submits to the non-exclusive jurisdiction of all those courts for the purposes
of any actions or proceedings instituted by the Company to obtain that
injunctive relief, and Executive agrees that process in any or all of those
actions or proceedings may be served by registered mail, addressed to the last
address provided by Executive to the Company, or in any other manner authorized
by law. Executive further agrees that, in addition to any other remedies
available to the Company by operation of law or otherwise, he will not be
entitled to any amounts which may otherwise be payable under the terms of
Sections 7(b), 7(c), 7(d) and 7(e) hereof and under the terms of the benefit
plans of the Company in which he participates and to which he might otherwise
then be entitled by virtue hereof, if (A) Executive breaches his obligations
under Section 10 hereof either intentionally or recklessly and such breach has a
material and adverse impact on the Company; or (B) Executive breaches his
obligations under Section 11 hereof with respect to executives of the Company
but only if he is personally and directly involved in the solicitation
activities.
13
13. Miscellaneous.
(a) Successors and Assigns.
(i) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and permitted assigns and the Company
shall require any successor or assign to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession or assignment had taken place. The
Company may not assign or delegate any rights or obligations hereunder except to
a successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company. The term "the Company" as used herein shall mean a corporation or other
entity acquiring all or substantially all the assets and business of the Company
(including this Agreement) whether by operation of law or otherwise.
(ii) Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by Executive, his beneficiaries or legal
representatives, except by will or by the, laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by Executive's
legal personal representatives.
(b) Fees and Expenses; Legal Counsel. The Company shall pay all reasonable
legal and advisory fees and related expenses, up to a maximum amount of $10,000,
incurred by Executive in connection with the negotiation of this Agreement and
related employment arrangements. Executive acknowledges that he has had the
opportunity to consult with legal counsel of his choice in connection with the
drafting, negotiation and execution of this Agreement and related employment
arrangements.
(c) Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by Certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Chairman of the Board with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been received on
the date of delivery thereof or on the third business day after the mailing
thereof, except that notice of change of address shall be effective only upon
receipt.
(d) Indemnity Agreement. To the extent provided to any other executive of
the Company, the Company and Executive shall enter into an Indemnity Agreement,
consistent with the Company's by-laws (the "By-laws") and Certificate of
Incorporation (the "Certificate of Incorporation") providing for indemnification
of Executive in the carrying out of his duties and responsibilities (an
"Indemnity Agreement"); provided, that the entry into such Indemnity Agreement
shall not be a condition precedent to Executive's right to be indemnified by the
Company as provided in such By-laws and Certificate of Incorporation. In
addition, the Company will indemnify Executive and will cause Executive to be
indemnified by its subsidiary or affiliate, as applicable, in his capacity as an
officer or director of any subsidiary or affiliate of the Company for which
Executive serves as such, to the fullest extent permitted by the laws of
14
the state of incorporation of such subsidiary or affiliate in effect from time
to time, or the certificate or incorporation or by-laws of such subsidiary or
affiliate, whichever affords the greater protection to Executive. The Company
shall supplement its obligations pursuant to this Section 13(d) and under the
By-laws and Certificate of Incorporation with insurance policies maintained
generally for the benefit of its officers and directors against all costs,
charges and expenses incurred in connection with any action, suit or proceeding
to which Executive may be made a party by reason of being a director or officer
of the Company and Executive shall be covered to the greatest extent of any
other officer or director of the Company. Subject to the provision of any
Indemnity Agreement with Executive, which provision shall supercede, Executive
shall be entitled to select one firm of attorneys (plus local counsel, if
required) to represent him with respect to any matter for which he is entitled
to be indemnified by the Company, or for which the Company provides insurance
coverage, as contemplated by this Section 13(d). Any indemnification or
insurance payment to which Executive is otherwise entitled shall include
reimbursement to Executive for the reasonable fees and disbursements of
Executive's attorneys. The obligations under this paragraph shall survive any
termination of the Term of Agreement.
(e) Withholding. The Company shall be entitled to withhold the amount, if
any, of all taxes of any applicable jurisdiction required to be withheld by an
employer with respect to any amount paid to Executive hereunder. The Company, in
its sole and absolute discretion, shall make all determinations as to whether it
is obligated to withhold any taxes hereunder and the amount hereof.
(f) Release Of Claims. The Company may condition payment of the cash
termination benefits described in Sections 7(b), 7(c) and 7(d) of this Agreement
upon the delivery by Executive of a signed release of claims in the form of
Exhibit B hereto; provided, however, that Executive shall not be required to
release any rights Executive may have to be indemnified by the Company under
Section 13(d) of this Agreement or the certificate of incorporation or by-laws
of the Company.
(g) Modification. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
(h) 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 unable to
agree in such time, JAMS will provide a list of five
15
(5) 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 13(h) 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 any request by either party for temporary or preliminary
injunctive relief pending arbitration in accordance with applicable law or for
breaches by Executive of Executive's obligations under Sections 10 or 11 above
or an administrative claim with an administrative agency. The parties agree that
the arbitration provided herein shall be conducted in Orange County, California
unless otherwise mutually agreed or unless Executive's primary place of
employment is a different location. The Company shall pay the cost of any
arbitration brought pursuant to this paragraph, excluding, however, the cost of
representation of Executive unless (a) such cost is awarded in accordance with
law or otherwise awarded by the arbitrators; or (b) the matter involves issues
raised under Sections 5(e)(i)(B) or (C), in which case, the Company shall pay
the cost of representation of Executive as to such issues and of the
arbitration, regardless whether Executive prevails on that issue. Except as
otherwise provided above, the arbitrator may award legal fees to the prevailing
party in his sole discretion, provided that the percentage of fees so awarded
shall not exceed 1% of the net worth of the paying party (i.e., the Company or
Executive).
(i) Effect of Other Law; Financial Statements. Anything herein to the
contrary notwithstanding, the terms of this Agreement shall be modified to the
extent required to meet the provisions of the Xxxxxxxx-Xxxxx Act of 2002,
Section 409A of the Code, or other federal law applicable to the employment
arrangements between the Executive and the Company. Any delay in providing
benefits or payments, any failure to provide a benefit or payment, or any
repayment of compensation that is required under the preceding sentence shall
not in and of itself constitute a breach of this Agreement, provided, however,
that the Company shall provide economically equivalent payments or benefits to
Executive to the extent permitted by law.
(j) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California applicable to
contracts executed in and to be performed entirely within such State, without
giving effect to the conflict of law principles thereof.
(k) No Conflicts. Executive represents and warrants to the Company that he
is not a party to or otherwise bound by any agreement or arrangement (including,
without limitation, any license, covenant, or commitment of any nature), or
subject to any judgment, decree, or order of any court or administrative agency,
that would conflict with or will be in conflict with or in any way preclude,
limit or inhibit Executive's ability to execute this Agreement or to carry out
his duties and responsibilities hereunder.
16
(l) Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
(m) Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and Executive has executed this Agreement as of
the day and year first above written.
VALEANT PHARMACEUTICALS INTERNATIONAL.
By: /s/ Xxxxxx X. X'Xxxxx
-------------------------------------------
Title: Chairman, Board of Directors
EXECUTIVE
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxx
17
EXHIBIT A
GROSS-UP PROVISIONS
(a) Anything in this Agreement to the contrary notwithstanding, if
(i) it shall be determined that Executive is entitled to receive an "excess
parachute payment" (as defined in Section 280G of the Code) with respect to a
change in the ownership or effective control of the Company or in the ownership
of a substantial portion of the assets of the Company (as such terms are used in
Section 280G(b)(2) of the Code) (a "Payment"), and (ii) with respect to such
Payment, the Executive would be subject to the excise tax imposed by Section
4999 of the Code and/or any interest or penalties with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then Executive shall
be entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and any excise tax imposed by Section 4999 of the Code (and any interest and
penalties imposed with respect thereto) upon the Gross-Up Payments, Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments; provided, however, that (i) Executive shall not be entitled to
receive a Gross-Up Payment with respect to any excise tax other than the initial
application of the Excise Tax (although the parties acknowledge that, as set
forth below, the amount, if any, of excise tax due with respect to the Gross-Up
Payment shall be taken into account in determining whether, on an after-tax
basis, the Gross-Up Payment is sufficient to cover the initial application of
the Excise Tax); (ii) no equity compensation rights or cash compensation
increases granted on or after November 17, 2004 (each, a "Post-November 16
Increase") shall be eligible for a Gross-Up Payment with the result that if
Executive would be subject to an Excise Tax even without taking into account the
Post-November 16 Increases, then the Excise Tax and Gross-Up Payment shall be
computed by disregarding any additional excise tax that might be attributable to
the Post-November 16 Increases; and (iii) if Executive is subject to the Excise
Tax when taking Post-November 16 Increases into account but would not be so
subject if such Increases are not considered, then Executive shall be entitled
to a prorated Gross-Up Payment determined by (A) computing the Gross-Up Payment
amount as if subparagraph (ii) is inapplicable; and (B) multiplying the amount
so determined by a fraction (1) the numerator of which is the total amount of
"parachute payments" (regardless of whether they are "excess parachute payments"
under Section 280G) taken into account by Executive in computing the Excise Tax,
less the amount of such parachute payments attributable to the Post-November 16
Increases; and (2) the denominator of which is the full amount of the "parachute
payments" described in clause (1). For purposes of clarification, (x) if the
grant date of any stock option or other type of stock award occurs prior to
November 17, 2004, then Executive shall not be treated as having received any
Post-November 16 Increase with respect to such option or award, even if the
option or award vests or becomes exercisable on or after November 17, 2004;
1
and (y) no benefit provided under a generally applicable benefit plan or
arrangement shall be deemed a Post-November 16 Increase even if the amount of
such benefit is increased after November 16, 2004.
(b) Subject to the provisions of paragraph (c), all determinations
required to be made under this Exhibit A, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by a nationally
recognized accounting firm (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive within 15 business
days of the receipt of notice from Executive that there has been a Payment, or
such earlier time as is requested by the Company. The Accounting Firm shall be
jointly selected by the Company and Executive and shall not, during the two
years preceding the date of its selection, have acted in any way on behalf of
the Company or its affiliated companies. If the Company and Executive cannot
agree on the firm to serve as the Accounting Firm, then the Company and
Executive shall each select a nationally recognized accounting firm and those
two firms shall jointly select a nationally recognized accounting firm to serve
as the Accounting Firm. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Exhibit A, shall be paid by the Company to Executive within five days of
the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Executive (or that the amount of the
Excise Tax is less than the amount suggested by the Executive), it shall furnish
Executive with a written opinion, based upon "substantial authority" (within the
meaning of Section 6662 of the Code), that failure to report the Excise Tax (in
the amount suggested by the Executive) on Executive's applicable federal income
tax return would not result in the imposition of a penalty under Section 6662 or
6663 of the Code. Any determination by the Accounting Firm shall be binding upon
the Company and Executive, absent manifest error, except as provided in the
following two sentences, or in paragraph (c) or (e) hereof. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
paragraph (c) hereof and Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of a Gross-Up Payment (or an additional Gross-Up Payment). Such
notification shall be given as soon as practicable but no later than ten
business days after Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which he gives such notice
to the Company (or such shorter period ending on
2
the date that any payment of taxes with respect to such claim is due). If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim; provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Executive harmless, on
an after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation (or
incurred in connection with such contest), or imposed as a result of such
payment of costs and expenses. Without limitation on the foregoing provisions of
this paragraph (c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and xxx for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis, and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided Executive shall not be required by the Company to agree to any
extension of the statute of limitations relating to the payment of taxes for the
taxable year of Executive with respect to which such contested amount is claimed
to be due unless such extension is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by
the Company pursuant to paragraph (c) hereof, Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject to
paragraph (f) hereof and subject to the Company's complying with the
requirements of paragraph (c) hereof)
3
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by Executive of an amount advanced by the Company pursuant to paragraph
(c) hereof, a determination is made that Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
(e) If, pursuant to regulations issued under Section 280G or 4999 of
the Code, the Company and Executive were required to make a preliminary
determination of the amount of an excess parachute payment and thereafter a
redetermination of the Excise Tax is required under the applicable regulations,
the parties shall request the Accounting Firm to make such redetermination. If
as a result of such redetermination an additional Gross-Up Payment is required,
the amount thereof shall be paid by the Company to Executive within five days of
the receipt of the Accounting Firm's determination. If the redetermination of
the Excise Tax results in a reduction of the Excise Tax, Executive shall take
such steps as the Company may reasonably direct in order to obtain a refund of
the excess Excise Tax paid. If the Company determines that any suit or
proceeding is necessary or advisable in order to obtain such refund, the
provisions of paragraph (c) hereof relating to the contesting of a claim shall
apply to the claim for such refund, including, without limitation, the
provisions concerning legal representation, cooperation by Executive,
participation by the Company in the proceedings and indemnification by the
Company. Upon receipt of any such refund, Executive shall (subject to paragraph
(f) hereof) promptly pay the amount of such refund to the Company, but only to
the extent such refund is attributable to an Excise Tax with respect to which
Executive received a Gross-Up Payment from the Company (determined in a manner
consistent with paragraph (a) above). If the amount of the income taxes
otherwise payable by Executive in respect of the year in which Executive makes
such payment to the Company is reduced as a result of such payment, Executive
shall, no later than the filing of his income tax return in respect of such
year, pay the amount of such tax benefit to the Company (subject to paragraph
(f) hereof). In the event there is a subsequent redetermination of Executive's
income taxes resulting in a reduction of such tax benefit, the Company shall,
promptly after receipt of notice of such reduction, pay to Executive the amount
of such reduction. If the Company objects to the calculation or recalculation of
the tax benefit, as described in the preceding two sentences, the Accounting
Firm shall make the final determination of the appropriate amount. The Executive
shall not be obligated to pay to the Company the amount of any further tax
benefits that may be realized by him as a result of paying to the Company the
amount of the initial tax benefit.
(f) Each provision of this Exhibit A shall be interpreted in a
manner consistent with the overall intent of this Exhibit A, which is to make
Executive whole, on an after-tax basis, from any imposition of (or claim to
impose) the Excise Tax, it being acknowledged and understood that the reversal
of any advance made by the Company pursuant to paragraph (c) hereof, or the
correction of any other type of overpayment of a Gross-Up Payment to Executive
by the Company, may result in Executive paying to the
4
Company an amount which is less than the related advance or other overpayment by
the Company. In particular and not by way of limitation, any other provision of
this Exhibit A notwithstanding, Executive shall not in any event be obligated,
in connection with repaying any refund as described in paragraphs (d) and (e)
hereof, to pay the Company an amount greater than the net after-tax portion of
any advance or other type of Gross-Up Payment that he has retained or has
recovered as a refund from the applicable taxing authorities; but Executive
shall not be relieved of his obligation hereunder to recover certain amounts as
a refund or credit.
5
EXHIBIT B
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 my Amended and Restated
Executive Employment Agreement dated as of January 1, 2005 (the "Executive
Employment 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.
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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 Employment 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
Employment Agreement which are intended to survive the termination of my
employment; or (e) my rights as a stockholder.
* * *
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 Employment 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:
_____________________________________ __________________________
Xxxxxxx X. Xxxxx Date
_____________________________________ __________________________
Valeant Pharmaceuticals International Date
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