Exhibit
10.7
AGREEMENT
This Agreement
(“Agreement”) dated as of August 1, 2002, is entered
into by and between
(“Employee”), and Advanced Medical Optics, Inc., a
Delaware corporation (the “Company”).
RECITALS
The Company believes that because of
its position in the industry, financial resources and historical
operating results there is a possibility that the Company may
become the subject of a Change in Control (as defined below),
either now or at some time in the future.
The Company believes that it is in
the best interest of the Company and its stockholders to foster
Employee’s objectivity in making decisions with respect to
any pending or threatened Change in Control of the Company and to
assure that the Company will have the continued dedication and
availability of Employee as an employee of the Company or one of
its affiliates, notwithstanding the possibility, threat or
occurrence of a Change in Control. The Company believes that these
goals can be accomplished by alleviating certain of the risks and
uncertainties with regard to Employee’s financial and
professional security that would be created by a pending or
threatened Change in Control and that inevitably would distract
Employee and could impair his or her ability to objectively perform
his or her duties for and on behalf of the Company. Accordingly,
the Company believes that it is appropriate and in the best
interest of the Company and its stockholders to provide to Employee
compensation arrangements upon a Change in Control that lessen
Employee’s financial risks and uncertainties and that are
competitive with those of other corporations.
With these and other considerations
in mind, the Board of Directors of the Company, acting through its
Organization, Compensation and Corporate Governance Committee, has
authorized the Company to enter into this Agreement with Employee
to provide the protections set forth herein for Employee’s
financial security following a Change in Control.
NOW, THEREFORE, in consideration of
the foregoing, it is hereby agreed as follows:
1. Term of Agreement . This
Agreement shall be effective for the period commencing on the date
first written above and ending on the second anniversary of such
date. The Company may, in its sole discretion and for any reason,
provide written notice of termination (effective as of the then
applicable expiration date) to Employee no later than 60 days
before the expiration date of this Agreement. If written notice is
not so provided, this Agreement shall be automatically extended for
an additional period of 12 months past the expiration date. This
Agreement shall continue to be automatically extended for an
additional 12 months at the end of such 12-month period and each
succeeding 12-month period unless notice is given in the manner
described in this Section. No termination of this Agreement shall
affect Employee’s rights hereunder with respect to a Change
in Control which has occurred prior to such termination.
2. Purpose of Agreement . The
purpose of this Agreement is to provide that, in the event of a
“Change in Control,” Employee may become entitled to
receive certain additional benefits, as described herein, in the
event of his or her termination.
3. Change in Control . As
used in this Agreement, the phrase “Change in Control”
shall mean the following and shall be deemed to occur if any of the
following events occur:
(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 hereinafter defined) 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 date
hereof, 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:
(1) 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 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
(2) 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
2
(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.
Notwithstanding the preceding
provisions of this Section, 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 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, a Change in Control shall not be deemed
to have occurred if the Person described in the preceding
provisions of this Section 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.
4. Effect of a Change in
Control . In the event of a Change in Control, Sections 6
through 10 of this Agreement shall become applicable to Employee.
These Sections shall continue to remain applicable until the second
anniversary of the date upon which the Change in Control occurs. At
that point, so long as the employment of Employee has not been
terminated on account of a Qualifying Termination, as defined in
Section 5, this Agreement shall terminate and be of no further
force. If Employee’s employment with the Company and its
affiliated companies is terminated on account of a Qualifying
Termination on or before such date, this Agreement shall remain in
effect until Employee receives the various benefits to which he or
she has become entitled under the terms of this
Agreement.
5. Qualifying Termination .
If, subsequent to a Change in Control, Employee’s employment
with the Company and its affiliated companies is terminated, such
termination shall be considered a Qualifying Termination
unless:
(a) Employee voluntarily terminates
his or her employment with the Company and its affiliated
companies. Employee, however, shall not be considered to have
voluntarily terminated his or her employment with the Company and
its affiliated companies if, following the Change in Control,
Employee’s overall compensation is reduced or adversely
modified in any material respect or Employee’s duties are
materially changed, and subsequent to such reduction, modification
or change, Employee elects to terminate his or her employment with
the Company and its affiliated companies. For such purposes,
Employee’s duties shall be considered to have been
“materially changed” if, without Employee’s
express written consent, there is any substantial diminution or
adverse modification in Employee’s overall position,
responsibilities or reporting relationship, or if, without
Employee’s express written consent, Employee’s job
location is transferred to a site more than 50 miles away from his
or her place of employment prior to the Change in
Control.
3
(b) The termination is on account of
Employee’s death or Disability. For such purposes,
“Disability” shall mean a physical or mental incapacity
as a result of which Employee becomes unable to continue the
performance of his or her responsibilities for the Company and its
affiliated companies and which, at least 26 weeks after its
commencement, is determined to be total and permanent by a
physician agreed to by the Company and Employee, or in the event of
Employee’s inability to designate a physician,
Employee’s legal representative. In the absence of agreement
between the Company and Employee, each party shall nominate a
qualified physician and the two physicians so nominated shall
select a third physician who shall make the determination as to
Disability.
(c) Employee is involuntarily
terminated for “cause.” For this purpose,
“cause” shall be limited to only three types of
events:
(1) the willful refusal of Employee
to comply with a lawful, written instruction of the Board so long
as the instruction is consistent with the scope and
responsibilities of Employee’s position prior to the Change
in Control;
(2) dishonesty by Employee 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
(3) Employee’s conviction of
any felony involving an act of moral turpitude.
In addition, notwithstanding anything contained
in this Agreement to the contrary, if Employee’s employment
is terminated prior to a Change in Control and it is determined
that such termination (i) was at the request of a third party who
has indicated an intention or taken steps reasonably calculated to
effect a Change in Control and who subsequently effectuates a
Change in Control (a “Third Party”) or (ii) otherwise
occurred in connection with, or in anticipation of, a Change in
Control which actually occurs, then, for all purposes of this
Agreement, the date of a Change in Control with respect to Employee
shall mean the date immediately prior to the date of such
termination of Employee’s employment.
6. Severance Payment . If
Employee’s employment is terminated as a result of a
Qualifying Termination, the Company shall pay Employee within 30
days after the Qualifying Termination a cash lump sum equal to
[one][two] times Employee’s “Compensation” (the
“Severance Payment”).
(a) For purposes of this Agreement,
and subject to Sections 6 (c), (d) and (e), below, Employee’s
“Compensation” shall equal the sum of (i)
Employee’s highest annual salary rate within the five-year
period ending on the date of Employee’s Qualifying
Termination plus (ii) a “Management Bonus Increment.”
The Management Bonus Increment shall equal the average of the two
highest of the last five bonuses paid to Employee under the
Management Bonus Plan or any successor thereto.
4
(b) In lieu of a cash lump sum,
Employee may elect to receive the Severance Payment provided by
this Section in equal annual installments over two (2) or three (3)
years at Employee’s election. Such installments shall be paid
to Employee on each anniversary of the date of Employee’s
Qualifying Termination, beginning with the first such anniversary
and continuing on each such anniversary thereafter until fully
paid. Such election to receive the Severance Payment in
installments, and the number of installments to receive, may be
made and/or revoked by Employee at any time prior to the occurrence
of a Change in Control by written notice to the Secretary of the
Company. Upon the occurrence of a Change in Control, any such
election to receive the Severance Payment in installments that has
been made and not revoked prior to the Change in Control shall be
irrevocable and binding on both the Company and Employee. In the
event that at the time of a Change in Control there is not in
effect an election by Employee to receive the Severance Payment in
installments, such Severance Payment shall be paid to Employee in a
single cash lump sum as provided above.
(c) If Employee has not participated
in the Management Bonus Plan (including any successor thereto) for
at least two full plan years, then the missing bonus component(s)
will be computed, for purposes of calculating the Management Bonus
Increment under this Agreement, by reference to the guideline
percentage for officers at Employee’s grade level for the
most recently completed bonus period, assuming a 100% target bonus
for both corporate and individual objectives.
(d) If Employee’s normal
severance payment under the Company’s applicable severance
pay policies for a reduction in force would be greater than the
Compensation described in Section 6(a), above, then
Employee’s “Compensation” for purposes of Section
6(a) shall be such greater amount.
(e) The Severance Payment hereunder
is in lieu of any severance payment that Employee might otherwise
be entitled to from the Company under the Company’s
applicable severance pay policies.
7. Incentive Compensation
Grants . Employee may have
