EMPLOYMENT AGREEMENT

 

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                        CONFIDENTIAL TREATMENT REQUESTED

 

                                                                   Exhibit 10.23

 

                              EMPLOYMENT AGREEMENT

 

     This EMPLOYMENT AGREEMENT ("Agreement"), dated as of August 15, 2005 (the

"Effective Date"), is made by and between AVANIR PHARMACEUTICALS, a California

corporation having its principal offices at 11388 Sorrento Valley Road, San

Diego, California, 92121 (the "Company"), and Eric Brandt ("Employee").

 

                                     AGREEMENT

 

     1.    Effective Date.

 

          Employee's employment under this Agreement shall commence on September

6, 2005, or upon such earlier date as the Company and Employee shall mutually

agree on ("Commencement Date").

 

     2.    At-will Employment.

 

          Employee's employment relationship with the Company ("Employment") is

at-will, terminable at any time and for any reason by either the Company or

Employee. While certain sections of this Agreement describe events that could

occur at a particular time in the future, nothing in this Agreement shall be

construed as a guarantee of employment of any length.

 

     3.    Employment Duties.

 

          a. Title/Responsibilities. Employee shall be the President and Chief

Executive Officer of the Company and shall be elected as a member of the Board

of Directors of the Company as of the Commencement Date. Employee shall perform

all of the duties and responsibilities of such offices set forth in the Bylaws

of the Company and those commonly associated with such offices and such further

duties and responsibilities as may from time to time be assigned to him by the

Board of Directors of the Company (the "Board").

 

          b. Full-Time Attention. Employee shall devote his full time,

attention, energy and skills to the Company during the period he is employed

under this Agreement. Notwithstanding anything in this Agreement to the

contrary, Employee may, with the consent of the Board, not to be unreasonably

withheld, and subject to the Company's Corporate Governance Guidelines, serve as

a director of one or more other corporations; provided, that, without further

approval by the Board, Employee may serve on the boards of no more than two

public companies and two charitable or civic organizations. Employee's current

board memberships and involvement in charitable organizations, as disclosed by

Employee to the Company, are hereby approved.

 

          c. Policy Compliance. Employee shall comply with all of the Company's

policies, practices and procedures, including the terms of the Confidentiality

Agreement (defined below).

 

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     4.    Compensation.

 

          a. Base Salary. The Company shall pay Employee a base salary of

$41,666.67 per month (an annual rate of $500,000), or such higher amount as the

Board may determine from time to time ("Base Salary"), payable in accordance

with the Company's regular payroll practices. The Compensation Committee will

evaluate whether to increase the Base Salary in October 2006 and then annually

thereafter.

 

          b. Bonus Compensation. In addition to the Base Salary, Employee shall

be eligible for the following bonus compensation:

 

               i. a guaranteed bonus equal to 60% of the then-current annual

Base Salary, which is payable on February 15, 2006, but a portion of which

amount shall be immediately repaid to the Company if, within one year from the

Commencement Date, Employee resigns other than for Good Reason or is terminated

with Cause; and

 

               ii. an annual target bonus equal to 60% of the then-current

annual Base Salary, which is payable in October 2006 and annually thereafter,

provided that the actual bonus may be higher or lower than the target amount,

depending on the Employee's satisfaction of reasonable performance criteria

(which may include Company overall performance criteria) established by the

Compensation Committee of the Board.

 

          Employee must be employed by the Company when bonuses are distributed

in order to be eligible to receive any portion of such bonus.

 

          c. Signing Bonus. Employee shall receive a signing bonus upon the

execution of this Agreement in the amount of $150,000, but which amount shall be

immediately repaid to the Company if, within one year from the Commencement

Date, Employee resigns or is terminated with Cause. If the repayment is due in

2006, the amount repaid shall be net of any federal, state or other income taxes

payable by Employee with respect to the receipt of $150,000 in 2005. When, as

and if Employee realizes the benefit of any tax deduction on account of such

repayment (including without limitation realization by way of amending prior tax

returns), he shall promptly thereafter pay an additional amount to the Company

in the amount of such realized tax benefit, provided that Employee shall use his

best efforts to fully realize such tax benefit.

 

          d. Equity Compensation. Employee shall be granted the following equity

awards as additional compensation:

 

               i. Employee shall be awarded the right to purchase 1,000,000

shares of Class A common stock on the Commencement Date at a price of $0.001 per

share (the "Restricted Shares"). The Restricted Shares will be subject to a

right of repurchase in favor of the Company that will lapse as to one-third of

the Restricted Shares on the first anniversary of the Commencement Date and as

to an additional one-twelfth of the Restricted Shares on the corresponding day

of every third month thereafter in the form attached hereto as Exhibit 4 (the

 

 

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"Restricted Stock Agreement"). Employee will have the option to pay any required

withholdings by surrender of Restricted Shares, which will be valued for this

purpose at the average market price in the 5 most recent trading days prior to

the withholding payment date.

 

               ii. Employee will be eligible for a target option grant of

250,000 shares of Class A common stock, with an exercise price equal to 100% of

the fair market value of the underlying shares on the date of grant, subject to

a four-year vesting schedule (25% vesting one year after the grant and the

remainder vesting in 12 equal installments on a quarterly basis thereafter) and

otherwise subject to the terms and conditions of the Company's equity incentive

plans. The size of the option grants shall be established by the Compensation

Committee and may be larger or smaller than the target size, depending on the

Employee's satisfaction of reasonable performance criteria (which may include

Company overall performance criteria) established by the Compensation Committee.

Employee shall be eligible to receive such an option grant in February 2006 and

annually thereafter in February of each year.

 

The foregoing share amounts and share purchase prices shall be adjusted, as

necessary, to give effect to any stock split, reverse stock split, stock

dividend, recapitalization or similar transaction affecting the Company's Class

A common stock that is effected after the Effective Date.

 

          e. Employee Benefits. Employee shall be entitled to participate in all

employee benefit plans, programs and arrangements maintained by the Company and

made available to employees generally, including, without limitation,

retirement, profit sharing and savings plans and medical, disability, dental,

life and accidental death and dismemberment insurance plans and vacation. The

Employee's participation in such plans, programs and arrangements shall be on

the same basis and terms as are applicable to other employees of the Company

generally. Notwithstanding the above, Employee shall be entitled to 5 weeks of

vacation per year of service, the first 5 weeks to vest immediately upon the

Commencement Date and, beginning in 2006 and continuing for each subsequent year

of employment, 5 weeks shall vest immediately upon the anniversary of the

Commencement Date. Such vested vacation represents accrued vacation for all

purposes under California law.

 

          f. Reimbursement of Expenses. During his Employment with the Company,

Employee shall be entitled to reimbursement for all reasonable and necessary

business expenses incurred on behalf of the Company, including without

limitation, travel and entertainment expenses, business supplies and cellular

phone expenses, in accordance with the Company's policies and procedures.

 

          g. Reimbursement of Moving/Housing Expenses. The Company shall (i)

reimburse Employee for his reasonable documented moving expenses related to his

employment with Company, including but not limited to packing and unpacking,

home sale assistance including realtor fees, and incidental expenses and (ii)

reimburse Employee for reasonable documented hotel and/or apartment expenses in

San Diego County until Employee has relocated to San Diego County.

 

 

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     5. Confidentiality Agreement. Employee shall concurrently herewith execute

and deliver to the Company the Employee Confidentiality and Inventions Agreement

("Confidentiality Agreement") in the form attached hereto as Exhibit 1.

 

     6. Non-Competition. During his Employment, Employee shall not, directly or

indirectly, either as an employee, employer, consultant, corporate officer or

director, investor, or in any other capacity, engage or participate in any

business that is a Competitor of the Company, unless such participation or

interest is fully disclosed to the Company and approved by the Board.

"Competitor" as used in this paragraph refers to any company that has

therapeutic products (i) on the market or having successfully completed Phase II

clinical development and (ii) that are in competition with the products the

Company has on the market or that have successfully completed Phase II clinical

development. Notwithstanding the above, Employee may own securities in any

Competitor that is a public company, so long as Employee does not own, of record

or beneficially, more than an aggregate of five percent of the outstanding

securities of such company.

 

     7. Non-Solicitation. During his Employment, and for a period of 12 months

thereafter, whether for Employee's own account or the account of any other

person, Employee shall not solicit, directly or indirectly, any employee to

leave his or her employment with the Company. For purposes of this Agreement,

the phrase, "shall not solicit, directly or indirectly," includes, without

limitation, that Employee shall not: (i) identify any Company employees to any

third party as potential candidates for employment, such as by disclosing the

names, backgrounds, compensation or qualifications of any Company employees;

(ii) personally or through any other person approach, recruit or otherwise

solicit employees of Company to work for any other employer; or (iii)

participate in any pre-employment interview with any person who was employed by

the Company while Employee was employed by the Company whether under this

Agreement or otherwise. It shall not be a violation of this Agreement for

Employee to respond if any employee or former employee of Company initiates

contact with Employee for the purposes discussed in this paragraph.

 

     8. Agreement with Previous Employers. Employee represents and warrants to

the Company that he does not have any agreement (other than customary

confidentiality agreements) with any previous employer that prevents him from

performing his duties and responsibilities under this Agreement or that in any

way limits his performance hereunder.

 

     9. Voluntary Resignation or Termination for "Cause."

 

          a. Payment upon Voluntary Resignation or Termination for Cause. If

Employee voluntarily resigns his Employment, other than for Good Reason, or if

Employee is terminated for Cause, the Company shall pay Employee all accrued and

unpaid Base Salary through the date of termination and any vacation that is

accrued but unused as of such date. Employee shall not be eligible for Severance

Payments, as defined below, or any continuation of benefits (other than those

provided for under the Federal Consolidated Omnibus Budget Reconciliation Act

("COBRA")), or any other compensation pursuant to this Agreement or otherwise.

 

 

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          b. Definition of "Cause." As set forth above, the Employment

relationship between the parties is at-will, terminable at any time by either

party for any reason or no reason. The termination may nonetheless be for

"Cause." For purposes of this Agreement, "Cause" is defined as: (i) the willful

refusal of Employee to comply with a lawful instruction of the Board so long as

the instruction is consistent with the scope and responsibilities of Employee's

position ; (ii) Employee's substantial and material failure or refusal to

perform according to, or to comply with, the policies, procedures or practices

established by the Company or the Board of Directors that results in material

harm to the business of the Company; (iii) Employee's commission of or

participation in a fraud or act of dishonesty against the Company that results

in material harm to the business of the Company or to its public reputation; or

(iv) Employee's conviction of, or the entering of a guilty plea or plea of "no

contest" with respect to a felony involving fraud, dishonesty or an act of moral

turpitude, in each case as determined by no fewer than two-thirds of the members

of the Company's Board of Directors (excluding the Employee, if applicable). The

conduct described under clause (i) and (ii) will only constitute Cause if such

conduct is not cured within 15 business days of Employee's receipt of written

notice from the Company or the Board specifying the particulars of the conduct

that may constitute Cause.

 

     10. Termination Without Cause or Resignation for Good Reason. If, other

than in connection with a Change in Control Transaction, Employee (i) is

terminated without "Cause," as defined in Section 9(b), or (ii) "Resigns for

Good Reason," as defined in Section 12(d)(ii), then Employee shall be paid all

accrued and unpaid Base Salary and any accrued but unused vacation through the

date of termination. In addition, subject to Employee's resignation from the

Company's board of directors (if applicable) and, if and only if the Company is

also willing to enter into it, in exchange for Employee's execution of a mutual

release of all claims by and against the Company and its subsidiaries and

affiliates effective as of the date of termination in the form attached hereto

as Exhibit 2:

 

          a. Employee shall be eligible to receive severance payments under this

Agreement in an amount equal to 12 months Base Salary and an amount equal to the

greater of (i) 60% of Base Salary or (ii) the last bonus, if any, paid to

Employee pursuant to Section 4(b) (the "Severance Payments"), payable in full

six months and one day after the date of termination, and

 

          b. the Company's right to repurchase the Restricted Shares under the

Restricted Stock Agreement shall lapse and Employee's ownership of the

Restricted Shares shall be fully vested.

 

     11. Employee's Disability or Death. Employee's Employment shall terminate

automatically in the event of Employee's death or "Disability." In the event of

Employee's death or Disability, the Company shall pay Employee's estate or

Employee all accrued and unpaid Base Salary through the date of death or

Disability and any vacation that is accrued but unused as of the date of death

or Disability. For purposes of this Agreement, "Disability" shall mean the

Employee's failure to perform his duties hereunder, for a period of not less

than 90 days within any 120-day period because of Employee's incapacitation due

to physical or mental injury, disability, or illness. In addition, Company shall

reimburse Employee for the cost (as grossed up for applicable taxes) of a $3

million life insurance policy and disability insurance equal to 60%

 

 

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of Employee's base salary at the time of any disability for Employee during his

employment with Company, to be purchased and maintained by Employee at his sole

discretion.

 

     12. Change of Control Termination.

 

          a. Payment Upon Change of Control Termination. In the event of a

"Change of Control Termination" (defined below), Employee shall be paid all

accrued and unpaid Base Salary and any accrued but unused vacation through the

date of termination. In addition, Employee shall be eligible to receive

severance under this Agreement in the following amounts:

 

               i. if the Transaction Value (defined below) is less than $***,

then Employee shall receive an amount equal to 12 months Base Salary plus the

greater of (i) 60% of Base Salary or (ii) the last bonus, if any, paid to

Employee pursuant to Section 4(b);

 

               ii. if the Transaction Value is equal to or greater than $***,

but less than $***, then Employee shall receive an amount equal to 24 months

Base Salary plus two times the greater of (i) 60% of Base Salary or (ii) the

last bonus, if any, paid to Employee pursuant to Section 4(b); and

 

               iii. if the Transaction Value is equal to or greater than $***,

or if the Aggregate Transaction Value (defined below) is equal to, or greater

than, $***, then Employee shall receive an amount equal to 36 months Base Salary

plus three times the greater of (i) 60% of Base Salary or (ii) the last bonus,

if any, paid to Employee pursuant to Section 4(b).

 

           The foregoing transaction values shall be adjusted, as necessary, to

give effect to any stock split, reverse stock split, stock dividend,

recapitalization or similar transaction affecting the Company's Class A common

stock that is effected after the Effective Date. For the avoidance of doubt,

Employee shall only be entitled to receive the greatest applicable severance

payment described above in clauses (i) through (iv).

 

          b. For purposes of Section 12(a):

 

               i. "Aggregate Transaction Value" shall equal the sum of (i) the

aggregate value of the entire equity interest in the Company, at the valuation

reflected in the Change of Control Transaction, as reasonably determined by the

Company's Board of Directors and (ii) the aggregate indebtedness of the Company

at the time of the Change of Control Transaction; and

 

               ii. "Transaction Value" shall equal the Aggregate Transaction

Value, less the aggregate indebtedness included in calculating Aggregate

Transaction Value, with the result divided by the total number of shares of

Class A common stock issued and outstanding immediately prior to the

consummation of the Change of Control Transaction (calculated giving effect to

dilutive common stock equivalents using the treasury stock method).

 

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***   Certain confidential portions of this Exhibit were omitted by means of

     blackout of the text (the "Mark"). This Exhibit has been filed separately

     with the Secretary of the Commission without the Mark pursuant to the

     Company's Application Requesting Confidential Treatment under Rule 24b-2

     under the 1934 Act.

 

 

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          c. The payment of any severance payment pursuant to this Section 12 is

conditioned on Employee's resignation from the Company's board of directors (if

applicable) and, if and only if the Company is also willing to enter into it,

his execution of a mutual release of all claims by and against the Company and

its subsidiaries and affiliates effective as of the date of termination, in the

form attached hereto as Exhibit 2. Severance payments to be made under this

Section 12 shall be paid in full six months and one day after the date of

termination.

 

          d. Definition of "Change of Control Termination". A "Change of Control

Termination" occurs where Employee is (i) terminated without Cause, or (ii)

"Resigns for Good Reason," as defined below, in either case within 24 months

following a "Change of Control," as defined below or, if in connection with the

Change of Control, prior thereto. For purposes of this Section 12(d):

 

               i.    Cause is defined in Section 9(b) above.

 

               ii.   "Resigns for Good Reason" is defined as a resignation based

                    on:

 

                    (1)   a material reduction in Employee's duties and

                         responsibilities as set forth in this Agreement;

 

                    (2)   the assignment to Employee of any significant duties

                         inconsistent with his status as an executive officer of

                         the Company;

 

                    (3)   a reduction by the Company in Employee's Base Salary by

                         greater than 5%, except to the extent the base salaries

                         of other executive officers of the Company are also

                         reduced; or

 

                    (4)   a relocation of Employee's or the Company's principal

                         executive offices to a location 50 miles or more from

                          the Company's current principal executive offices; or

 

                    (5)   Company's material breach of this Agreement.

 

               Notwithstanding the foregoing, an event described in Section

12(d)(ii)(1)-(4) shall not constitute Good Reason unless it is communicated in

writing within 90 days of the event giving rise to the claim by Employee to the

Company or its successor and unless it is not corrected by the Company or its

successor in a manner that is reasonably satisfactory to Employee within 30 days

of the Company's receipt of such written notice.

 

               iii. A "Change of Control" shall have occurred if, and only if,

 

                    (1)   any individual, partnership, firm, corporation,

                         association, trust, unincorporated organization or

                         other entity or person,

 

 

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                         or any syndicate or group deemed to be a person under

                         Section 14(d)(2) of the Securities Exchange Act of 1934

                         (the "Exchange Act") is or becomes the "Beneficial

                         Owner" (as defined in Rule 13d-3 of the General Rules

                         and Regulations under the Exchange Act), directly or

                         indirectly, of securities of the Company representing

                         40% or more of the combined voting power of the

                         Company's then outstanding securities entitled to vote

                         in the election of directors of the Company;

 

                    (2)   there occurs a reorganization, merger, consolidation or

                         other corporate transaction involving the Company

                          ("Transaction"), in each case, with respect to which

                         the stockholders of the Company immediately prior to

                         such Transaction do not, immediately after the

                         Transaction own more than 40% of the combined voting

                         power of the Company or other corporation resulting

                         from such Transaction;

 

                    (3)   all or substantially all of the assets of the Company

                         are sold, liquidated or distributed; or

 

                    (4)   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.

 

                    The first of any of these events to occur shall be deemed to

                    be the "Change of Control Transaction" for purposes of this

                    Agreement.

 

          e. Stock Option and Restricted Stock Vesting Upon Change of Control

Termination. In the event of a Change of Control Termination: (i) all

outstanding stock options issued to Employee, including those options described

in Section 4(d)(ii), shall be accelerated

 

 

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and become immediately exercisable, provided, however, that the Stock Options

shall be exercisable for the period or periods set forth in, and in accordance

with the other terms and conditions of, the stock option plans under which such

options were granted, and (ii) the Company's right to repurchase the Restricted

Shares under the Restricted Stock Agreement shall lapse and Employee's ownership

of the Restricted Shares shall be fully vested.

 

          f. Benefits Continuation. In the event of a Change of Control

Termination, Employee shall, to the extent practicable, be entitled to continue

to participate in all of the employee health and welfare benefit programs

available to Employee before the termination, including but not limited to group

medical insurance, group dental insurance, group-term life insurance, and

disability insurance. In addition, Employee shall receive executive outplacement

benefits of a type and duration generally provided by companies to executives at

Employee's level. These programs shall be continued at no cost to Employee,

except to the extent that tax rules require the inclusion of the value of such

benefits in Employee's income. Employee shall be entitled to continue to

participate in the programs for the shorter of (i) 18 months following the

termination or (ii) the period continuing until the date on which Employee

secures a new position providing for similar benefits. Notwithstanding the above

and in addition to any benefits to which Employee may be entitled above, in the

event of a Change of Control Termination, at a minimum, the Company shall pay

Employee's COBRA benefits until the earlier of (i) such time as when he secures

a new position providing for similar benefits, or (ii) 18 months from

termination.

 

          g. Indemnification for Excise Tax. In the event that Employee becomes

entitled to receive a severance payment in accordance with the provisions of

Section 12(a), and such severance payment and/or any other benefits or payments

(including transfers of property) that Employee 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 Internal

Revenue Code of 1986, as amended (the "Code") (or any successor thereto) or any

comparable provision of state law (an "Excise Tax"), the following rules shall

apply:

 

                i. The Company shall pay to Employee, within 30 days after

Employee's termination, an additional amount (the "Gross-Up Payment") such that

the net amount retained by Employee, 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 Employee 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 Employee shall not suffer any loss or expense

resulting from the assessment of any Excise Tax or the Company's reimbursement

of Employee for payment of any such Excise Tax.

 

               ii. For purposes of determining whether any of the severance

payments or Other Benefits will be subject to an Excise Tax and the amount of

such Excise Tax,

 

 

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                    (1) any other payment or benefits received or to be received

by Employee in connection with a Change in Control of the Company or Employee'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 Employee 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)

 

                    (2) 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 (1), above, and

 

                     (3) the value of any non-cash benefits or any deferred

payment or benefit shall be determined by the Company's independent auditors in

accordance with the principles of Sections 280G(d)(3) and (4) of the Code (or

any successor or successors thereto).

 

               iii. For purposes of determining the amount of the Gross-Up

Payment, Employee 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 Employee's residence on

the date of Employee's termination, net of the maximum reduction in federal

income taxes which could be obtained from deduction of such state and local

taxes.

 

               iv. In the event that the Excise Tax is subsequently determined

to be less than the amount taken into account hereunder at the time of

Employee's termination, Employee 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 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.

 

     13. Allergan Option Losses.

 

          a. If, during the entire period from the Effective Date until the 3rd

business day prior to the expiration of the Stock Options (the "Exercise and

Sell Period"), Employee is

 

 

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unable to exercise some or all of the Stock Options and simultaneously sell in

the public market all Allergan stock to be received on such exercise due to

limitations under Applicable Law, then, upon delivery by Employee of the

Certification, the Company shall issue a number of shares of Class A common

stock with a value equal to the intrinsic value of the forfeited Stock Options

(net of any applicable exercise prices) as to which Employee was unable to make

such exercise and simultaneous sale, such values to be determined with reference

to (i) the average closing price of the Allergan Inc. common stock for each

trading day in the Exercise and Sell Period and (ii) the average closing price

of the Company's Class A common stock for each trading day in the Exercise and

Sell Period.

 

          b. For purposes of this Section 13, (a) "Stock Options" shall mean

vested options to purchase shares of Allergan Inc. common stock held by Employee

immediately prior to hi