VALEANT PHARMACEUTICALS
INTERNATIONAL
THIS AGREEMENT
(the “Agreement”) is entered into on December 30,
2005 (but effective as of the dates contemplated in sections 1 and
2(a)), by and between Valeant Pharmaceuticals International (the
“Company”), a Delaware corporation, and Robert
O’Leary (“O’Leary”), an individual resident
of San Diego County, California (hereinafter the Company and
O’Leary are referred to as “the
parties”).
WHEREAS,
O’Leary had been employed by the Company as its Chairman of
the Board of Directors (“Chairman”) and Chief Executive
Officer until December 31, 2004;
WHEREAS, effective
January 1, 2005, O’Leary assumed the position of
Executive Chairman;
WHEREAS, the
employment agreement entered into by the Company and O’Leary
on March 21, 2005 (the “Employment Agreement”)
expires December 31, 2005 and after such date shall be of no
further effect; and
WHEREAS, the Board
of Directors of the Company has requested that O’Leary
continue in his role as Chairman and O’Leary has agreed to do
so, becoming non-executive Chairman beginning January 1,
2006.
NOW, THEREFORE,
for consideration, the value, sufficiency, and receipt of which is
hereby acknowledged, the parties agree as follows.
1.
TERM. The initial term of this Agreement shall be from
January 1, 2006 until the election of the Chairman of the
Board immediately following the annual stockholders’ meeting
in May, 2006 (the “Initial Term”). The term of this
Agreement shall be automatically extended to each successive period
as to which the Board of Directors elects O’Leary as Chairman
and O’Leary agrees to serve as Chairman.
(a) POSITIONS AND DUTIES. During the term of this
Agreement, O’Leary shall serve as non-executive Chairman.
O’Leary’s duties as non-executive Chairman will include
the following, working in close consultation with the
Company’s Lead Director:
(i) Partnering with the Company’s Chief
Executive Officer and members of the Board to achieve the
Company’s mission.
(ii) Serving as Chairman at meetings of the
Board.
1.
(iii) Scheduling Board and other meetings in
conjunction with the CEO and establishing appropriate
agendas.
(iv) Working with the CEO and relevant Board members
on recruitment and retention of new Board members.
(v) Directing the Board’s self-evaluation
process.
(vi) After consultation with other members of the
Board, the Chief Executive Officer and the Lead Director,
developing recommendations for the assignment of committee
memberships and submitting nominees to the full Board for
approval.
(vii) Acting as intermediary between the Board and
employees in appropriate areas as directed by the Board or the
Chief Executive Officer.
(viii) Working with the Compensation Committee,
ensuring that proper objectives are set for the CEO and monitoring
performance against those objectives.
(ix) Ensuring that the Board appropriately reviews
governance issues such as structure, roles and relationships with
management.
(x) Serving as a Company spokesman to the media and
community on behalf of the Company, as may be requested by the
Company.
(xi) Overseeing the preparation and distribution of
the annual proxy statement.
(xii) Performing such other duties as the Board or
Company may require and as are consistent with the position of
non-executive Chairman.
(b) TIME COMMITMENT. O’Leary 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 assigned hereunder.
(c) POLICIES AND PROCEDURES. O’Leary agrees to
comply with all of the Company’s standard policies and
procedures.
(a) For the Initial Term, on or before
January 05, 2006, O’Leary shall receive a pro-rated
retainer of $12,500 and beginning with meetings occurring on or
after January 1, 2006, shall be paid meeting and other fees
consistent with the fee schedule generally applicable, as adopted
from time to time by the Board of Directors. For subsequent terms
O’Leary shall receive the retainer payable to all directors,
paid on the schedule generally applicable to directors.
(b) Upon signing of this Agreement, in consideration
of his service for the Initial Term, the Company shall grant
O’Leary 5,000 Restricted Stock Units upon the terms
and
2.
conditions
generally applicable to such grants to members of the Board of
Directors of the Company. For each subsequent term (each such term
beginning upon his election as Chairman at the Board meeting
immediately following the annual stockholders meeting, as provided
in the bylaws of the Company) as non-executive Chairman, the
Company shall grant O’Leary a number of restricted stock
units equal in value to $240,000, upon the terms and conditions
generally applicable to such grants to members of the Board of
Directors of the Company.
4.
BENEFITS. While O’Leary serves as a non-executive Chairman,
the Company shall provide him with the following additional
benefits:
(a) HEALTH INSURANCE. The Company shall provide
O’Leary access to health insurance coverage under the
Company’s program for members of the Board of Directors, upon
the same terms and conditions applicable to all other non-employee
directors of the Company.
(b) INDEMNIFICATION. The Company shall continue the
indemnification coverage for O’Leary’s service as an
executive as well as a member of the Company’s Board of
Directors, as provided in Section 12 herein.
(c) REIMBURSEMENT. The Company shall promptly
reimburse O’Leary for all expenses reasonably incurred by him
in connection with the performance of his duties hereunder or for
promoting, pursuing or otherwise furthering the business or
interests of the Company, consistent with the policies of expense
reimbursement for non-executive members of the Board of
Directors.
(d) SUPPORT. The Company shall provide O’Leary
with such office space and secretarial support as are necessary for
the performance of his duties hereunder.
5.
OTHER BENEFITS. Effective January 1, 2006, O’Leary will
no longer be entitled to participate in the employee benefit plans,
practices and programs maintained by the Company and made available
to company executives generally including, without limitation the
Company’s long- and short-term disability plans, medical
plan, dental plan, accidental death and disability plan,
change-in-control plan, travel accident plan, group life plan,
section 401(k) plan and employee assistance program; provided
however, nothing in this paragraph shall limit or reduce any
similar benefit specifically provided for herein.
6.
STOCK OPTION VESTING AND EXERCISABILITY.
(a) CONTINUED STOCK OPTION VESTING AND EXERCISABILITY.
For as long as O’Leary provides services to the Company
whether as an employee, non-employee director, or consultant, to
the extent provided in the applicable stock plans and stock option
agreements, stock options currently held by him shall continue to
vest in accordance with the existing stock agreement terms and
conditions, including acceleration in the event of a Change in
Control (as defined herein).
(b) CHANGE IN CONTROL; TERMINATION DUE TO DISABILITY
OR DEATH. If O’Leary’s service as a non-executive
Chairman terminates due to a Change in Control of the Company or by
reason of O’Leary’s death or Disability, then all
unvested stock
3.
options shall
immediately vest and become fully exercisable, and shall remain
exercisable until the earlier to occur of (x) the third
anniversary of O’Leary’s termination of such service;
or (y) expiration of the original term of such option;
provided that , if such continued exercisability would cause
adverse tax consequences under Section 409A of the Code, then
such stock options shall not be exercisable beyond the latest date
(not later than the earlier of subsections (x) and
(y) above) in which such options may be exercised without
resulting in adverse tax consequences under Section 409A of
the Code. For purposes of this Agreement, “Change in
Control” is defined as the first to occur of the
following:
(1) the acquisition 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 “Exchange Act”)) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 30% or more of the combined voting power of
the Company’s then outstanding voting securities (a
“25% Beneficial Owner”); provided, however, that for
purposes hereof, the following acquisitions shall not constitute or
give rise to a Change in Control: (A) any acquisition by the
Company or any of its subsidiaries; (B) any acquisition
directly from the Company or any of its subsidiaries; (C) any
acquisition by any employee benefit plan (or related trust or
fiduciary) sponsored or maintained by the Company or any
corporation controlled by the Company; (D) any acquisition by
any underwriter temporarily holding securities pursuant to an
offering of such securities; (E) any acquisition by a
corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their
ownership of stock in the Company; (F) any acquisition in
connection with which, pursuant to Rule 13d-l promulgated
pursuant to the Exchange Act, the Person is permitted to, and
actually does, report its beneficial ownership on
Schedule 13-G (or any successor Schedule); provided, that, if
any such Person subsequently becomes required to or does report its
beneficial ownership on Schedule 13D (or any successor
Schedule), then, for purposes of this paragraph, such Person shall
be deemed to have first acquired, on the first date on which such
Person becomes required to or does so report, beneficial ownership
of all of the voting securities of the Company beneficially owned
by it on such date; and (G) any acquisition in connection with
a merger or consolidation which, pursuant to paragraph 6(d)(2)
below, does not constitute a Change in Control; or
(2) The closing of a merger or consolidation to which
the Company or any direct or indirect subsidiary of the Company is
a party if the merger or consolidation would result in the voting
securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity or parent thereof) less than 50% of the
combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately
after such merger or consolidation; or
(3) the closing of a complete liquidation or
dissolution of the Company or there is consummated an agreement for
the sale or other disposition of all or substantially all of the
assets of the Company.
7.
FEDERAL EXCISE TAX. In the event that O’Leary becomes
entitled to payments and/or benefits which would constitute
“parachute payments” within the meaning of
4.
Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the “Code”), the provisions
of Exhibit A shall apply.
8.
PROPRIETARY INFORMATION. As a condition of this Agreement,
O’Leary has executed and will continue to be bound by the
Company’s standard form of proprietary information and
inventions agreement.
9.
SUCCESSORS AND ASSIGNS.
(a) COMPANY’S SUCCESSORS AND ASSIGNS. This
Agreement will be binding upon and will inure to the benefit of the
Company, its successors and assigns, and the Company will 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 it if no such succession or
assignment had taken place. The term “the Company” as
used herein will include such successors and assigns. The term
“successors and assigns” as used herein will 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, or any entity employing
O’Leary which has spun off or split off from the
Company.
(b) NO ASSIGNMENT BY O’LEARY. Neither this
Agreement nor any right or interest hereunder will be assignable or
transferable by O’Leary, his beneficiaries or legal
representatives, except by will or by the laws of descent and
distribution. This Agreement will inure to the benefit of and be
enforceable by O’Leary’s legal personal
representative.
10.
DISPUTE RESOLUTION. To ensure rapid and economical resolution of
any disputes which may arise under this Agreement, O’Leary
and the Company agree that any and all disputes or controversies of
any nature whatsoever arising from or regarding
O’Leary’s service with the Company or the
interpretation, performance, enforcement or breach of this
Agreement shall be resolved, to the fullest extent allowed by law,
by confidential, final and binding arbitration conducted before a
single arbitrator with Judicial Arbitration and Mediation Services,
Inc. (“JAMS”) in Orange County, California, under the
then-existing JAMS rules. THE PARTIES ACKNOWLEDGE THAT BY AGREEING
TO THIS ARBITRATION PROCEDURE, THEY WAIVE THE RIGHT TO RESOLVE ANY
SUCH DISPUTE THROUGH A TRIAL BY JURY, JUDGE OR ADMINISTRATIVE
PROCEEDING. The arbitration shall be completed within six
(6) months from the date the demand for arbitration is filed
with JAMS, provided that the arbitrator may extend such date for
good reason as determined in his sole discretion. The arbitrator
shall: (a) have the authority to compel adequate discovery for the
resolution of the dispute and to award such relief as would
otherwise be permitted by law; and (b) issue a written
arbitration decision including the arbitrator’s essential
findings and conclusions and a statement of the award. The Company
shall pay all JAMS’ arbitration fees. The arbitrator shall
have discretion to award to the prevailing party on any claim
recovery of reasonable attorneys fees and costs; provided, however,
that (a) O’Leary shall be liable for such amounts only
if the arbitrator finds that O’Leary’s position in the
matter is frivolous or in bad faith; and (b) the amount of
fees so awarded shall not exceed 1% of the net worth of the paying
party (i.e., the Company or O’Leary). Nothing in this
Agreement is intended to prevent either O’Leary or the
Company from obtaining injunctive relief in court to prevent
irreparable harm pending the conclusion of any such arbitration.
The arbitrator, and not a court,
5.
shall be
authorized to determine whether the provisions of this paragraph
apply to a dispute, controversy or claim sought to be resolved in
accordance with these arbitration procedures. Notwithstanding the
foregoing, neither party shall be permitted to initiate a demand
for arbitration until it has participated in a non-binding
mediation conducted by JAMS, after providing notice to the other
party. Both parties shall participate in such a mediation with
forty-five (45) days of delivery of such notice. If the parties
cannot mutually agree upon a mediator within ten (10) days of
such notice, then a mediator shall be designated by
JAMS.
11.
NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice
of Termination) will be in writing and will 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 will be directed to the
attention of the Board with a copy to the Secretary of the Company.
All notices and communications will be deemed to have been received
on the date of delivery thereof or on the third (3rd) business day
after the mailing thereof, except that notice of change of address
will be effective only upon receipt.
(a) The Company agrees that if O’Leary is made a
party to or involved in, or is threatened to be made a party to or
otherwise to be involved in, any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a
“Proceeding”), by reason of the fact that he is or was
a director, officer or employee of the Company or any affiliate or
is or was serving at the request of the Company or any affiliate as
a director, officer, member, employee or agent of another
corporation, limited liability corporation, partnership, joint
venture, trust or other enterprise, including service with respect
to employee benefit plans, whether or not the basis of s
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