def14a
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Soliciting Material Pursuant to § 240.14a-12 |
VALEANT PHARMACEUTICALS INTERNATIONAL
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)
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Check box if any part of the fee is offset as provided by Exchange
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offsetting fee was paid previously. Identify the previous filing
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April 21, 2006
To the Stockholders of
Valeant Pharmaceuticals International:
You are cordially invited to attend Valeant Pharmaceutical
Internationals 2006 Annual Meeting of Stockholders to be
held at 1:00 p.m. on Tuesday, May 23, 2006 at Valeant
Pharmaceuticals Internationals offices located at 3300
Hyland Avenue, Costa Mesa, California 92626. At the meeting we
will vote on the matters set forth in the accompanying notice of
annual meeting and proxy statement, as well as address any other
business matters that may properly come before the meeting.
Timothy C. Tyson, Chief Executive Officer, will present a full
report discussing recent events and plans for the future
immediately following the Annual Meeting. We encourage you to
remain for this important session with Tim.
Corporate integrity continues to be the hallmark of our
management team and our Board of Directors. The drive for
accountability and transparency is an integral part of our
culture.
We encourage you to vote so that your shares will be represented
at the meeting. Information on how you may vote your shares
appears on the enclosed proxy card.
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Sincerely, |
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![-s- ROBERT W. O'LEARY](a19643da1964301.gif) |
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Robert W. OLeary |
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Chairman of the Board |
VALEANT PHARMACEUTICALS INTERNATIONAL
3300 Hyland Avenue
Costa Mesa, California 92626
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 23, 2006
To the Stockholders of
Valeant Pharmaceuticals International:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of Valeant Pharmaceuticals International, a Delaware corporation
(the Company), will be held at our corporate
headquarters located at 3300 Hyland Avenue, Costa Mesa,
California 92626, on May 23, 2006, at 1:00 p.m., local
time, for the following purposes:
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1. To elect three directors to hold office until the 2009
Annual Meeting of Stockholders or until their respective
successors are elected and qualified. |
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2. To approve the Companys 2006 Equity Incentive Plan. |
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3. To ratify the appointment of PricewaterhouseCoopers LLP
as independent registered public accounting firm (the
accounting firm) for the Company for the fiscal year
ending December 31, 2006. |
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4. To transact such other business as may properly come
before the meeting or any adjournments or postponements thereof. |
The record date for the meeting is April 11, 2006. Only
stockholders of record at the close of business on
April 11, 2006 will be entitled to notice of and to vote,
in person or by proxy, at the meeting and any adjournments or
postponements thereof.
The Proxy Statement that accompanies this Notice of Annual
Meeting of Stockholders contains additional information
regarding the proposals to be considered at the Annual Meeting,
and Stockholders are encouraged to read it in its entirety. The
Companys 2005 Annual Report and
Form 10-K
accompany this Proxy Statement.
As set forth in the enclosed Proxy Statement, proxies are being
solicited by and on behalf of the Board of Directors of the
Company. All proposals set forth above are proposals of the
Board of Directors. It is expected that these materials will be
first mailed to stockholders on or about April 21, 2006.
All stockholders are cordially invited to attend the Annual
Meeting in person. Your vote is important. Please complete,
date, sign and return the accompanying proxy in the enclosed,
postage-paid envelope, or vote over the telephone or the
Internet as instructed by these materials, as promptly as
possible, whether or not you plan to attend the Annual
Meeting. Your promptness in returning the proxy will assist
in the expeditious and orderly processing of the proxies and in
ensuring that a quorum is present. If you return your proxy, you
may nevertheless attend the Annual Meeting and vote your shares
in person if you wish. Please note however that if your shares
are held of record by a broker or other nominee and you wish to
vote at the meeting, you must obtain a proxy issued in your name
from the record holder. If you want to revoke your proxy at a
later time for any reason, you may do so in the manner described
in the Proxy Statement.
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By Order of the Board of Directors, |
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![-s- CHRISTINA DE VACA](a19643da1964302.gif) |
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Christina de Vaca |
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Secretary |
Dated: April 21, 2006
TABLE OF CONTENTS
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i
VALEANT PHARMACEUTICALS INTERNATIONAL
3300 Hyland Avenue
Costa Mesa, California 92626
PROXY STATEMENT
2006 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 2006
This Proxy Statement is being mailed on or about April 21,
2006 to stockholders of record at the close of business on
April 11, 2006 (the Record Date) of Valeant
Pharmaceuticals International (the Company or
Valeant) in connection with the solicitation of
proxies by the Valeant Board of Directors for use at the Annual
Meeting of Stockholders to be held on Tuesday, May 23,
2006, and any adjournments or postponements thereof (the
Annual Meeting), for the purposes set forth in this
Proxy Statement and in the accompanying Notice of Annual Meeting
of Stockholders.
METHOD OF VOTING
Stockholders can vote by proxy by means of the mail, telephone
or the Internet, or by attending the Annual Meeting and voting
in person. A proxy card (the Proxy) is enclosed. If
you vote by means of the Proxy, the Proxy must be completed,
signed and dated by you or your authorized representative. If
you return your signed proxy card to us before the Annual
Meeting, we will vote your shares as you direct. If you vote by
telephone or the Internet, you do not need to return the Proxy.
Telephone and Internet voting facilities for stockholders of
record will be available 24 hours a day, and will close at
5:00 p.m., Eastern Time, on May 22, 2006. Robert W.
OLeary and Christina de Vaca, together and separately, are
the designated proxyholders (the Proxyholders). If
you hold Common Stock in street name, you must
either instruct your broker or nominee as to how to vote such
shares or obtain a proxy, executed in your favor by the broker
or nominee, to be able to vote at the Annual Meeting.
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Voting by Mail. If you choose to vote by mail, simply
mark the enclosed Proxy and complete, sign, date and mail it in
the postage-paid envelope provided. |
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Voting by Telephone. You can vote by calling the
toll-free telephone number on the Proxy. Voice prompts will
instruct you to vote your shares and confirm that your vote has
been properly recorded. |
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Voting by Internet. You can vote on the Internet at
http://proxy.georgeson.com/. As with telephone voting,
you can confirm that your vote has been properly recorded. |
We provide Internet proxy voting to allow you to vote your
shares on-line, with procedures designed to ensure the
authenticity and correctness of your proxy vote instructions.
However, please be aware that you must bear any costs associated
with your Internet access, such as usage charges from Internet
access providers and telephone companies.
When a Proxy in the form enclosed with this Proxy Statement is
returned properly executed, the shares represented thereby will
be voted at the Annual Meeting in accordance with the directions
indicated thereon. You may either vote For all the
nominees to the Board of Directors or you may
Withhold your vote for any nominee you specify. For
each of the other matters to be voted on, you may vote
For or Against or abstain from voting.
If you return a signed and dated proxy card without marketing
any voting selections, your shares will be voted FOR
the election of the Board of Directors nominees,
FOR the approval of the Companys 2006 Equity
Incentive Plan, and FOR the ratification of the
appointment of PricewaterhouseCoopers LLP, as independent
registered public accounting firm for the fiscal year ending
December 31, 2006, and in accordance with the
recommendations of the Board of Directors as to any other matter
that may properly be brought before the Annual Meeting or any
continuation, adjournment or postponement thereof.
1
If shares are held by a broker or other intermediary, you must
either instruct the broker or intermediary as to how to vote
such shares or obtain a proxy, executed in your favor by your
broker or intermediary, to be able to vote such shares at the
Annual Meeting in person or by proxy.
If you receive more than one proxy card, your shares are
registered in more than one name or are registered in different
accounts. Please complete, sign and return each proxy
card to ensure that all of your shares are voted.
REVOCABILITY OF PROXIES
A stockholder who executes and returns the enclosed Proxy may
revoke it at any time prior to its exercise by giving written
notice of such revocation to the Secretary of the Company, at
the address of the Company, by revoking it in person at the
Annual Meeting, or by voting at the Annual Meeting. Stockholders
may also revoke a prior Proxy by executing a later-dated Proxy
and submitting it to the Secretary of the Company prior to
commencement of the Annual Meeting. Attendance at the Annual
Meeting by a stockholder who has executed and returned the
enclosed Proxy does not alone revoke the Proxy. You should
consult with your broker or other intermediary concerning the
method of revoking their Proxy.
VOTING RIGHTS
Only stockholders of record at the close of business on
April 11, 2006 (each a Stockholder) will be
entitled to notice of and to vote, in person or by proxy, at the
Annual Meeting. As of the close of business on April 11,
2006, there were 92,792,040 shares of the Companys
common stock, par value $.01 per share (the Common
Stock) outstanding and entitled to vote, held of record by
approximately 5,274 Stockholders, each of which shares is
entitled to one vote, in person or by proxy, at the Annual
Meeting.
A majority of the shares of Common Stock issued and outstanding
and entitled to vote at the Annual Meeting, present either in
person or by proxy, will constitute a quorum for the transaction
of business at the Annual Meeting. Votes withheld, abstentions
and broker non-votes (as defined below) will be
counted for purposes of determining the presence of a quorum.
Brokers holding Common Stock in street name who are
members of a stock exchange are required by the rules of the
exchange to transmit this Proxy Statement to the beneficial
owner of the Common Stock and to solicit voting instructions
with respect to the matters submitted to the Stockholders. If
the broker has not received instructions from the beneficial
owner by the date specified in the statement accompanying such
material, the broker may give or authorize the giving of a Proxy
to vote the Common Stock at his discretion in the election of
directors or the appointment of the independent registered
public accounting firm. However, brokers or nominees do not have
discretion to vote on certain non-discretionary items without
specific instructions from the beneficial owner. On
non-discretionary items for which you do not give your broker
instructions, the shares will be treated as broker non-votes.
For Proposal No. 1, the election of directors, the
candidates receiving the highest number of For
votes, up to the number of directors to be elected, will be
elected. Only votes For or Withheld will
effect the outcome. Abstentions and broker non-votes will have
no effect. Our Restated Certificate of Incorporation, as amended
(the Certificate of Incorporation), and Amended and
Restated Bylaws (the Bylaws) divide our Board of
Directors into three classes, with each class to be elected for
a three-year term on a staggered basis. Our Certificate of
Incorporation and Bylaws do not permit cumulative voting.
To be approved, Proposal No. 2, approving the
Companys 2006 Equity Incentive Plan, requires a
For vote from holders of a majority of the shares
present in person or represented by proxy and entitled to vote
at the Annual Meeting. If you Abstain from voting,
it will have the same effect as an Against vote.
Broker non-votes will have no effect.
To be approved, Proposal No. 3 must receive a
For vote from holders of a majority of shares
present in person or represented by proxy and entitled to vote
at the Annual Meeting. If you Abstain from voting,
it will have the same effect as an Against vote.
Broker non-votes will have no effect.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides that
the Board of Directors be divided into three classes of
directors. There are three directors in the class whose term of
office expires in 2006 and three directors can be elected at the
Annual Meeting, each to serve until the 2009 Annual Meeting of
Stockholders or until his or her respective successor is elected
and qualified. Upon the recommendation of the Corporate
Governance/ Nominating Committee, the Board of Directors
nominated for election as directors at the Annual Meeting:
Robert A. Ingram, Lawrence N. Kugelman and Theo Melas-Kyriazi.
Each of the nominees is currently a director of the Company who
was previously elected by stockholders. Each nominee has
indicated his willingness to serve and, unless otherwise
instructed, the Proxyholders will vote the Proxies received by
them for the Board of Directors nominees. If for any
reason one or more nominees should not be available for election
or be unable to serve as directors at the time of the Annual
Meeting or any continuation, postponement or adjournment
thereof, the accompanying Proxy will be voted for the election
of such other persons, if any, as the Board of Directors may
nominate. The Board of Directors has no reason to believe that
any nominee will be unavailable for election or unable to serve.
Directors are elected by a plurality of the votes properly cast
in person or by proxy. The three nominees for election at the
Annual Meeting who receive the highest number of affirmative
votes will be elected. Shares represented by executed proxies
will be voted, if authority to do so is not withheld, for the
election of the three nominees named above. Abstentions and
broker non-votes will have no effect on the outcome.
Apart from the three nominees recommended by the Board of
Directors, no other persons have been nominated for election as
directors. Procedures to be used by a Stockholder submitting a
nomination for the Board of Directors for next years
annual meeting are provided under the caption
Other Stockholder Proposals and Director
Nominations for the 2007 Annual Meeting.
The Board of Directors of the Company recommends that the
Stockholders vote FOR the election of the three nominees
for director proposed by your Board: Robert A. Ingram, Lawrence
N. Kugelman and Theo Melas-Kyriazi.
INFORMATION CONCERNING COMPANY NOMINEES AND DIRECTORS
The Board of Directors presently consists of eight members and
one vacancy in the class of 2008. Our Certificate of
Incorporation and Bylaws divide the Board of Directors into
three equal classes, with each class elected to a three-year
term on a staggered basis. Accordingly, at each annual meeting,
the terms of one-third of the Directors expire and the
stockholders elect their successors. If a Director ceases to
serve before his or her term expires, the Board of Directors
will appoint a new director to serve out the remainder of the
term, as a member of the class of the director he or she
succeeded. The Board of Directors also has the power to appoint
directors to fill vacancies created by new directorships if the
Board of Directors increases in size.
Lawrence N. Kugelman has served as a director of the Company
since 2002 and is standing for election for a term expiring in
2009. Each of Robert A. Ingram and Theo Melas-Kyriazi has served
as a director of the Company since 2003 and is standing for
election for a term expiring in 2009.
Edward A. Burkhardt, Timothy C. Tyson and Elaine Ullian are
serving until the 2007 Annual Meeting of Stockholders. Richard
H. Koppes and Robert W. OLeary are serving until the 2008
Annual Meeting of Stockholders.
The Corporate Governance/ Nominating Committee of the Board of
Directors considers the qualifications of potential candidates
for election as directors and recommends candidates to the Board
of Directors. The members of the Corporate Governance/
Nominating Committee are Messrs. Koppes and Ingram and
Ms. Ullian. The Corporate Governance/ Nominating Committee
reviewed the background, qualifications and performance of the
three directors standing for re-election. Mr. Ingram
recused himself as to his own nomination.
The Corporate Governance/ Nominating Committee made its report
to the Board of Directors on February 21, 2006. Following
that report, the Board determined that it would be in the best
interests of the Company and its Stockholders to nominate
Messrs. Ingram, Kugelman and Melas-Kyriazi as directors to
be elected at the Annual Meeting. Messrs. Ingram, Kugelman
and Melas-Kyriazi each recused himself as to his own nomination.
3
Set forth below with respect to each director or nominee is
certain personal information, including such persons
present principal occupation, recent business experience and
age, the year such person commenced service as a director of the
Company and other public company directorships held by such
person.
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Nominees For Election
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ROBERT A. INGRAM(a)(b)
Mr. Ingram has been the Vice Chairman Pharmaceuticals of
GlaxoSmithKline plc, a pharmaceutical research and development
company, since January 2003. Mr. Ingram was the Chief
Operating Officer and President, Pharmaceutical Operations, of
GlaxoSmithKline plc from January 2001 to January 2003. He was
Chief Executive of Glaxo Wellcome plc from October 1997 to
December 2000 and Chairman of Glaxo Wellcome Inc., Glaxo
Wellcome plcs U.S. subsidiary, from January 1999 to
December 2000. Mr. Ingram was President and Chief Executive
Officer of Glaxo Wellcome Inc. from October 1997 to January
1999. Mr. Ingram is also a member of the Board of Advisors
for the H. Lee Moffitt Cancer Center and Research Institute.
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2003 |
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Edwards Life Sciences Corporation (member of Audit Committee);
Lowes Companies, Inc. (member of Governance Committee and
Compensation Committee); Nortel Networks Corporation* (member of
Audit Committee and Committee on Directors); Wachovia
Corporation (member of Executive Committee, Compensation
Committee and Corporate Governance Committee); OSI
Pharmaceuticals, Inc. (Chairman of the Board); Allergan Inc.
(member of Corporate Governance Committee and Science and
Technology Committee)
* Retiring from this Board on May 2, 2006 |
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LAWRENCE N. KUGELMAN(b)(c)
Mr. Kugelman is a healthcare consultant and private
investor. From December 1995 through October 1996,
Mr. Kugelman was President, Chief Executive Officer and
Director of Coventry Health Care, Inc., a managed care
organization. From 1980 through 1992, he served as a Chief
Executive Officer of several HMOs and managed healthcare
organizations in the United States.
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2002 |
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Coventry Health Care, Inc. (Chairman of Audit Committee);
LabOne, Inc.*
* Resigned from this Board in October, 2005 |
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THEO MELAS-KYRIAZI(c)
Mr. Melas-Kyriazi was the Chief Financial Officer of Thermo
Electron Corporation from January 1999 through October 2004.
Mr. Melas-Kyriazi was a Vice President of Thermo Electron
Corporation from February 1998, and was Treasurer of Thermo
Electron Corporation and all of its publicly traded subsidiaries
from May 1988 to June 1994.
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46 |
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2003 |
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Cyberkinetics Neurotechnology Systems, Inc. (member of Audit
Committee and Compensation Committee) |
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Directors Whose Terms Expire in 2007
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EDWARD A. BURKHARDT(b)(c)
Mr. Burkhardt has been the President of Rail World, Inc.
since August 1999. From October 1987 through August 1999,
Mr. Burkhardt held a number of positions with Wisconsin
Central Transportation Corporation, including Chairman,
President and Chief Executive Officer.
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2001 |
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PolyMedica Corporation (member of Audit Committee and Governance
Committee) |
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TIMOTHY C. TYSON(d)
Mr. Tyson has been the President of the Company since
November 2002 and Chief Executive Officer since January 2005.
From November 2002 to December 2004, he served as Chief
Operating Officer of the Company. From June 1998 through
November 2002, Mr. Tyson served as President of Global
Manufacturing and Supply for GlaxoSmithKline plc. From February
1992 through June 1998, he held various senior management
positions at GlaxoSmithKline, including Vice President, General
Manager Glaxo Dermatology and Cerenex Division; Vice President,
General Manager Marketing and Vice President, General Manager
Business Operations.
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2004 |
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ELAINE ULLIAN(a)(b)
Ms. Ullian has been the President and Chief Executive
Officer of Boston Medical Center since July 1996. From April
1994 through July 1996, Ms. Ullian was the President and
Chief Executive Officer of Boston University Medical Center
Hospital. From January 1987 through March 1994, she was the
President and Chief Executive Officer of Faulkner Hospital.
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2004 |
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Thermo Electron Corporation (Presiding Director, Chairman of
Compensation Committee, member of Audit Committee and Executive
Committee); Vertex Pharmaceuticals (member of Compensation
Committee) |
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Directors Whose Terms Expire in 2008
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RICHARD H. KOPPES(a)(c)
Mr. Koppes has been Of Counsel to the law firm of Jones Day
since August 1996, and is Co-Director of Executive Education
Programs at Stanford University School of Law. Mr. Koppes
served as a principal of American Partners Capital Group, Inc.,
a venture capital and consulting firm, from August 1996 to
December 1998. From May 1986 through July 1996, Mr. Koppes
held several positions with the California Public
Employees Retirement System (CalPERS) including General
Counsel, Interim Chief Executive Officer and Deputy Executive
Officer. He has also been an officer of the National Association
of Public Pension Attorneys (NAPPA) for the past nine
years. He is also on the Boards of Investor Research
Responsibility Center (IRRC), the International Corporate
Governance Network (ICGN) and the Society of Corporate
Secretaries and Governance Professionals.
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2002 |
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Apria Healthcare Group Inc. (Chairman of Compliance Committee
and member of Audit Committee) |
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ROBERT W. OLEARY(d)
Mr. OLeary has been the Chairman of the Company since
June 2002. From June 2002 until December 2004,
Mr. OLeary was also the Chief Executive Officer of
the Company. Mr. OLeary has been the Chairman and
Chief Executive Officer of the Sagamore Group, a firm
specializing in spin-offs and corporate reorganizations in the
service sector, since March 2001. From July 2000 until October
2000, Mr. OLeary was President and Chief Executive
Officer of PacifiCare Health Systems, Inc., a managed health
services company. Mr. OLeary was Chairman and Chief
Executive Officer of Premier, Inc., a strategic alliance of
not-for-profit health care and hospital systems from January
1996 to August 1998, and continued to serve as Chairman from
September 1998 to June 2000. From July 1991 to February 1995,
Mr. OLeary was Chairman and Chief Executive Officer
of American Medical International, Inc. (AMI), an international
hospital management company.
|
|
|
62 |
|
|
|
2002 |
|
|
Thermo Electron Corporation (Chairman of Nominating and
Corporate Governance Committee); Smiths Group plc (member of
Audit Committee and Remuneration Committee); Viasys Healthcare
Inc. |
|
|
(a) |
Member of the Corporate Governance/ Nominating Committee. |
|
(b) |
Member of the Compensation Committee. |
|
(c) |
Member of the Finance and Audit Committee. |
|
(d) |
Member of the Executive Committee. |
None of the directors or nominees for director were selected
pursuant to any arrangement or understanding. None of the
directors or nominees for directors is related by blood,
marriage or adoption to one another or to any other executive
officer of the Company.
6
GOVERNANCE
The Board of Directors is committed to sound and effective
corporate governance practices with the goal of ensuring the
Companys financial strength and overall business success.
The Board of Directors adopted and adheres to governance
guidelines consistent with the highest ethical standards and
legal requirements. Our governance practices are continually
assessed against those practices suggested by recognized
governance authorities and are updated to maintain alignment
with stockholder interests and accepted key governance best
practices.
|
|
|
Director Nomination Process |
The Corporate Governance/ Nominating Committee is responsible
for the selection of director nominees to fill new or vacant
positions for the Board of Directors. The Corporate Governance/
Nominating Committee seeks appropriate candidates through
various sources, including other non-management directors and
search firms to which reasonable fees are paid for their
assistance. In addition to the review and evaluation of
potential new candidates, the Corporate Governance/ Nominating
Committee assesses the qualifications of incumbent directors
based on the same factors, as well as a directors
performance prior to their re-election.
Essential criteria for all candidates considered by the
committee include the following: integrity and ethical behavior;
maturity; management experience and expertise; independence and
diversity of thought; broad business or professional experience;
and an understanding of business, corporate governance and
financial affairs and the complexities of business organizations.
Additionally, the Corporate Governance/ Nominating Committee
considers stockholder candidates submitted to the attention of
the Corporate Secretary, together with appropriate biographical
information as outlined under the caption
Other Stockholder Proposals and Director
Nominations for the 2007 Annual Meeting included in this
Proxy Statement. Stockholder nominations that comply with these
procedures and that meet the criteria outlined above will
receive the same consideration that the Corporate Governance/
Nominating Committees candidates receive.
|
|
|
Communication with the Board of Directors |
Stockholders and others may contact our Companys directors
in writing, as a group or individually, by directing their
correspondence to the attention of the Chief Governance Officer
and Corporate Secretary, Valeant Pharmaceuticals International,
3300 Hyland Avenue, Costa Mesa, California 92626. Stockholders
and others may also contact our Companys directors by
calling the Companys helpline in the United States and
Canada at (800) 461-9330, or internationally at
(720) 514-4400 (collect calls accepted). The Corporate
Secretary will log incoming information and forward appropriate
messages promptly to the director(s). Communications are
distributed to the Board of Directors, or to any individual
director or directors as appropriate, depending on the facts and
circumstances outlined in the communication. Certain items that
are unrelated to the duties and responsibilities of the Board of
Directors will not be distributed to the Board of Directors,
such as junk mail and mass mailings, product complaints, product
inquiries, new product suggestions, resumes and other forms of
job inquiries, surveys and business solicitations or
advertisements.
In addition, material that is inappropriate or unsuitable will
be excluded, with the provision that any communication that is
excluded must be made available to any non-employee director
upon request.
Communications that include information better addressed by the
complaint hotline supervised by the Finance and Audit Committee
will be forwarded to that hotline.
This communications process has been approved by the Board of
Directors and is available on the Company website referenced at
the end of this section.
|
|
|
Annual Meeting of Stockholders |
The Board of Directors considers it important for its members to
be present and available to stockholders at the Companys
Annual Meeting. Directors are therefore expected to attend the
Companys Annual
7
Meeting. All of our Board members were in attendance at the 2005
annual meeting except for two directors who had unavoidable
scheduling conflicts.
In 2005, Randy H. Thurman, the Lead Director in 2005, chaired
the Board of Directors regularly scheduled non-management
executive sessions. Additionally, Mr. Thurman worked with
the Chairman to establish Board of Directors agendas.
The Board has adopted certain specific categorical standards to
ensure that directors do not have a material relationship with
the Company, either directly or as a partner, stockholder or
officer of an organization, its parent or a consolidated
subsidiary that has a relationship with the Company. These
guidelines are consistent with the independence requirements of
the New York Stock Exchange listing standards and are set forth
in the Corporate Governance Guidelines, which are included as
Annex A to this Proxy Statement. A director will be deemed
independent upon affirmative determination by the Board that he
or she meets the requirements established in the NYSE listing
standards.
The Board has determined that the following directors are
independent as defined in the New York Stock Exchange listing
standards: Messrs. Burkhardt, Ingram, Koppes, Kugelman,
Melas-Kyriazi and Ms. Ullian. Additionally, each of the
members of our Finance and Audit, Compensation and Corporate
Governance/ Nominating Committees has no material relationship
with the Company and meets the New York Stock Exchange director
independence standards. The members of our Finance and Audit
Committee are also independent as defined under the
applicable Securities and Exchange Commission rules.
In 2005 and 2006, the Board adopted or initiated several key
governance initiatives pursuant to the direction and
recommendation of the Committee.
|
|
|
|
|
Overboarding. Directors shall sit on no more than five
public company boards in addition to Valeant. The new guideline
also allows the Board to consider an exception in its discretion. |
|
|
|
Term Limits. A term limit of no more than five three-year
terms was substituted for an age limitation. |
|
|
|
Director Resignation upon Job Status Change. A Director
shall resign in the event of material changes in said
Directors occupation, or a significant reduction from the
roles and responsibilities described in the proxy for the year
in which the director was last elected as a board member. This
new guideline also allows the Board to consider an exception in
its discretion. |
|
|
|
Limiting Board Size. The Board has directed that the
Bylaws be amended to limit the size of the Board to no less than
seven and no more than 11 members. |
|
|
|
Majority Voting. The Board has directed that a draft of
an amendment to the Bylaws of the Company be submitted to them
for review and approval which would require that, beginning with
the 2007 election, a nominee receive a majority of the votes
present in person or represented by proxy and entitled to vote
at an election of directors in order to be elected to the Board
of Directors. |
|
|
|
Executive Stock Ownership Guidelines. At the request of
the Corporate Governance/ Nominating Committee, the Compensation
Committee is currently in the process of designing an
appropriate Executive Stock Ownership model for consideration by
the full Board. |
|
|
|
Director Education. All Board members are required to
participate in at least one accredited director education
session every three years and are strongly encouraged to attend
at least one accredited director education session each year. |
|
|
|
Director Ownership Guidelines. The Board ratified its
earlier action establishing that directors shall own shares with
a value equal to three times their Board retainer within four
years of their initial election to the Board. |
8
|
|
|
|
|
Sales Visit Process. Directors are provided an
opportunity to experience a day in the field with one of the
Companys Sales Representatives as a means to experience
first hand the market in which the Company operates. |
|
|
|
Governance Processes Update |
|
|
|
|
|
Board Assessment Methodology and Workplan. The assessment
process was implemented in 2003 and continues to evolve
consistent with the methodology approved in the four-year
Workplan (see Annex B). Individual director reviews will be
implemented in 2006. |
|
|
|
Formal Chief Executive Officer Evaluation Process. For
the third consecutive year, all directors were afforded the
opportunity to provide input into the evaluation of the Chief
Executive Officer, allowing for a substantive and robust
evaluation process. |
|
|
|
Code of Business Conduct and Ethics |
The Code of Business Conduct and Ethics applies to all Company
directors, officers and employees and sets forth the ethical and
legal principles required to be followed in conducting business
on behalf of the Company. The Board also adopted a Code of
Ethics for the Companys Chief Executive Officer and senior
level financial executives as a supplement to the Code of
Business Conduct and Ethics, which is intended to promote honest
and ethical conduct, as well as full and accurate reporting, and
compliance with applicable laws. The Companys Compliance
Officer oversees Code related matters and receives any report
received via the Companys helpline. The Companys
compliance process is fully outlined on the Companys
website. Interested parties may call the helpline at
(800) 461-9330 in the United States and Canada, or
internationally at (720) 514-4400 (collect calls accepted).
Key documents such as Corporate Governance Guidelines, Board
Committee Charters, the Code of Business Conduct and Ethics, the
Code of Ethics for the Companys Chief Executive Officer
and senior level financial executives are reviewed annually and
updated by the corresponding Committees and the Board of
Directors. Each of these documents and information regarding
stockholder communications with the Board can be found on the
Companys website at www.valeant.com. If the Company
makes any substantive amendments to the Code of Business Conduct
and Ethics or grants any waiver from a provision of the Code to
any executive or director, the Company will promptly disclose
the nature of the amendment or waiver on its website. A written
copy of any of these documents will be provided to any
stockholder upon request to the Chief Governance Officer and
Corporate Secretary, Valeant Pharmaceuticals International, 3300
Hyland Avenue, Costa Mesa, CA 92626.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The following table describes the current members of each
Committee, its Chairman, its primary responsibilities and the
number of meetings held in 2005. The Committees, except the
Executive Committee, are composed of non-employee, independent
directors, as defined under the rules promulgated by the NYSE
and adopted by the Board of Directors. All directors serve on
one or more Committees of the Board.
9
|
|
|
|
|
|
Committee/Members |
|
Primary Responsibilities |
|
Meetings Held |
|
|
FINANCE AND AUDIT
Theo Melas-Kyriazi (Chairman)
1
Edward Burkhardt Richard
Koppes Lawrence
Kugelman2
1 The Committee chairman was changed from
Mr. Burkhardt to Mr. Melas-Kyriazi in May 2005.
2 Mr. Kugelman
was added to the committee in May 2005 as an additional member. |
|
Oversee the Companys financial controls and
reporting processes
Select independent accounting firm and review the
scope and timing of the audits
Review annual financial statements and audit
results
Review quarterly financial statements and quarterly
earnings releases
Review internal control over financial reporting
including the independent accounting firms and
managements assessment
Oversee compliance with the Companys Code of
Conduct and conflicts of interest outside jurisdiction of
Corporate Governance/Nominating Committee
Annually review adequacy of the Committee charter |
|
Nineteen |
|
COMPENSATION
Lawrence Kugelman
(Chairman) Robert Ingram Edward
Burkhardt Elaine
Ullian3
3 Ms. Ullian was added to the committee in May
2005 as an additional member. |
|
Administer the Companys annual incentives and
long-term incentive plans
Review and adopt major compensation plans, including
Board compensation
Approve compensation for the chief executive
officer, corporate officers and certain senior management
Annually review adequacy of the Committee charter |
|
Seven |
|
CORPORATE GOVERNANCE/
NOMINATING
Richard Koppes (Chairman) Robert
Ingram Elaine Ullian |
|
Develop and recommend to the Board corporate
governance guidelines applicable to the Board and the Company
Review and recommend changes to the Companys
corporate governance guidelines when appropriate
Monitor implementation of the guidelines
Assist in succession planning
Review possible conflicts of interest of Board
members and Company management
Make recommendations regarding the appropriate size
and effectiveness of the Board
Identify new Director candidates to fill new or
vacant positions
Evaluate incumbent Directors
Recommend nominees to the Board of Directors for
election
Annually review adequacy of the Committee charter |
|
Four |
|
EXECUTIVE
Robert OLeary (Chairman)
Timothy Tyson
|
|
Exercise the power and authority of the Board of
Directors between meetings, except as expressly limited by the
Bylaws or by the Delaware General Corporation Law
Serve as the Chief Executive Officer succession
planning committee, as specified in the Chief Executive Officer
succession plan
Annually review adequacy of the Committee charter |
|
Two |
|
The Board of Directors met nine times during 2005. All of the
directors attended at least 75% of the Board meetings, except
for Mr. Ingram, who attended 66% of the Board meetings.
Mr. Ingram would have attended at least 75% of the Board
meetings but for his inability to attend due to illness. In
addition, all committee members attended at least 75% of the
committee meetings on which they serve.
10
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
|
|
|
|
|
|
|
Name |
|
Age | |
|
Title |
|
|
| |
|
|
Timothy C. Tyson
|
|
|
54 |
|
|
President and Chief Executive Officer |
Bary G. Bailey
|
|
|
47 |
|
|
Executive Vice President and Chief Financial Officer |
Kim D. Lamon, M.D., Ph.D.
|
|
|
54 |
|
|
President and Chief Scientific Officer of Valeant Research and
Development |
Wesley P. Wheeler
|
|
|
49 |
|
|
President, North America |
Charles J. Bramlage
|
|
|
45 |
|
|
President, European Operations |
Eileen C. Pruette
|
|
|
47 |
|
|
Executive Vice President and General Counsel |
John I. Cooper
|
|
|
50 |
|
|
Executive Vice President of Global Manufacturing and Supply |
TIMOTHY C. TYSON has been our President since November 2002 and
Chief Executive Officer since January 2005. He served as Chief
Operating Officer of the Company from November 2002 to December
2004. Mr. Tyson served as President of Global Manufacturing
and Supply for GlaxoSmithKline plc from June 1998 to November
2002. In that capacity, he was responsible for managing 115
manufacturing sites and 42,000 employees in 42 countries. From
February 1992 through June 1998, he held various senior
management positions at GlaxoSmithKline, including Vice
President, General Manager Glaxo Dermatology and Cerenex
Division; Vice President, General Manager Marketing and Vice
President, General Manager Business Operations. At
GlaxoSmithKline plc, he managed two divisions, launched 32
pharmaceutical products and managed its 5,000 person
U.S. sales force.
BARY G. BAILEY has been our Executive Vice President and Chief
Financial Officer since December 2002. Mr. Bailey served as
Executive Vice President, Pharmacy and Technology of PacifiCare
Health Systems, Inc., a provider of managed care services to
approximately 5 million members, from July 2000 to December
2002. In that capacity, Mr. Bailey was responsible for
managing approximately 1,500 employees in both operations and
technology. From May 1995 to July 2000, he was Executive Vice
President and Chief Financial Officer of Premier, Inc.
KIM D. LAMON, M.D., Ph.D. who has been our President
and Chief Scientific Officer of Valeant Research and Development
since August 2003 resigned from the Company effective
June 30, 2006. Dr. Lamon served as President and Chief
Executive Officer of Ribapharm Inc. from January 2003 to August
2003. Previously, he had been the President of SciPharm
Consulting LLC, which he founded in 1999. From May 1994 to April
1999, he held senior research and clinical positions at Covance,
Inc., Corning Clinical Laboratories and Corning Life Sciences,
Inc. Dr. Lamon is Adjunct Assistant Professor of
Pharmacology at Thomas Jefferson University School of Medicine.
Dr. Lamon served as a director of Valeant Pharmaceuticals
International from August 1, 2002 through May 22, 2003.
WESLEY P. WHEELER has been the President of North American
operations and Global Commercial Development since February
2003. Mr. Wheeler is responsible for the Companys
regional operations in the United States and Canada. He is also
responsible for the Companys commercial development
activities and global marketing functions. Prior to joining the
Company, Mr. Wheeler had extensive management experience in
the pharmaceutical industry. From January 2002 to February 2003,
Mr. Wheeler served as President and Chief Executive Officer
of DSM Pharmaceuticals Inc., a leading contract manufacturer of
prescription pharmaceuticals and biopharmaceuticals and a
subsidiary of its Dutch parent, DSM. From 1998 to 2002,
Mr. Wheeler was the Senior Vice President of Global
Logistics and Strategy for GlaxoSmithKline plc. From 1997 to
1998, Mr. Wheeler was Vice President of Marketing at Glaxo
Wellcome.
CHARLES J. BRAMLAGE has been President of our European
operations since September 2003. He is responsible for the
Companys Western, Central and Eastern European markets.
Mr. Bramlage has more than 20 years of pharmaceutical
experience with a strong background in marketing and sales. From
April 2001 to September 2003, Mr. Bramlage held senior
executive positions, including most recently as President and
11
Chief Executive Officer, at BattellePharma, Inc., a specialty
pharmaceutical company developing products using new inhalation
technology and now known as Ventaira Pharmaceuticals, Inc. From
April 1992 to April 2001, Mr. Bramlage held various
marketing and sales positions at GlaxoSmithKline plc, including
Vice President of Respiratory Global Commercial Development and
Vice President of U.S. Respiratory and Cardiovascular
Marketing.
EILEEN C. PRUETTE has been our Executive Vice President and
General Counsel since April 2003. Ms. Pruette served as
Vice President, U.S. Legal and Global Intellectual Property
for Sony Ericsson Mobile Communications from October 2001 to
March 2003. Ms. Pruette served as General Counsel at
Ericsson Inc. for a number of operating groups from January 1996
to October 2001. From June 1990 to January 1995,
Ms. Pruette served at GlaxoSmithKline, where she provided
legal support for commercial operations while rendering
regulatory, commercial and employment law counsel.
JOHN I. COOPER has been our Executive Vice President of Global
Manufacturing and Supply since January 2003. He is responsible
for managing all manufacturing operations for the Company
worldwide, including supply and logistics operations, quality
assurance, global procurement and physical product development.
From 2002 to 2003, Mr. Cooper was Vice President of Global
Operation Excellence for GlaxoSmithKline plc, which included the
management of global process improvement projects and the
identification, and sharing, of global best practices.
Mr. Cooper served as Vice President and Area Supply
Director for Latin America for GlaxoSmithKline plc from 1999 to
2002, and was responsible for supervising ten manufacturing
facilities, creating operating efficiency improvements and
ensuring product quality.
None of the executive officers were selected pursuant to any
arrangement or understanding. None of the executive officers are
related by blood, marriage or adoption to one another or to any
director or nominee for director of the Company.
12
OWNERSHIP OF THE COMPANYS SECURITIES
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock and the percent of
shares owned beneficially by those known by the Company to be
beneficial owners of more than 5% of the outstanding shares of
the Common Stock as of March 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares | |
|
|
|
|
and Nature of | |
|
|
|
|
Beneficial | |
|
Percentage of | |
Identity of Owner or Group |
|
Ownership | |
|
Class(1) | |
|
|
| |
|
| |
Iridian Asset Management LLC
|
|
|
11,292,204 |
(2) |
|
|
12.2 |
% |
|
276 Post Road West, Westport, CT 06880 |
|
|
|
|
|
|
|
|
Loomis, Sayles & Co., L.P.
|
|
|
5,959,612 |
(3) |
|
|
6.4 |
% |
|
One Financial Center, Boston, MA 02111 |
|
|
|
|
|
|
|
|
Franklin Mutual Advisers, LLC
|
|
|
5,916,853 |
(4) |
|
|
6.4 |
% |
|
101 John F. Kennedy Parkway, Short Hills, NJ 07078 |
|
|
|
|
|
|
|
|
T. Rowe Price Associates, Inc.
|
|
|
5,561,110 |
(5) |
|
|
6.0 |
% |
|
100 E. Pratt Street, Baltimore, MD 21202 |
|
|
|
|
|
|
|
|
CAM North America, LLC
|
|
|
5,159,798 |
(6) |
|
|
5.6 |
% |
Solomon Brothers Asset Management Inc
|
|
|
|
|
|
|
|
|
Smith Barney Fund Management LLC
|
|
|
|
|
|
|
|
|
|
399 Park Avenue, New York, NY 10022 |
|
|
|
|
|
|
|
|
Perry Corp.
|
|
|
4,175,528 |
(7) |
|
|
4.5 |
% |
|
767 Fifth Avenue, New York, NY 10153 |
|
|
|
|
|
|
|
|
This table is based upon information supplied by the principal
stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission. Unless otherwise indicated in the
footnotes to this table, the Company believes that the
stockholders named in the table have sole voting and investment
power with respect to the shares indicated as beneficially owned.
|
|
(1) |
Based on 92,792,040 shares of Common Stock outstanding on
March 31, 2006. |
|
(2) |
Includes 11,292,204 shares beneficially owned by Iridian
Asset Management LLC, the Governor and Company of the Bank of
Ireland, IBI Interfunding, BancIreland/ First Financial, Inc and
BIAM (US) Inc., 11,282,204 shares and
11,292,204 shares, respectively, over which each of the
aforementioned parties has shared voting and shared dispositive
power. |
|
(3) |
Shares issuable upon conversion of certain bonds beneficially
owned by Loomis, Sayles & Co. Includes
4,660,578 shares over which Loomis, Sayles & Co.,
L.P. holds sole voting power, 176,990 shares over which
Loomis, Sayles & Co., L.P. holds shared voting power,
and 5,959,612 shares over which Loomis, Sayles &
Co., L.P. holds sole dispositive power. Loomis,
Sayles & Co., L.P. disclaims beneficial ownership of
these securities. |
|
(4) |
Includes 5,916,853 shares beneficially owned by one or more
open-end investment companies or other managed accounts which,
pursuant to advisory contracts, are advised by Franklin Mutual
Advisers, LLC (FMA), which is deemed to have sole
voting and dispositive power of such shares. FMA disclaims
pecuniary interest in or beneficial ownership of such shares. |
|
(5) |
Includes 5,561,110 shares over which T. Rowe Price
Associates, Inc. holds sole dispositive power and
799,500 shares over which T. Rowe Price Associates, Inc.
has sole voting power. T. Rowe Price Associates, Inc. disclaims
beneficial ownership of these shares. |
13
|
|
(6) |
Includes (i) 462,298 shares beneficially owned by CAM
North America, LLC, 135,662 shares over which CAM North
America, LLC holds shared voting power and 462,298 shares
over which CAM North America, LLC holds shared dispositive
power; (ii) 14,000 shares beneficially owned by Salmon
Brothers Asset Management Inc, over which Salmon Brothers Asset
Management Inc holds shared voting and dispositive power; and
(iii) 4,683,500 shares beneficially owned by Smith
Barney Fund Management LLC, over which Smith Barney Fund
Management LLC holds shared voting and dispositive power. |
|
(7) |
Includes 4,175,528 shares over which the Perry Corp. and
Mr. Richard C. Perry hold sole voting and sole dispositive
power. This includes 1,610,800 shares beneficially owned by
the Perrry Corp and Mr. Richard C. Perry,
1,947,428 shares issuable upon conversion of certain bonds
beneficially owned by the Perrry Corp and Mr. Richard C.
Perry, and 617,300 shares issuable upon exercise of certain
options, beneficially owned by the Perry Corp. and
Mr. Perry. |
14
OWNERSHIP BY MANAGEMENT
The following table sets forth, as of March 31, 2006,
certain information regarding the beneficial ownership of the
Common Stock and the percent of shares owned beneficially by
each current director, each director nominee nominated by the
Board of Directors and each Named Executive Officer (as defined
below), and all directors, director nominees and executive
officers of the Company as a group.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares | |
|
|
|
|
and Nature of | |
|
|
|
|
Beneficial | |
|
Percentage | |
Identity of Owner or Group |
|
Ownership(1) | |
|
of Class(12) | |
|
|
| |
|
| |
Officers and Directors
|
|
|
|
|
|
|
|
|
Bary G. Bailey
|
|
|
526,042 |
(2) |
|
|
* |
|
Charles J. Bramlage
|
|
|
105,000 |
(3) |
|
|
* |
|
Edward A. Burkhardt
|
|
|
261,250 |
(4) |
|
|
* |
|
Robert A. Ingram
|
|
|
|
|
|
|
* |
|
Richard H. Koppes
|
|
|
13,750 |
(5) |
|
|
* |
|
Lawrence N. Kugelman
|
|
|
17,500 |
(6) |
|
|
* |
|
Kim D. Lamon
|
|
|
413,426 |
(7) |
|
|
* |
|
Theo Melas-Kyriazi
|
|
|
|
|
|
|
* |
|
Robert W. OLeary
|
|
|
1,256,896 |
(8) |
|
|
1.4 |
% |
Timothy C. Tyson
|
|
|
1,107,296 |
(9) |
|
|
1.2 |
% |
Elaine Ullian
|
|
|
500 |
|
|
|
* |
|
Wesley P. Wheeler
|
|
|
219,696 |
(10) |
|
|
* |
|
Directors and executive officers of the Company as a group
(14 persons)
|
|
|
4,258,222 |
(11) |
|
|
4.6 |
% |
|
|
|
|
* |
Less than 1% of the outstanding Common Stock. |
|
|
|
|
(1) |
This table is based on information supplied by officers and
directors. The Company believes that, except as indicated
otherwise in the following notes, shares shown as beneficially
owned are those as to which the named persons possess sole
voting and investment power. However, under the laws of
California and certain other states, personal property owned by
a married person may be community property, which either spouse
may manage and control, and the Company has no information as to
whether any shares shown in this table are subject to community
property laws. |
|
|
(2) |
Includes 509,596 shares of Valeant common stock, which
Mr. Bailey has the right to acquire within 60 days
upon the exercise of stock options. |
|
|
(3) |
Includes 105,000 shares of Valeant common stock, which
Mr. Bramlage has the right to acquire within 60 days
upon the exercise of stock options. |
|
|
(4) |
Includes 11,250 shares of Valeant common stock, which
Mr. Burkhardt has the right to acquire within 60 days
upon the exercise of stock options. |
|
|
(5) |
Includes 11,250 shares of Valeant common stock, which
Mr. Koppes has the right to acquire within 60 days
upon the exercise of stock options. |
|
|
(6) |
Includes 7,500 shares of Valeant common stock, which
Mr. Kugelman has the right to acquire within 60 days
upon the exercise of stock options. |
|
|
(7) |
Includes 406,980 shares of Valeant common stock, which
Dr. Lamon has the right to acquire within 60 days upon
the exercise of stock options and 5,000 shares held by
trust. |
|
|
(8) |
Includes 1,236,450 shares of Valeant common stock, which
Mr. OLeary has the right to acquire within
60 days upon the exercise of stock options,
18,000 shares held by trust and 1,000 shares held by
his daughter. |
|
|
(9) |
Includes 1,093,500 shares of Valeant common stock, which
Mr. Tyson has the right to acquire within 60 days upon
the exercise of stock options. |
15
|
|
(10) |
Includes 216,250 shares of Valeant common stock, which
Mr. Wheeler has the right to acquire within 60 days
upon the exercise of stock options. |
|
(11) |
Includes 3,925,776 shares of Valeant common stock, which
Directors and executive officers of the Company as a group (14
persons) have the right to acquire within 60 days upon the
exercise of stock options. |
|
(12) |
Based on 92,792,040 shares of Common Stock outstanding on
March 31, 2006 plus shares beneficially owned by each
individual. Under
Rule 13d-3 of the
Securities Exchange Act of 1934, certain shares may be deemed to
be beneficially owned by more than one person (if, for example,
a person shares the power to vote or the power to dispose of the
shares). In addition, under
Rule 13d-3(d)(1)
of the Securities Exchange Act of 1934, shares not outstanding
which are subject to options, warrants, rights or conversion
privileges exercisable on or before 60 days of the date as
of which the information is provided are deemed outstanding for
the purpose of calculating the number and percentage owned by
such person (or group), but not deemed outstanding for the
purpose of calculating the percentage owned by each other person
(or group) listed. As a result, the percentage of outstanding
shares of any person as shown in this table does not necessarily
reflect the persons actual ownership or voting power with
respect to the number of shares of Common Stock actually
outstanding on March 31, 2006. |
SECTION 16(a) REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Companys executive officers and directors,
and persons who own more than ten percent of a registered class
of the Companys equity securities, to file reports of
ownership and changes in ownership with the SEC and the NYSE.
Such executive officers, directors and stockholders are required
by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Companys knowledge, based solely on a review of the
copies of such reports furnished to the Company, or written
representations from certain reporting persons that no such
forms were required for those persons, the Company believes that
during fiscal year 2005, all filing requirements applicable to
its executive officers, directors and ten percent beneficial
owners were timely satisfied, except that
Messrs. Burkhardt, Ingram, Koppes, Kugelman, Melas-Kyriazi
and Thurman (who was on our Board in 2005) and Ms. Ullian
each filed one late Form 4 covering dividend equivalent
shares accrued on restricted stock units. In addition,
Mr. Ingram and Ms. Ullian each filed a late
Form 4 covering restricted stock units received in lieu of
cash for Board fees.
16
EXECUTIVE COMPENSATION AND RELATED MATTERS
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term
compensation awarded to or paid to (i) the person serving
as Chief Executive Officer of the Company during 2005 and
(ii) its other four most highly paid executive officers of
the Company who were serving as executive officers at
December 31, 2005 (together, the Named Executive
Officers) for services rendered to the Company in all
capacities during the years ended December 31, 2005, 2004
and 2003.
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Long-term | |
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Compensation | |
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Annual Compensation | |
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| |
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| |
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Restricted | |
|
Securities | |
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Other Annual | |
|
Stock | |
|
Underlying | |
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All Other | |
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Salary | |
|
Bonus | |
|
Compensation | |
|
Awards | |
|
Options | |
|
Compensation | |
Name and Principal Position |
|
Year | |
|
($) | |
|
($)(1) | |
|
($)(2) | |
|
($) | |
|
(#)(3) | |
|
($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Timothy C. Tyson
|
|
|
2005 |
|
|
|
755,000 |
|
|
|
1,000,000 |
|
|
|
94,961 |
(4) |
|
|
531,600 |
(5) |
|
|
360,000 |
|
|
|
12,613 |
(6) |
|
President and |
|
|
2004 |
|
|
|
621,000 |
|
|
|
603,325 |
|
|
|
76,132 |
(7) |
|
|
|
|
|
|
400,000 |
|
|
|
8,958 |
(8) |
|
Chief Executive Officer
|
|
|
2003 |
|
|
|
600,000 |
|
|
|
1,101,500 |
(9) |
|
|
89,063 |
(10) |
|
|
|
|
|
|
487,000 |
|
|
|
29,527 |
(11) |
Bary G. Bailey
|
|
|
2005 |
|
|
|
429,785 |
|
|
|
472,763 |
|
|
|
46,100 |
(12) |
|
|
177,200 |
(13) |
|
|
120,000 |
|
|
|
12,690 |
(14) |
|
Executive Vice President |
|
|
2004 |
|
|
|
415,000 |
|
|
|
374,138 |
|
|
|
46,100 |
(15) |
|
|
|
|
|
|
140,000 |
|
|
|
12,490 |
(16) |
|
and Chief Financial Officer |
|
|
2003 |
|
|
|
400,000 |
|
|
|
610,564 |
(17) |
|
|
31,415 |
(18) |
|
|
|
|
|
|
305,461 |
|
|
|
16,854 |
(19) |
Kim D. Lamon
|
|
|
2005 |
|
|
|
453,604 |
|
|
|
544,705 |
|
|
|
59,100 |
(20) |
|
|
177,200 |
(13) |
|
|
90,000 |
|
|
|
16,148 |
(21) |
|
President and |
|
|
2004 |
|
|
|
438,000 |
|
|
|
567,648 |
|
|
|
109,880 |
(22) |
|
|
|
|
|
|
85,000 |
|
|
|
15,840 |
(23) |
|
Chief Scientific Officer
|
|
|
2003 |
|
|
|
400,912 |
|
|
|
935,000 |
(24) |
|
|
67,847 |
(25) |
|
|
|
|
|
|
552,055 |
|
|
|
25,471 |
(26) |
Wesley P. Wheeler
|
|
|
2005 |
|
|
|
404,625 |
|
|
|
391,058 |
|
|
|
36,100 |
(27) |
|
|
177,200 |
(13) |
|
|
90,000 |
|
|
|
12,871 |
(28) |
|
President,
|
|
|
2004 |
|
|
|
390,000 |
|
|
|
592,024 |
|
|
|
36,238 |
(29) |
|
|
|
|
|
|
75,000 |
|
|
|
12,156 |
(30) |
|
North America
|
|
|
2003 |
|
|
|
362,260 |
|
|
|
630,195 |
(31) |
|
|
198,022 |
(32) |
|
|
|
|
|
|
324,000 |
|
|
|
18,267 |
(33) |
Charles J. Bramlage
|
|
|
2005 |
|
|
|
383,875 |
|
|
|
300,906 |
(34) |
|
|
36,100 |
(35) |
|
|
177,200 |
(13) |
|
|
90,000 |
|
|
|
12,230 |
(36) |
|
President,
|
|
|
2004 |
|
|
|
370,000 |
|
|
|
150,000 |
|
|
|
57,094 |
(37) |
|
|
|
|
|
|
70,000 |
|
|
|
11,748 |
(38) |
|
European Operations
|
|
|
2003 |
|
|
|
140,538 |
|
|
|
240,000 |
(39) |
|
|
20,854 |
(40) |
|
|
|
|
|
|
175,000 |
|
|
|
1,041 |
(41) |
|
|
|
|
(1) |
Except where otherwise indicated, amounts included in this
column are for performance bonuses earned with respect to the
applicable year, but paid in the following year. |
|
|
(2) |
These numbers include the cost to the Company of providing
perquisites and other personal benefits. As permitted by
existing SEC rules and as described in the proposed SEC rules,
unless the aggregate value of perquisites and personal benefits
is less than $10,000, amounts are shown with respect to certain
perquisites or personal benefits where such amounts are valued
at the greater of $25,000 or 10% of total perquisites and other
personal benefits. |
|
|
(3) |
Includes grants of options to purchase shares of Common Stock
granted under the Companys 2003 Equity Incentive Plan (the
2003 Plan), which is an amendment and restatement of
its Amended and Restated 1998 Stock Option Plan. |
|
|
(4) |
Includes the following perquisites: spouse travel benefits
($43,154); automobile allowance ($22,493); legal expenses
($13,374); executive medical reimbursement allowance ($10,000);
tax preparation expenses; and annual physical. |
|
|
(5) |
Mr. Tyson held 30,000 restricted stock units with an
aggregate value of $542,400 as of December 31, 2005. Fifty
percent of the shares of restricted stock units vest on the
third anniversary of the date of grant, 25% of the shares vest
of the fourth anniversary of the date of grant and 25% of the
shares vest on the fifth anniversary of the date of grant,
provided that Mr. Tyson remains employed with the Company
until the respective vesting dates. Dividend equivalent rights
will be paid every quarter, if applicable. |
|
|
(6) |
Consisted of the following: group term life insurance ($4,710);
whole life insurance ($2,088); executive life insurance
($2,040); and 401(k) match ($3,775). |
|
|
(7) |
Includes the following perquisites: spouse travel benefits
($32,864); automobile allowance ($22,493); executive medical
reimbursement allowance ($10,000); tax preparation expenses
($9,675); and annual physical. |
17
|
|
|
|
(8) |
Consisted of the following: group term life insurance ($4,710);
whole life insurance ($2,088); and executive life insurance
($2,160). |
|
|
(9) |
Includes $212,500 which was paid to Mr. Tyson in connection
with his employment agreement. |
|
|
(10) |
Includes the following perquisites: automobile allowance
($22,493); relocation expenses ($46,325); executive medical
reimbursement allowance ($10,000); tax preparation expense
($9,245); and annual physical. |
|
(11) |
Consisted of the following: group term life insurance ($4,710);
whole life insurance ($2,088); executive life insurance
($1,188); and vacation pay-out ($21,541). |
|
(12) |
Includes the following perquisites: executive allowance
($35,000); executive medical reimbursement allowance ($10,000);
and annual physical. |
|
(13) |
Messrs. Bailey, Wheeler and Bramlage and Dr. Lamon
each held 10,000 restricted stock units with an aggregate value
of $180,800 as of December 31, 2005. Fifty percent of the
shares of restricted stock units on the third anniversary of the
date of grant, 25% of the shares vest of the fourth anniversary
of the date of grant and 25% of the shares vest on the fifth
anniversary of the date of grant, provided that the officers
remain employed with the Company until their respective vesting
dates. Dividend equivalent rights will be paid every quarter, if
applicable. |
|
(14) |
Consisted of the following: group term life insurance ($3,030);
whole life insurance ($1,320); executive life insurance
($2,040); and 401(k) match ($6,300). |
|
(15) |
Includes the following perquisites: executive allowance
($35,000); executive medical reimbursement allowance ($10,000);
and annual physical. |
|
(16) |
Consisted of the following: group term life insurance ($2,860);
whole life insurance ($1,320); executive life insurance
($2,160); and 401(k) match ($6,150). |
|
(17) |
Includes $15,564 bonus which was paid to Mr. Bailey in
connection with the sale of the Companys Russian
subsidiaries. |
|
(18) |
Includes the following perquisites: executive allowance
($20,417); executive medical reimbursement allowance ($10,000);
and annual physical. |
|
(19) |
Consisted of the following: group term life insurance ($2,790);
whole life insurance ($1,080); executive life insurance
($1,188); and vacation pay-out ($11,796). |
|
(20) |
Includes the following perquisites: executive allowance
($25,000); spouse travel benefits ($23,000); executive medical
reimbursement allowance ($10,000); and annual physical. |
|
(21) |
Consisted of the following: group term life insurance ($5,212);
whole life insurance ($2,596); executive life insurance
($2,040); and 401(k) match ($6,300). |
|
(22) |
Includes the following perquisites: executive allowance
($25,000); spouse travel benefits ($31,333); housing expense
($42,447); executive medical reimbursement allowance; and annual
physical. |
|
(23) |
Consisted of the following: group term life insurance ($4,986);
whole life insurance ($2,544); executive life insurance
($2,160); and 401(k) match ($6,150). |
|
(24) |
Includes $400,000 which was paid to Dr. Lamon in connection
with the commencement of his employment with the Company. |
|
(25) |
Includes the following perquisites: relocation expenses
($50,596); executive medical reimbursement allowance ($10,000);
executive allowance ($6,250); and annual physical. |
|
(26) |
Consisted of the following: group term life insurance ($1,232);
whole life insurance ($576); executive life insurance ($990);
and vacation pay-out ($22,673). |
|
(27) |
Includes the following perquisites: executive allowance
($25,000); executive medical reimbursement allowance ($10,000);
and annual physical. |
|
(28) |
Consisted of the following: group term life insurance ($3,270);
whole life insurance ($1,560); executive life insurance
($2,040); and 401(k) match ($6,001). |
18
|
|
(29) |
Includes the following perquisites: executive allowance
($25,000); executive medical reimbursement allowance ($10,000);
annual physical; and other insurance. |
|
(30) |
Consisted of the following: group term life insurance ($3,100);
whole life insurance ($1,410); executive life insurance
($2,040); and 401(k) match ($5,606). |
|
(31) |
Includes $229,835 which was paid to Mr. Wheeler in
connection with the commencement of his employment with the
Company. |
|
(32) |
Includes the following perquisites: relocation expenses
($172,439); executive allowance ($14,583); executive medical
reimbursement allowance; and annual physical. |
|
(33) |
Consisted of the following: group term life insurance ($2,525);
whole life insurance ($990); executive life insurance ($1,530);
and vacation pay-out ($13,222). |
|
(34) |
Includes $77,821 which was paid to Mr. Bramlage in
connection with market restructuring implementation. |
|
(35) |
Includes the following perquisites: executive allowance
($25,000); executive medical reimbursement allowance ($10,000);
and annual physical. |
|
(36) |
Consisted of the following: group term life insurance ($2,790);
whole life insurance ($1,100); executive life insurance
($2,040); and 401(k) match ($6,300). |
|
(37) |
Includes the following perquisites: executive allowance
($25,000); relocation expenses ($20,994); executive medical
reimbursement allowance ($10,000); and annual physical. |
|
(38) |
Consisted of the following: group term life insurance ($2,148);
whole life insurance ($1,410); executive life insurance
($2,040); and 401(k) match ($6,150). |
|
(39) |
Includes $120,000 which was paid to Mr. Bramlage in
connection with the commencement of his employment with the
Company. |
|
(40) |
Includes the following perquisites: executive allowance
($9,754); executive medical reimbursement allowance ($10,000);
and annual physical. |
|
(41) |
Consisted of the following: group term life insurance ($531) and
executive life insurance ($510). |
OPTION GRANT INFORMATION
The following table sets forth information with respect to
options to purchase shares of Common Stock granted to the Named
Executive Officers in 2005.
Option Grants In Last Fiscal Year
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Percent of | |
|
|
|
|
|
|
|
|
Securities | |
|
Total Options | |
|
Exercise | |
|
|
|
Grant Date | |
|
|
Underlying | |
|
Granted to | |
|
Price | |
|
Expiration | |
|
Present | |
Name |
|
Options(1) | |
|
Employees(2) | |
|
($/Share) | |
|
Date | |
|
Value($)(3) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Timothy C. Tyson
|
|
|
360,000 |
|
|
|
16.5 |
% |
|
|
17.72 |
|
|
|
11/1/15 |
|
|
|
2,028,060 |
|
Bary G. Bailey
|
|
|
120,000 |
|
|
|
5.5 |
% |
|
|
17.72 |
|
|
|
11/1/15 |
|
|
|
676,020 |
|
Kim D. Lamon
|
|
|
90,000 |
|
|
|
4.1 |
% |
|
|
17.72 |
|
|
|
11/1/15 |
|
|
|
507,015 |
|
Wesley P. Wheeler
|
|
|
90,000 |
|
|
|
4.1 |
% |
|
|
17.72 |
|
|
|
11/1/15 |
|
|
|
507,015 |
|
Charles J. Bramlage
|
|
|
90,000 |
|
|
|
4.1 |
% |
|
|
17.72 |
|
|
|
11/1/15 |
|
|
|
507,015 |
|
|
|
(1) |
All options were granted under the 2003 Plan, and have ten-year
terms. The options granted to the executive officers vest and
become exercisable in four equal installments beginning one year
following the date of grant, and on each of the next succeeding
three anniversary dates of the grant date. All options were
granted with an exercise price equal to the fair market value of
the underlying shares on the date of grant. Under the 2003 Plan,
unvested options accelerate upon a change in control. |
|
(2) |
Options to purchase a total of 2,188,000 shares were
granted to employees, including the Named Executive Officers
(but excluding non-employee directors), during 2005. |
19
|
|
(3) |
Based on the Black-Scholes option pricing model adapted for use
in valuing executive stock options using the following
assumptions: expected volatility (38%), risk-free interest rate
(4.35%), dividend per share ($0.31) and weighted-average life
(4.1 years). The actual value, if any, an executive may
realize will depend on the excess of the stock price on the date
the option is exercised over the exercise price. There is no
assurance the value realized by an executive will be at or near
the value estimated by the Black-Scholes model. |
Aggregated Option Exercises
In 2005 and December 31, 2005 Option Values(1)
The following table sets forth information regarding
(i) stock option exercises by the Named Executive Officers
during 2005 and (ii) unexercised stock options held by the
Named Executive Officers at December 31, 2005.
|
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|
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|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
Number of | |
|
|
|
|
|
|
|
|
Securities Underlying | |
|
Value of Unexercised | |
|
|
|
|
|
|
Unexercised Options | |
|
In-the-Money Options | |
|
|
Shares | |
|
Value | |
|
at December 31, 2005(#) | |
|
at December 31, 2005($)(1) | |
|
|
Acquired on | |
|
Realized | |
|
| |
|
| |
Name |
|
Exercise(#) | |
|
($) | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Timothy C. Tyson
|
|
|
|
|
|
|
|
|
|
|
1,093,500 |
|
|
|
1,153,500 |
|
|
|
7,245,000 |
|
|
|
2,544,600 |
|
Bary G. Bailey
|
|
|
|
|
|
|
|
|
|
|
487,731 |
|
|
|
477,730 |
|
|
|
2,408,655 |
|
|
|
991,850 |
|
Kim D. Lamon
|
|
|
|
|
|
|
|
|
|
|
305,716 |
|
|
|
432,589 |
|
|
|
1,404,442 |
|
|
|
1,391,659 |
|
Wesley P. Wheeler
|
|
|
2,000 |
|
|
|
17,460 |
|
|
|
178,750 |
|
|
|
308,250 |
|
|
|
531,440 |
|
|
|
578,400 |
|
Charles J. Bramlage
|
|
|
|
|
|
|
|
|
|
|
105,000 |
|
|
|
230,000 |
|
|
|
193,125 |
|
|
|
225,525 |
|
|
|
(1) |
Based upon the fair market value of the shares of Common Stock
on December 30, 2005 ($18.08, which was the NYSE closing
price for the Companys Common Stock on December 30,
2005), less the exercise price per share. |
COMPENSATION OF DIRECTORS
Members of the Board of Directors, other than employees, were
paid an annual fee of $30,000 in 2005, payable quarterly, plus a
fee of $1,500 for each Board meeting and committee meeting
attended, except the Companys Finance and Audit Committee
members, who were paid a fee of $1,750 for each committee
meeting attended. Each committee chair received an additional
annual fee of $7,500, payable quarterly, except the
Companys Finance and Audit Committee Chair, who received
an additional annual fee of $10,000, payable quarterly.
Directors are also reimbursed for their
out-of-pocket expenses
in attending meetings and paid a $1,500 per diem ($750 for
four hours or less) for services rendered to the Company in
their capacity as directors apart from meetings. The Board of
Directors can change the compensation of directors at any time.
Presently, on the date of each annual meeting (including the
Annual Meeting), non-employee directors holding office as
director after, and giving effect to, the election at the annual
meeting, are granted a number of restricted stock units equal to
the lesser of (a) $120,000 divided by the per share fair
market value on the date of grant, or (b) the economic
value of 25,000 options, assuming a strike price equal to the
per share fair market value on the date of grant. The economic
value of the 25,000 options is calculated using the
Black-Scholes option pricing model. In 2005, the Lead Director
received an additional 1,899 restricted stock units as
compensation for his added responsibilities as Lead Director.
The Company and Mr. OLeary have agreed to the terms
pursuant to which Mr. OLeary will continue to serve
as non-executive Chairman of the Board of Directors, effective
from January 1, 2006 until the election of the Chairman of
the Board of Directors immediately following the annual meeting
of stockholders scheduled for May 23, 2006 (the
Initial Term). The terms of the agreement are also
effective for each successive period as to which the Board of
Directors of the Company elects Mr. OLeary as
Chairman and Mr. OLeary agrees to serve as Chairman.
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For the Initial Term, Mr. OLeary will receive a
pro-rated retainer of $12,500 and will be paid meeting and other
fees consistent with the fee schedule generally applicable, as
adopted from time to time by the Board of Directors of the
Company. For any subsequent terms, Mr. OLeary shall
receive the retainer payable to all directors, paid on the
schedule generally applicable to directors. In consideration of
his service for the Initial Term, the Company granted
Mr. OLeary 5,000 restricted stock units in December
2005 upon the terms and 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
Mr. OLearys election as Chairman at the Board
of Directors meeting immediately following the annual
stockholders meeting, as provided in the Bylaws of the Company)
as non-executive Chairman, the Company has agreed to grant
Mr. OLeary 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.
The Company has agreed that, for as long as
Mr. OLeary 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 option agreement
terms and conditions.
The Company also agreed to continue the provisions from
Mr. OLearys previous arrangements relating to
the gross up payments to address the excise tax
imposed by Section 4999 of the Code and/or any interest or
penalties with respect to such excise tax.
Mr. Tyson received compensation in 2005 only in his
capacity as President and Chief Executive Officer of the
Company. See Summary Compensation Table.
Except for the 5,000 restricted stock units described above,
Mr. OLeary received compensation in 2005 only in his
capacity as executive Chairman of the Company and not as a
director.
CERTAIN EMPLOYMENT AGREEMENTS
President and Chief Executive Officer Agreement
The Company entered into an Executive Employment Agreement with
Mr. Tyson on October 24, 2002, and an Amended and
Restated Executive Employment Agreement with Mr. Tyson on
March 21, 2005 and effective as of January 1, 2005
(Mr. Tysons agreement, as amended and restated, is
referred to herein as the Tyson Employment
Agreement). Mr. Tysons agreement, pursuant to
which he serves as President and Chief Executive Officer,
currently extends to December 31, 2006 and thereafter
automatically extends for successive one-year terms unless
either party elects not to extend it.
Under the Tyson Employment Agreement, Mr. Tyson receives an
annual base salary of $755,000 and is eligible to receive a
bonus at the discretion of the Board of Directors or the
Compensation Committee. The agreement provides that the Company
annually will consider granting Mr. Tyson options,
restricted stock or other equity grants to purchase shares of
Company common stock, as determined by the Compensation
Committee, and also provided for a grant in 2004 of an option to
purchase 400,000 shares of Company common stock.
The Tyson Employment Agreement provides that
Mr. Tysons employment may be terminated by the
Company upon his death or disability, or with or without cause,
or by Mr. Tyson with or without good reason (as defined in
the agreement). Upon termination by reason of death or
disability, by the Company for cause, or by Mr. Tyson
without good reason, Mr. Tyson receives all amounts earned
or accrued through the termination date, as specified in the
agreement. Upon termination by reason of death or disability,
Mr. Tyson is entitled to a prorated portion of his annual
bonus, health and medical coverage for two years, and immediate
vesting of all outstanding awards, options and stock
appreciation rights (which remain exercisable for up to two
years). Upon termination of Mr. Tysons employment by
the Company without cause, or by Mr. Tyson for good reason,
Mr. Tyson is entitled to the same benefits he would receive
upon termination for death or disability, plus, subject to his
not engaging in certain prohibited activities, a
severance payment equal to two times his base salary and average
annual bonus and incentive compensation. If such termination
occurs within
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twelve months following or in contemplation of a change in
control, such severance payment is equal to three times his base
salary and bonus, and Mr. Tyson is also entitled to
employee benefits for twenty-four months and a cash payment
equal to the excess of the actuarial equivalent of his aggregate
retirement benefits had he remained employed by the Company for
an additional two years over the actuarial equivalent of his
actual retirement benefit. In each case, the executive is under
no obligation to mitigate amounts payable under his agreement.
For purposes of the Tyson Employment Agreement, a change
in control generally means the occurrence of any of the
following events:
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the acquisition by any person of beneficial ownership of more
than 30% of the combined voting power of the Companys
outstanding voting securities, other than an acquisition
(i) directly from the Company, (ii) by a trustee or
other fiduciary holding securities under one or more employee
benefit plans maintained by the Company or any of its
subsidiaries, or (iii) by 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; |
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the individuals serving on the board of directors of the Company
as of the date of the Tyson Employment Agreement and any new
director whose election by the Board or nomination for election
by the Companys stockholders was approved by the
affirmative vote of at least a majority of the directors then
still in office who either were directors on the date of the
Tyson Employment Agreement or whose election or nomination for
election was previously so approved, cease for any reason to
constitute at least a majority of the board of directors; |
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the closing of a merger or consolidation involving the Company
if the stockholders immediately before the merger or
consolidation do not, as a result of the merger or
consolidation, own more than 50% of the combined voting power of
the then outstanding voting securities of the corporation
resulting from the 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 the merger of consolidation; or |
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the closing of 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. |
Mr. Tysons agreement provides for certain
gross-up payments if he is subject to the excise tax
imposed under Section 4999 of the Internal Revenue Code (or
related interest and penalties) with respect to payments and
benefits under his agreement or otherwise.
Chief Financial Officer Agreement
The Company entered into an Executive Employment Agreement with
Mr. Bailey on October 22, 2002 (the Bailey
Employment Agreement). Mr. Baileys agreement,
pursuant to which he serves as the Chief Financial Officer, has
an initial term of two years and thereafter automatically
extends for successive one-year terms unless either party elects
not to extend it.
Under his agreement, Mr. Bailey received an initial annual
base salary of $400,000, which salary is subject to increase
from time to time as determined by the Board of Directors, and
is eligible to receive a bonus of 80% to 160% of base salary.
The Bailey Employment Agreement provides that
Mr. Baileys employment may be terminated by the
Company upon his death or disability, or with or without cause,
or by Mr. Bailey with or without good reason (as defined in
the agreement). Upon termination by reason of death or
disability, by the Company for cause, or by Mr. Bailey
without good reason, Mr. Bailey receives all amounts earned
or accrued through the termination date, as specified in the
agreement. Upon termination by reason of death or disability,
Mr. Bailey is also entitled to a prorated portion of his
annual bonus. Upon termination of Mr. Baileys
employment by the Company without cause, or by Mr. Bailey
for good reason, or if the Company decides not to extend the term
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of his agreement, Mr. Bailey is entitled to accrued
compensation, plus, subject to his not engaging in certain
prohibited activities for one year, an additional
payment equal to the sum of (a) base salary for the greater
of one year or the number of months remaining in the initial
term of his agreement and (b) average annual bonus. If such
termination occurs within twelve months after a change in
control, such payment is based on three times salary and bonus,
and Mr. Bailey is also entitled to (i) certain
employee benefits for up to twenty-four months,
(ii) immediate vesting of all outstanding awards, options
and stock appreciation rights, and (iii) a cash payment
equal to the excess of the actuarial equivalent of his aggregate
retirement benefits had he remained employed by the Company for
an additional two years over the actuarial equivalent of his
actual retirement benefit.
For purposes of the Bailey Employment Agreement, a change
in control generally means the occurrence of any of the
following events:
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the acquisition by any person of beneficial ownership of more
than 30% of the combined voting power of the Companys
outstanding voting securities, other than an acquisition
(i) directly from the Company, (ii) by a trustee or
other fiduciary holding securities under one or more employee
benefit plans maintained by the Company or any of its
subsidiaries, or (iii) by 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; |
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the individuals serving on the board of directors of the Company
as of October 22, 2002 and any new director whose election
by the Board or nomination for election by the Companys
stockholders was approved by the affirmative vote of at least
two-thirds of the directors then still in office who either were
directors on October 22, 2002 or whose election or
nomination for election was previously so approved, cease for
any reason to constitute at least two-thirds of the board of
directors; |
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the approval by the stockholders of Company of a merger or
consolidation involving the Company if the stockholders
immediately before the merger or consolidation do not, as a
result of the merger or consolidation, own more than 70% of the
combined voting power of the then outstanding voting securities
of the corporation resulting from the 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 the merger of
consolidation; or |
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the approval by the stockholders of the Company of 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. |
Mr. Baileys agreement provides that payments and
benefits under his agreement and all other related arrangements
will not exceed the maximum amount that may be paid to him
without triggering golden parachute penalties under
Section 280G of the Internal Revenue Code of 1986, but only
if this would increase the net amount he would realize after
payment of income and excise taxes.
Executive Officer Agreements
The Company has entered into an employment agreement with
Dr. Lamon and severance agreements with
Messrs. Wheeler and Bramlage.
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Lamon Employment Agreement |
On February 21, 2003, Ribapharm Inc.
(Ribapharm) entered into an Executive Employment
Agreement with Kim D. Lamon, M.D., Ph.D., regarding
his services as President and Chief Executive Officer of
Ribapharm Inc. (the Lamon Agreement). Following the
merger of Ribapharm into the Company, the Lamon Agreement became
effective between the Company and Dr. Lamon, and the
Ribapharm options he had received in connection with the Lamon
Agreement were converted into Company options. The Lamon
Agreement has a term of two years from its initial effective
date of January 23, 2003, and shall be
23
automatically extended for one-year periods unless either party,
no later than 90 days prior to a scheduled expiration date,
notifies the other that the term shall not be extended.
The Lamon Agreement provides for a base salary of
$425,000 per year, subject to increase by the Board of
Directors. Dr. Lamon also is eligible to receive a bonus of
from 80% to 160% of his base salary, with a minimum cash bonus
of $340,000 for fiscal year 2003 (the Guaranteed
Bonus). The agreement also provides for grants of options
to purchase an aggregate of 1,000,000 shares of Ribapharm
common stock, which, following the merger of Ribapharm into the
Company, were converted into options to
purchase 405,055 shares of Company common stock under
the Companys option plan. Twenty-five percent of the
options vest each year, and they will continue to vest so long
as Dr. Lamon continues to provide services as an employee
or a director to the Company, an affiliate of the Company or a
successor to the Company. Dr. Lamon may receive additional
options at the discretion of the Compensation Committee.
The Lamon Agreement provides that Dr. Lamons
employment may be terminated by the Company upon his disability,
or with or without cause, or by Dr. Lamon with or without
good reason (as defined in the agreement). Upon termination by
reason of death or disability, by the Company for cause, or by
Dr. Lamon without good reason, Dr. Lamon will receive
all amounts earned or accrued through the termination date, as
specified in the agreement. Upon termination by reason of death
or disability, Dr. Lamon or his heirs will, in addition, be
entitled to a prorated portion of his annual bonus. If
Dr. Lamons employment is terminated by the Company
without cause, or by Dr. Lamon with good reason, and
Dr. Lamon agrees not to engage in certain activities that
might compete with the Company for a period of one year after
termination (the Prohibited Activities), he will
receive a payment equal to two years base salary and two
years Guaranteed Bonus. If the Company or Dr. Lamon
fail to renew the Lamon Agreement, and Dr. Lamon agrees not
to engage in Prohibited Activities for a period of one year
following the non-renewal, Dr. Lamon will receive the same
payments he would receive after a termination by the Company
without cause or by him with good reason.
Under the Lamon Agreement, a change in control
generally means any of the following events:
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the acquisition by any person of beneficial ownership of more
than 30% of the combined voting power of the Companys
outstanding voting securities, other than an acquisition
(i) directly from the Company, (ii) by a trustee or
other fiduciary holding securities under one or more employee
benefit plans maintained by the Company or any of its
subsidiaries, or (iii) by 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; |
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the individuals serving on the board of directors of the Company
as of October 2, 2003, and any new director whose election
by the Board or nomination for election by the Companys
stockholders was approved by the affirmative vote of at least
two-thirds of the directors then still in office who either were
directors on October 2, 2003 or whose election or
nomination for election was previously so approved, cease for
any reason to constitute at least two-thirds of the board of
directors; |
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the approval by the stockholders of the Company of a merger or
consolidation involving the Company if the stockholders
immediately before the merger or consolidation do not, as a
result of the merger or consolidation, own more than 70% of the
combined voting power of the then outstanding voting securities
of the corporation resulting from the 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 the merger of consolidation; |
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the approval by the stockholders of the Company of 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; or |
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liquidation or dissolution of the Company. |
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If during the period beginning six months prior to a change in
control and ending twenty-four months after a change in control
Dr. Lamon is terminated by the Company without cause, or
terminates his employment with good reason, and he agrees not to
engage in Prohibited Activities for a period of one year
following termination, he will be entitled to the following
additional rights: a payment equal to three times his annual
base salary; a continuation of life insurance, medical, dental
and hospitalization benefits for himself and his family for
24 months (or if lesser, for the number of months until
Dr. Lamons 65th birthday), immediate vesting of
all outstanding options and awards granted to Dr. Lamon by
the Company, and if the Company has established a supplemental
and excess retirement plan, Dr. Lamon will be entitled to
the benefits he would receive if he had remained employed for
24 months, or until his 65th birthday (whichever is
sooner).
Dr. Lamons agreement provides for certain
gross-up payments if he is subject to the excise tax
imposed under Section 4999 of the Internal Revenue Code (or
related interest and penalties) with respect to payments and
benefits under his agreement or otherwise.
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Bramlage and Wheeler Severance Agreements |
On June 16, 2005, the Company entered into Executive
Severance Agreements (each Executive Severance
Agreement) with each of Charles Bramlage, President,
European Operations, and Wesley Wheeler, President, North
America (each an Executive). Each Executive
Severance Agreement expires on December 31, 2010 unless
sooner terminated following a change in control, and shall
automatically be extended for successive one-year periods unless
no later than six months prior to a scheduled expiration date
the Company notifies the Executive that the agreement will not
be extended.
Under each Executive Severance Agreement, upon termination by
reason of death or disability, by the Company for cause, or by
the Executive without good reason, the Executive will receive
all amounts earned or accrued through the termination date, as
specified in the agreement. Upon termination by reason of death
or disability, the Executive, or his heirs will, in addition, be
entitled to a prorated portion of his annual bonus. The
Executive or his heirs will be entitled to other compensation or
benefits in accordance with the Companys benefit plans and
other applicable programs and practices then in effect.
If the Executives employment is terminated by the Company
without cause, or by the Executive with good reason, and the
Executive agrees to not to engage in certain activities that
might compete with the Company for a period of one year after
termination, he will receive a payment equal to the sum of:
(a) any accrued and unpaid salary, (b) any unpaid
annual bonus payable for the most recently completed year,
(c) the Executives annual base salary then in effect
and (d) the lesser of the average of annual incentive
program bonuses paid to the Executive for the five prior years
(or such shorter period if the Executive has not been eligible
to participate in the annual incentive program) or the
Executives target bonus at such time. If the Executive is
terminated by the Company, other than for cause, disability or
death, or by the Executive for good reason, the Company will
also pay up to an aggregate of $20,000 for outplacement services.
Under each Executive Severance Agreement, a change in
control generally means any of the following events:
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the acquisition by any person of beneficial ownership of more
than 30% of the combined voting power of the Companys
outstanding voting securities, other than an acquisition
(i) directly from the Company, (ii) by a trustee or
other fiduciary holding securities under one or more employee
benefit plans maintained by the Company or any of its
subsidiaries, or (iii) by 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; |
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the individuals serving on the board of directors of the Company
as of the date of each Executive Severance Agreement, and any
new director whose election by the Board or nomination for
election by the Companys stockholders was approved by the
affirmative vote of at least two-thirds of the directors then
still in office who either were directors on the date of each
Executive Severance Agreement or |
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whose election or nomination for election was previously so
approved, cease for any reason to constitute at least two-thirds
of the board of directors; |
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the approval by the stockholders of the Company of a merger or
consolidation involving the Company if the stockholders
immediately before the merger or consolidation do not, as a
result of the merger or consolidation, own more than 70% of the
combined voting power of the then outstanding voting securities
of the corporation resulting from the 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 the merger of
consolidation; or |
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the approval by the stockholders of the Company of 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. |
If in contemplation of or within twelve months after a change in
control, the Executive is terminated by the Company without
cause, or terminates his employment with good reason, and he
agrees not to engage in prohibited activities for a period of
one year following termination, he will be entitled to a payment
equal to two times the sum of (a) his annual base salary
plus (b) the higher of average of annual incentive program
bonuses paid to the Executive for the five prior years (or such
shorter period if the Executive has not been eligible to
participate in the annual incentive program) or the
Executives target bonus at the time of the change in
control. In addition, for one year after such termination
following a change in control or such longer period as may be
provided by the terms of the appropriate benefit plans, the
Company shall provide the Executive and his family with medical,
dental and life insurance benefits at least equal to those which
would have been provided had the Executive not been terminated,
in accordance with the applicable benefit plans in effect on the
change in control measurement date or, if more favorable, in
effect generally at any time after the change in control
measurement date with respect to other peer executives of the
Company and its affiliated companies. All outstanding options to
purchase shares of Common Stock, each outstanding restricted
stock award and any other unvested equity compensation right
shall be fully vested or exercisable and each such share or
equity interest shall no longer be subject to a right of
repurchase by the Company.
Each Executive Severance Agreement provides that payments and
benefits under the agreement and all other related arrangements
will not exceed the maximum amount that may be paid to the
Executive without triggering excess parachute
payment penalties under Section 280G of the Internal
Revenue Code of 1986, but only if this would increase the net
amount he would realize after payment of income and excise taxes.
COMMITTEE REPORTS
COMPENSATION COMMITTEE REPORT
The Report of the Compensation Committee of the Board of
Directors shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 (the
Securities Act) or under the Securities Exchange Act
of 1934 (the Exchange Act), except to the extent
that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such
Acts.
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Compensation Committee Oversight |
The Compensation Committee reviews and approves corporate goals
and objectives relevant to the Chief Executive Officers
compensation, evaluates the Chief Executive Officers
performance in light of those goals and objectives, considers
and recommends to the Board of Directors the compensation level
to be paid to the Chief Executive Officer and, upon
recommendation of the Chief Executive Officer, reviews and
approves the compensation levels for all other executive
officers. The Compensation Committee also makes recommendations
to the Board of Directors with respect to the Companys
incentive compensation and equity-based plans and overall
compensation policies in conjunction with management.
Additionally, it administers and grants options and awards under
the Companys various equity incentive plans, specifically
approving
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annual grants with respect to executive officers, and approving
annual aggregate grants to others, as well as reviews and
oversees the annual succession planning assessment and performs
such duties as the Board of Directors may from time to time
request.
Each of the four Directors who serve as a Compensation Committee
member meets the independence requirements specified by the NYSE
and the Companys corporate governance guidelines.
The Compensation Committee believes compensation policies and
practices should be consistent with the Companys business
objectives and the creation of long-term stockholder value.
Executive compensation is designed to reinforce the
Companys broader strategic goals and financial objectives.
It is based on performance and factors specifically relevant to
the Company, at a level competitive with the market and in a
manner that will attract and retain strong talent. Compensation
of executive officers and other key employees is comprised of
three principal elements: (i) base salary, (ii) annual
bonus and (iii) equity awards. In the aggregate, the
compensation philosophy is to be competitive in base salary and
benefits and provide opportunities for above-competitive pay
when specific stretch goals are exceeded and there are
incremental improvements in stockholder value. The
Companys compensation philosophy for the senior executives
is to maintain a significant portion of total compensation in
the form of incentives. The Compensation Committee engages an
independent compensation consulting advisor in connection with
its regular evaluation of the Companys executive
compensation program to ensure the compensation philosophy and
compensation levels support the Companys goals and
objectives.
Compensation programs are linked directly with desired
performance and accountability. Salary levels are aligned to be
consistent with data of companies comparable in size and
performance in the pharmaceutical and biotechnology industries.
The companies used for comparison in the survey data include,
but are not limited to, some of those in the performance graph.
The Companys salary levels for executives are generally in
the median range of compensation paid for similar positions in
comparable companies. However, where the median of the market
does not adequately reflect the scope of an individuals
roles, the Company may target pay above the median. Salary
grades levels are updated to reflect changes in the marketplace.
The salary of an executive generally reflects individual
performance, level of responsibility, tenure, value of the
position, internal relative pay and the competitive marketplace.
Base salaries are reviewed on an annual basis by one or more
supervisory managers and the Compensation Committee and are
reviewed within the context of the executives total
compensation package. To determine the base salary level of an
executive, the Board of Directors adopts an annual budget and
financial plan, which incorporates the goals and objectives to
be achieved by the Company and its specific operating units. The
goals focus on growth in revenues and growth in EBITDA or net
income. Each executive is responsible for the performance of his
or her unit in relation to the plan. Specific goals and
objectives for each executive are reviewed by the executive and
his or her supervisor. In reviewing the annual performance,
which will determine the executives base salary, the
supervisor assesses a grade based on established and benchmarked
responsibilities. This assessment is used to determine base
salary for the following year. Base salary, annual bonus and
long-term incentive comprise the overall total compensation
package for the executive management of the Company.
The initial salaries for Messrs. Tyson and Bailey are set
forth in their respective employment agreements, each of which
was approved by the Compensation Committee.
Messrs. Tysons and Baileys agreements provide
for base salaries to be reviewed by the Board of Directors at
least annually, and increased (but not decreased) at the
Boards discretion. Mr. Tysons agreement
provided for his salary to be increased in connection with his
appointment as Chief Executive Officer on January 1, 2005.
The incentive bonus plan is intended to provide a means of
providing an incentive to key employees to accomplish agreed
upon goals. The goals are in two categories: (1) financial
objectives and (2) strategic
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initiatives. There is a pre-determined weighting of financial
goals and strategic initiatives for each participant in the
plan, with those executives having the greatest direct influence
on financial objectives having their total potential bonus most
heavily weighted on financial objectives. The specific financial
objective measured, as well as the goal set, reflect the
participants core functions. Strategic initiatives are
developed in consultation with the employees managers to
address key projects which will contribute to the efficiency
and/or effectiveness of the Company as well as accomplishment of
key product development milestones that are expected to lead to
growth in long-term stockholder value.
The Compensation Committee reviews and approves minimum, target
and maximum goals for the executive officers under the executive
incentive plan. Incentive compensation payments are tied to the
degree to which these goals are achieved, as determined by the
Compensation Committee. The Compensation Committee evaluates the
performance of the Chief Executive Officer and determines his
award. The Compensation Committee also reviews the design of the
annual incentive program each year to ensure it is consistent
with the Companys compensation philosophy, strategic and
business goals, and to ensure alignment with pay and performance.
Bonus opportunities are reviewed each year and are set on the
basis of competitive practices. The target bonus award
opportunities for the senior executives range from 55% of base
salary up to 100% of base salary, depending on their position.
If target goals are exceeded, an executive may earn up to 200%
of his or her target bonus level. If minimum financial goals are
not achieved, senior executives are not entitled to the
financial metrics component of the bonus and any potential bonus
payment would be limited to achievement of predetermined and
approved strategic initiatives. In addition, the payout at
minimum goal is only 10% of the executives target bonus
level, providing significant leverage and emphasis on
performance.
Bonus levels for Messrs. Tyson and Bailey are set forth in
their respective employment agreements. Messrs. Tyson and
Bailey are eligible to receive a target cash bonus of 100% and
80% of base salary, respectively, and have the opportunity to
receive up to a maximum of 200% of the respective target bonus,
based on performance by the executive and the Company and within
the discretion of the Board.
Certain officers and employees of the Company received bonuses
during 2005 and 2006 for services performed during 2004 and
2005, respectively. The Compensation Committee considered and
approved these bonuses, which were all based on the degree of
achievement of the target goals established at the beginning of
the applicable performance year.
The Compensation Committee believes that executive officers and
other significant employees, who are in a position to make a
substantial contribution to the long-term success of the Company
and to build stockholder value, should have a significant stake
in the Companys on-going success. This stake focuses
attention on managing the Company as an owner with an equity
position in the business and seeks to align these
employees interests with the long-term interests of
stockholders. Accordingly, the Companys 2003 Equity
Incentive Plan (the 2003 Plan), provides for the
grant of incentive stock options, nonqualified stock options,
stock appreciation rights, restricted stock awards, phantom
stock and stock bonuses (collectively awards) to key
employees, officers, directors, consultants and advisors of the
Company. Options granted under the 2003 Plan must have an
exercise price that is not less than 85% of the fair market
value of the common stock on the date of grant and a term not
exceeding 10 years. To date, the Compensation Committee has
approved only grants having an exercise price of 100% of the
fair market value of the common stock on the date of the grant.
Under the 2003 Plan, 500,000 shares may be issued as
phantom stock awards or restricted stock awards. The size of an
equity grant to any executive is generally tied to level of
responsibility, position, salary, individual performance,
internal equity alignment, number of shares previously granted,
company financial performance and competitive practices. None of
these factors are specifically weighted. No grant to an
executive is automatic. In addition, the Compensation Committee
considers the Companys average three-year run-rate to
determine the size of the equity pool for grants to all
employees. Management recommends to the Compensation Committee
those executives to whom equity grants should be made and the
number of shares to be granted to them. The Compensation
Committee determines the awards for the Chief Executive
28
Officer. To encourage executives to remain in the employ of the
Company, options generally vest and become exercisable in four
annual installments of 25% on the anniversaries of the date of
grant. In 2005, the Compensation Committee also chose to include
restricted stock units as part of the equity grants for the top
seven officers in the Company (which includes the chief
executive officer as discussed under Chief Executive
Officer Compensation). The Compensation Committee is
currently considering the use of other forms of long-term
incentives for future grants. The voting results on the proposal
put forth to stockholders for the new equity plan will be
considered by the Compensation Committee in determining the
appropriate mix and types of long-term incentives. The
Compensation Committees policy is to make grants at the
same time every year.
The Companys 2003 Employee Stock Purchase Plan (the
Purchase Plan) is a tax-effective means of providing
the Companys employees with an opportunity to purchase the
Companys stock at a discount. As a broad-based plan, the
Purchase Plan is intended to expand the opportunity for
ownership of the Companys stock beyond the key employees
who typically will receive grants under the 2003 Plan.
Participation is limited to those employees who are not eligible
to participate in the 2003 Plan. There are 7,000,000 shares
of common stock reserved for issuance under the Purchase Plan,
plus an annual increase on the first day of the Companys
fiscal year for a period of ten years, which commenced on
January 1, 2005 and ends on January 1, 2015, equal to
the lesser of (i) 1.5% of the shares of common stock
outstanding on each calculation date,
(ii) 1,500,000 shares of common stock, or (iii) a
number of shares that may be determined by the Compensation
Committee. The Compensation Committee supports this Plan and its
objectives and feels it is important to the culture of the
organization, but will continue to review it in light of new
Financial Accounting Standards 123R rules.
The Company also has a Retirement Savings Plan. The Retirement
Savings Plan is a 401(k) defined contribution plan. The
Retirement Savings Plan provides eligible employees the
opportunity to defer between one percent and fifty percent of
pay subject to the IRS annual caps. The maximum contribution for
2005 was $14,000; employees over the age of 50 were permitted to
contribute an additional $4,000. The Company will match fifty
percent of the first six percent of pay a participant
contributes to the plan through salary deferral. Participants
are always one hundred percent vested in the contributions they
choose to defer. The matching contributions made by the Company
vest according to a five-year graded vesting schedule. Loan and
financial hardship withdrawals are available under the
Retirement Savings Plan. Benefits may be paid to a participant
at retirement, termination of employment, age 59 1/2 and
still working, death or disability. The Company does not have a
defined benefit program and does not have any supplemental
retirement plans for its executive officers.
The Company has an Executive Allowance program, which provides a
taxable annual allowance to the executive. The amount is paid
over the course of the year and is based on their job seniority.
This annual allowance benefit is effective immediately upon hire
and may be used by the executive for optional services such as
auto lease, financial planning, supplemental life insurance and
health fitness membership.
The Company also has an Executive Health Plan, which waives the
monthly payroll contribution for benefits for the executive and
provides them with an annual executive medical reimbursement
program of $10,000 annually of reimbursements for amounts not
covered by carriers. A comprehensive physical is also provided
through the University of California at Irvine Corporate Health
Services Center.
As described previously, the Company uses
change-in-control
agreements for its senior management team to be competitive and
ensure stockholder and executive interests are protected in the
event of a change in control. During 2005, the Committee
reviewed the design elements and estimated costs of these
agreements and found them to be reasonable relative to
prevailing competitive practices.
29
The Company operates in a highly competitive industry
environment. The Compensation Committee conducts an annual
review of the Companys executive total compensation
program with the assistance of its independent external
executive compensation consultant. During 2005, the Compensation
Committee conducted comprehensive analysis for each of the most
senior executives, covering each pay component and the aggregate
value of the pay components for each executive including base
salary, bonus, equity, the dollar cost to the Company of all
benefits (including, but not restricted to deferred
compensation, health care and retirement) and perquisites to
which they are entitled. These analyses also included the
accumulated realized and unrealized value of stock options and
restricted stock grants.
During 2005, the Compensation Committee also conducted a review
of the competitiveness of the Companys key compensation
elements (salary, annual bonus and long-term incentives) as
compared with competitive groups used for compensation purposes.
The competitive groups consist of a broad range of
pharmaceutical and biotechnology companies, recommended by our
external consultant, that are size and industry relevant, and
with whom the Company competes for executive talent. A number,
but not all, of these companies are included in the line of
business index shown on the performance graph. For the top five
executive officers, the Company selected a peer group of
publicly traded companies with whom it believes it competes for
top executive talent.
Comparative data is unavailable for many of the Companys
direct competitors that may be either privately held foreign
corporations or divisions of substantially larger corporations.
The Compensation Committee reviewed executive compensation
information provided from nationally recognized compensation
surveys. Competitive compensation levels were derived using
appropriate revenue comparisons to normalize compensation values
for benchmark executive positions. For the top five executives,
compensation proxy data was also reviewed.
The Compensation Committee regularly reviews the rebalancing of
total compensation elements to align with strategic and
operating goals, legislative updates and competitive market
practices.
|
|
|
Chief Executive Officer Compensation |
The goal of the Compensation Committee is to grant compensation
consistent with the performance of the Chief Executive Officer
and consistent with compensation granted to other chief
executive officers of companies in the same industry.
Mr. Tysons compensation is set forth in his
employment agreement, which was negotiated by the Compensation
Committee and approved by the Board of Directors. The factors
used to determine the Chief Executive Officers
compensation are identical to those of other named executive
officers. The Compensation Committee consulted with various
independent advisors and reviewed studies provided by an outside
compensation consultant.
The Compensation Committee has determined that in 2005
Mr. Tysons leadership delivered strong financial
performance enabling the Company to outperform market
expectations and exceeding the targets established for him in
the beginning of the year. Additionally, the Compensation
Committee considered Mr. Tysons role in
(a) driving the Companys significant operational
improvements; (b) building a robust operational
infrastructure with a broader and higher value business
portfolio; (c) continuing to promote a culture of integrity
and high ethical standards.
When Mr. Tyson was first appointed chief executive officer
in 2005, the Compensation Committee determined that his salary
would be kept below the 50 percentile market level to
adjust for the lack of a track record in his new role. Effective
January 1, 2006, and in recognition of his performance,
Mr. Tysons salary was adjusted to $860,000,
consistent with pre-established Company standards, which is at
the 50%-55% marketplace level. Furthermore, in the first quarter
of 2006, he was awarded a cash bonus in the amount of $1,000,000
to recognize his performance for 2005. These amounts were
approved by this Compensation Committee and the Board of
Directors.
The Compensation Committee recommended and, on November 1,
2005, Mr. Tyson was awarded 30,000 restricted stock units
and was granted options to purchase 360,000 shares of
Common Stock with a per share
30
exercise price of $17.72, which represents the fair market value
of the Common Stock on the date of grant. These awards were
determined by the Compensation Committee based on the
Companys overall performance, Mr. Tysons
individual performance and the compensation of similarly
situated executives at comparable corporations.
|
|
|
Internal Revenue Code Section 162(m) |
Section 162(m) of the Internal Revenue Code (the
Code), generally disallows a federal income tax
deduction to any publicly-held corporation for compensation paid
in excess of $1,000,000 in any taxable year to the Chief
Executive Officer and any of the four other most highly
compensated executive officers who are employed on the last day
of the taxable year. Section 162(m), however, does not
disallow a federal income tax deduction for qualified
performance-based compensation, the material terms
of which are disclosed to and approved by the stockholders. The
application of Section 162(m) is not expected to have a
material impact on the Company. The Compensation Committee
believes it is in the Companys best interest to try to
satisfy the requirements of Section 162(m) and has designed
a substantial portion of the Companys executive
compensation programs, where it is reasonable, to comply with
the statutes requirements. However, the Compensation
Committee also recognizes the need to remain flexible when
evaluating the compensation programs to ensure they meet the
Companys strategic and financial objectives and goals.
Therefore, the Compensation Committee retains the right to
regularly assess the viability of awarding non-deductible
compensation when appropriate under the executive compensation
program.
|
|
|
Compensation Committee |
|
Lawrence N. Kugelman, Chairman |
|
Edward A. Burkhardt |
|
Robert A. Ingram |
|
Elaine Ullian |
EQUITY COMPENSATION PLAN INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
|
|
|
|
Remaining Available for | |
|
|
Number of Securities | |
|
|
|
Future Issuance under | |
|
|
to Be Issued Upon | |
|
Weighted-Average | |
|
Equity Compensation Plans | |
|
|
Exercise of | |
|
Exercise Price of | |
|
(Excluding Securities | |
Plan Category |
|
Outstanding Options | |
|
Outstanding Options | |
|
Reflected in Column (a)) | |
|
|
| |
|
| |
|
| |
|
|
(a) | |
|
(b) | |
|
(c) | |
Equity Compensation Plans Approved By Stockholders
|
|
|
14,632,000 |
|
|
$ |
17.80 |
|
|
|
7,218,000 |
(1) |
Equity Compensation Plans Not Approved By Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
14,632,000 |
|
|
$ |
17.80 |
|
|
|
7,218,000 |
|
|
|
(1) |
Includes 6,705,000 shares of Common Stock from the
Companys 2003 Employee Stock Purchase Plan. |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The Compensation Committee is composed of Messrs. Kugelman,
Burkhardt and Ingram, and Ms. Ullian, each of whom is a
non-employee director for purposes of
Rule 16b-3 of the
Securities Exchange Act of 1934, as amended. None of these
members is a current or former officer of the Company. There
were no compensation committee interlocks with other companies
in 2005 within the meaning of the SECs proxy rules.
31
FINANCE AND AUDIT COMMITTEE
The Report of the Finance and Audit Committee of the Board of
Directors shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the
Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
All the members of the Finance and Audit Committee meet the
independence and experience requirements of the New York Stock
Exchange listing standards and the Securities and Exchange
Commission regulations. The Board has also determined that
Mr. Theo Melas-Kyriazi meets the requirements for being the
audit committee financial expert, as defined by
regulations of the SEC.
|
|
|
Report of the Finance and Audit Committee |
The Finance and Audit Committee is delegated by the Board to
monitor the integrity of the Companys financial
statements, the independent accounting firms
qualifications and independence, the performance of the
independent accounting firm and the Companys internal
auditors, and the Companys compliance with legal and
regulatory requirements.
The Finance and Audit Committee engaged PricewaterhouseCoopers
LLP as the Companys independent accounting firm for the
year ended December 31, 2005. During 2005 and through the
filing of the Companys Annual Report on Form 10K, the
Finance and Audit Committee met with senior members of the
Companys financial management, the Companys general
counsel, the Companys independent accounting firm and the
Companys Vice President of Audit and Corporate Compliance.
Meeting agendas are established by the Finance and Audit
Committees chairman and senior financial management. At
each of its regularly scheduled meetings, the Finance and Audit
Committee met privately with both the independent accounting
firm and the internal auditors without management present to
conduct open and frank discussions regarding matters including
financial reporting and internal accounting controls.
The Finance and Audit Committee reviewed the audit plans and
results of the audits performed by the independent accounting
firm and the internal auditors. The Finance and Audit Committee
also discussed with management, the independent accounting firm,
and internal auditors the Companys significant financial
risk exposures and the steps taken by management to monitor and
control such exposures, as well as the status and performance of
the Companys compliance programs.
Management reviewed and discussed the quarterly financial
statements included in the Companys Quarterly Reports on
Form 10-Q and the
audited financial statements presented in the Annual Report on
Form 10-K with the
Finance and Audit Committee prior to filing such reports with
the SEC, including a discussion of the quality of the
Companys accounting principles, the reasonableness of
significant accounting judgments and estimates and the clarity
of disclosures in the financial statements. The Finance and
Audit Committee reviews the Companys quarterly and annual
reports on
Form 10-Q and
Form 10-K prior to
filing with the SEC. The Finance and Audit Committee also
reviewed quarterly earnings announcements in advance of their
issuance with management and the independent accounting firm. In
its oversight role, the Finance and Audit Committee relies on
the work and assurances of the Companys management, which
has the primary responsibility for financial statements and
reports, and of the independent accounting firm, who, in their
report, express an opinion on the conformity of the
Companys annual financial statements to generally accepted
accounting principles and an opinion on whether
managements assessment that the Company maintained
effective internal control over financial reporting as of
December 31, 2005, is fairly stated, in all material
respects.
The Finance and Audit Committee discussed with
PricewaterhouseCoopers LLP the matters required by the
Codification of Statements on Auditing Standards (SAS 61 and
90), received the written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit
Committees) and discussed PricewaterhouseCoopers LLPs
independence with representatives of PricewaterhouseCoopers LLP.
32
The Finance and Audit Committee pre-approved the audit and
non-audit services performed by the independent accounting firm
in order to assure that the provision of such services does not
impair the accounting firms independence. These services
include audit services, audit-related services, tax services and
other services. The Finance and Audit Committee has adopted a
policy for the pre-approval of services provided by the
independent accounting firm. Any proposed services exceeding
pre-approved levels were pre-approved by the Finance and Audit
Committee.
In performing all of the above functions, the Finance and Audit
Committee acts only in an oversight capacity. In reliance on
these reviews and discussions, and the report of the independent
accounting firm, the Finance and Audit Committee has recommended
to the Board of Directors, and the Board has approved, that the
audited financial statements be included in the Companys
Annual Report on
Form 10-K for the
year ended December 31, 2005, for filing with the SEC.
|
|
|
Finance and Audit Committee |
|
Theo Melas-Kyriazi, Chairman |
|
Edward A. Burkhardt |
|
Richard H. Koppes |
|
Lawrence N. Kugelman |
33
PERFORMANCE GRAPH
The following graph compares Valeants cumulative total
return on the Common Stock with the cumulative return on the
Standard & Poors Mid Cap 400 Index (S&P
Mid Cap 400 Index), and a
10-Stock Custom
Composite Index (the Composite Index) for the five
years ended December 31, 2005. The Composite Index consists
of aaiPharma Inc., Allergan, Inc., Biovail Corporation, Forest
Laboratories, Inc. Class A, Gilead Sciences,
King Pharmaceuticals, Inc., Medicis Pharmaceutical Corporation,
Mylan Laboratories Inc., Shire Pharmaceuticals Group plc and
Watson Pharmaceuticals, Inc. The graph assumes an initial
investment of $100 on December 31, 2000 and that all
dividends were reinvested.
Based on reinvestment of $100 beginning December 31,
2000
|
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|
Dec 00 | |
|
Dec 01 | |
|
Dec 02 | |
|
Dec 03 | |
|
Dec 04 | |
|
Dec 05 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Valeant Pharmaceuticals International
|
|
$ |
100 |
|
|
$ |
110 |
|
|
$ |
37 |
|
|
$ |
87 |
|
|
$ |
92 |
|
|
$ |
64 |
|
S&P Mid Cap 400 Index
|
|
|
100 |
|
|
|
98 |
|
|
|
83 |
|
|
|
111 |
|
|
|
128 |
|
|
|
143 |
|
Composite Index (10 Stocks)
|
|
|
100 |
|
|
|
126 |
|
|
|
95 |
|
|
|
152 |
|
|
|
110 |
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|
130 |
|
CERTAIN TRANSACTIONS
On October 1, 2002, several former and current directors of
the Company, as individuals, as well as the Company, as a
nominal defendant, were named as defendants in a
stockholders derivative complaint filed in Delaware
Chancery Court. The complaint sought, among other things,
recovery of the bonuses paid to directors and officers in
connection with the initial public offering of Ribapharm (the
Ribapharm Bonuses). The Special Litigation Committee
of the Board of Directors determined to proceed with the claims
against the named director defendants related to the Ribapharm
Bonuses. For further information regarding this legal
proceeding, see the Companys most recent Annual Report on
Form 10-K filed
with the SEC.
Director Edward A. Burkhardt has entered into a settlement
agreement, as amended, whereby he forfeited his 2003 annual
stipend and his restricted stock units in exchange for a release
from further liability in the lawsuit. The settlement will not
be effective unless approved by the Delaware Chancery Court.
The Director of Consumer Markets for the Company, Richard
Cunningham, is Mr. OLearys
son-in-law. As Director
of Consumer Markets, Mr. Cunningham earned approximately
$214,852 in salary and bonus in 2005. In addition, in 2005
Mr. Cunningham received 4,000 stock options granted at the
fair market value at date of grant price of $17.72.
34
PROPOSAL NO. 2
APPROVAL OF THE COMPANYS 2006 EQUITY INCENTIVE PLAN
Our 2006 Equity Incentive Plan (the 2006 Plan) was
adopted by the Board on April 14, 2006, subject to
stockholder approval. The 2006 Plan is the successor to and
continuation of our 2003 Equity Incentive Plan (the 2003
Plan). The 2003 Plan was adopted by the Board on
April 21, 2003 and was subsequently approved by the
stockholders. All outstanding stock awards granted under the
2003 Plan will continue to be subject to the terms and
conditions as set forth in the agreements evidencing such stock
awards and the terms of the 2003 Plan except that the Board may
elect to extend one or more of the features of the 2006 Plan to
stock awards granted under the 2003 Plan. The key terms of the
2003 Plan are similar to those of the 2006 Plan, except as
otherwise noted below.
This Proposal No. 2 seeks an increase in the number of
shares that may be issued under the 2006 Plan beyond those
reserved for issuance under the 2003 Plan by
4,200,000 shares. At April 11, 2006, stock awards
covering an aggregate of 14,470,472 shares remained
outstanding under the 2003 Plan and its predecessor plans, and
approximately 542,000 shares remained available for future
grant under the 2003 Plan.
The approval of the 2006 Plan will allow us to continue to grant
stock options and other equity awards at levels determined
appropriate by the Board. The 2006 Plan will also provide us
with continued flexibility in designing equity incentives in an
environment where a number of companies have moved from
traditional option grants to other stock or stock-based awards,
including stock appreciation rights, restricted stock awards,
restricted stock unit awards, performance stock awards, and
performance cash awards. Accordingly, the 2006 Plan will allow
us to utilize a broad array of equity incentives in order to
secure and retain the services of our employees, consultants and
directors, and to provide incentives for such persons to exert
maximum efforts for our success and the success of our
affiliates.
In this Proposal No. 2, stockholders are requested to
approve the 2006 Plan. The affirmative vote of the holders of a
majority of the shares present in person or represented by proxy
and entitled to vote at the Annual Meeting will be required to
approve the adoption of the 2006 Plan. Abstentions will be
counted toward the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted toward a quorum,
but are not counted for any purpose in determining whether this
matter has been approved.
The Board of Directors of the Company recommends that the
Stockholders vote FOR the approval of the 2006 Plan.
The following is a summary of the material features of the 2006
Plan.
The 2006 Plan provides for the grant of incentive stock options,
nonstatutory stock options, restricted stock awards, restricted
stock unit awards, stock appreciation rights, performance stock
awards and other forms of equity compensation (together,
stock awards), as well as performance cash awards
(performance cash awards and together with
stock awards, awards). By contrast, the
2003 Plan provides for the grant of incentive stock options,
nonstatutory stock options, restricted stock awards, stock
appreciation rights, phantom stock awards, stock bonuses and
other awards. Incentive stock options granted under the 2006
Plan are intended to qualify as incentive stock
options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the
Code). Nonstatutory stock options granted under the
2006 Plan are not intended to qualify as incentive stock options
under the Code. See Federal Income Tax Information
for a discussion of the tax treatment of stock awards.
The Board adopted the 2006 Plan to provide a means to secure and
retain the services of employees (including officers), directors
and consultants eligible to receive awards, to provide
incentives for such individuals to exert maximum efforts for our
success and the success of our affiliates, and to provide a means
35
by which such eligible individuals may be given an opportunity
to benefit from increases in the value of our common stock
through the grant of stock awards.
The Board administers the 2006 Plan. Subject to the provisions
of the 2006 Plan, the Board has the authority to construe and
interpret the plan, to determine the persons to whom and the
dates on which awards will be granted, what type or combination
of types of awards will be granted, the number of shares of
common stock to be subject to each stock award, the time or
times during the term of each stock award within which all or a
portion of the award may be exercised, the exercise, purchase,
or strike price of each stock award, the type of consideration
permitted to exercise or purchase each stock award, and other
terms of the awards.
The Board has the power to delegate some or all of the
administration of the 2006 Plan to a committee or committees. In
the discretion of the Board, a committee may consist solely of
two or more non-employee directors within the
meaning of
Rule 16b-3 of the
Exchange Act or solely of two or more outside
directors within the meaning of Section 162(m) of the
Code. If administration is delegated to a committee, the
committee has the authority to delegate certain administrative
powers to a subcommittee of one or more members. As used herein
with respect to the 2006 Plan, the Board refers to
any committee the Board appoints or, if applicable, any
subcommittee, as well as to the Board itself.
Incentive stock options may be granted under the 2006 Plan only
to our employees (including officers) and employees of our
affiliates. Our employees (including officers), consultants and
directors and employees (including officers) and consultants of
our affiliates are eligible to receive all other types of awards
under the 2006 Plan. All of our approximately 3,775 employees,
directors and consultants are eligible to participate in the
2006 Plan.
No incentive stock option may be granted under the 2006 Plan to
any person who, at the time of the grant, owns (or is deemed to
own) stock possessing more than 10% of the total combined voting
power of Valeant or its affiliates, unless the exercise price of
such option is at least 110% of the fair market value of the
stock subject to the option on the date of grant and the term of
the option does not exceed five years from the date of grant. In
addition, the aggregate fair market value, determined on the
date of grant, of the shares of common stock with respect to
which incentive stock options are exercisable for the first time
by a participant during any calendar year (under the 2006 Plan
and any other plans of Valeant and its affiliates) may not
exceed $100,000.
Under the 2006 Plan, no person may be granted options or stock
appreciation rights covering more than 1,000,000 shares of
common stock during any calendar year (the
Section 162(m) Limitation).
|
|
|
Stock Subject to the 2006 Plan |
The maximum number of shares of common stock available for
future issuance, or the share reserve, under the
2006 Plan may not exceed, in the aggregate, the sum of
(a) the number of unallocated shares of common stock
remaining available for issuance under the 2003 Plan as of
May 23, 2006, (b) an additional 4,200,000 shares
and (c) the number of shares of common stock subject to
outstanding stock awards as of May 23, 2006 that would have
reverted to the reserve of the 2003 Plan pursuant to the terms
of the 2003 Plan.
Under the 2006 Plan, the share reserve may be used for any award
type without limitation, subject to the ISO Limitation described
below. In contrast, under the 2003 Plan, no more than an
aggregate of 500,000 shares of common stock may be granted
as restricted stock awards or phantom stock awards for which a
participant pays less than the fair market value of the common
stock on the date of grant.
Shares may be issued in connection with a merger or acquisition
as permitted by the rules of the applicable national securities
exchange, and such issuance shall not reduce the number of
shares available for issuance under the 2006 Plan. If a stock
award granted under either the 2006 Plan or the 2003 Plan
expires or otherwise terminates without being exercised in full,
or if any shares of common stock issued pursuant to a
36
stock award are forfeited to or repurchased by us, including,
but not limited to, any repurchase or forfeiture caused by the
failure to meet a contingency or condition required for the
vesting of such shares, or if any stock award is settled in
cash, then the shares of common stock not issued under such
stock award, or forfeited to or repurchased by us shall revert
to and again become available for issuance under the 2006 Plan.
If any shares subject to a stock award under either the 2006
Plan or the 2003 Plan are not delivered to a participant because
such shares are withheld for the payment of taxes or if the
exercise price of any stock award is satisfied by tendering
shares of common stock held by the participant, then the number
of shares that are not delivered or are so tendered shall be
available for issuance under the 2006 Plan.
The aggregate maximum number of shares of common stock that may
be issued under the 2006 Plan pursuant to the exercise of
incentive stock options is the share reserve (the ISO
Limitation).
Options may be granted under the 2006 Plan pursuant to stock
option agreements. The following is a description of the
permissible terms of options under the 2006 Plan. Individual
stock option agreements may be more restrictive as to any or all
of the permissible terms described below.
Exercise Price. The exercise price of incentive stock
options may not be less than 100% of the fair market value of
the stock subject to the option on the date of grant and, in
some cases (see Eligibility above), may not be less
than 110% of such fair market value. The exercise price of
nonstatutory stock options may not be less than 100% of the fair
market value of the stock on the date of grant. Accordingly, if
this Proposal No. 2 is approved by the stockholders,
all options granted by us under the 2006 Plan must carry an
exercise price of at least 100% of the fair market value of the
stock on the date of grant. By contrast, the exercise price of
nonstatutory stock options under the 2003 Plan may not be less
than 85% of the fair market value of the stock on the date of
grant. As of March 31, 2006, the closing price of our
common stock as reported on the New York Stock Exchange was
$15.85 per share.
Consideration. The exercise price of options granted
under the 2006 Plan may be paid, to the extent permitted by
applicable law and at the discretion of the Board, (i) by
cash, check, bank draft or money order (ii) pursuant to a
broker-assisted cashless exercise, (iii) by delivery of
other common stock of Valeant, (iv) pursuant to a net
exercise arrangement, or (iv) in any other form of legal
consideration acceptable to the Board. Under the 2003 Plan, the
exercise price shall be paid either (i) by cash, check or
wire transfer, (ii) by delivery of other common stock of
Valeant, or (iii) in any other form of legal consideration
that may be acceptable to the Board.
Vesting. Options granted under the 2006 Plan may become
exercisable in cumulative increments, or vest, as
determined by the Board. Vesting typically will occur during the
optionholders continued service with us or with an
affiliate, whether such service is performed in the capacity of
an employee, consultant or director (collectively,
service) and regardless of any change in the
capacity of the service performed. Shares covered by different
options granted under the 2006 Plan may be subject to different
vesting terms. The Board has the authority to accelerate the
time during which an option may vest or be exercised.
Term. The maximum term of options granted under the 2006
Plan is 10 years, except that in certain cases (see
Eligibility above) the maximum term is five years.
Termination of Service. Options granted under the 2006
Plan generally terminate three months after termination of the
participants service unless (i) such termination is
for cause (as defined in the 2006 Plan), in which case the
option will terminate upon the termination date;
(ii) termination is due to the participants
disability, in which case the option may be exercised (to the
extent the option was exercisable at the time of the termination
of service) at any time within twelve (12) months following
termination; (iii) the participant dies before the
participants service has terminated, or within the period
(if any) specified in the stock option agreement after
termination of service for a reason other than death, in which
case the option may be exercised (to the extent the option was
exercisable at the time of the participants death) within
twelve (12) months following the participants death
by the person or persons to whom the rights to such option have
passed; or (iv) the option by its terms specifically
provides otherwise. The option term may be extended in the
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event that exercise of the option following termination of
service is prohibited by applicable securities laws or if a sale
of the stock would violate the Companys insider trading
policy. In no event, however, may an option be exercised beyond
the expiration of its term.
Restrictions on Transfer. Unless provided otherwise by
the Board, a participant in the 2006 Plan may not transfer an
option other than by will or by the laws of descent and
distribution or pursuant to a domestic relations order. During
the lifetime of the participant, only the participant (or the
transferee pursuant to a domestic relations order) may exercise
an option. A participant may also designate a beneficiary who
may exercise an option following the participants death.
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Terms of Stock Appreciation Rights |
Stock appreciation rights may be granted under the 2006 Plan
pursuant to stock appreciation rights agreements.
Exercise. Each stock appreciation right is denominated in
shares of common stock equivalents. The strike price of each
stock appreciation right shall not be less than 100% of the fair
market value of the common stock equivalents subject to the
stock appreciation right on the date of grant. Upon exercise of
a stock appreciation right, we will pay the participant an
amount equal to the excess of (i) the aggregate fair market
value of our common stock on the date of exercise, over
(ii) the strike price determined by the Board on the date
of grant.
Settlement of Awards. The appreciation distribution upon
exercise of a stock appreciation right may be paid in cash,
shares of our common stock, any combination of the two, or any
other form of consideration determined by the Board.
Vesting. Stock appreciation rights vest and become
exercisable at the rate specified in the stock appreciation
right agreement as determined by the Board.
Termination of Service. Upon termination of a
participants service (other than for cause), the
participant generally may exercise any vested stock appreciation
right for three (3) months (or such longer or shorter
period specified in the stock appreciation right agreement)
after the date such service relationship ends. The stock
appreciation right term may be extended in the event that
exercise of the stock appreciation right following termination
of service is prohibited by applicable securities laws or if a
sale of the stock would violate the Companys insider
trading policy. Except as provided otherwise in a
participants stock appreciation rights agreement, upon
termination of a participants service for cause, the stock
appreciation right shall terminate upon the termination date of
such participants service. In no event may a stock
appreciation right be exercised beyond the expiration of its
term.
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Terms of Restricted Stock Awards |
Restricted stock awards may be granted under the 2006 Plan
pursuant to restricted stock award agreements.
Consideration. The Board may grant restricted stock
awards in consideration for past or future services rendered to
us or in exchange for any other form of legal consideration
acceptable to the Board.
Vesting. Shares of stock acquired under a restricted
stock award agreement may, but need not, be subject to
forfeiture to us in accordance with a vesting schedule as
determined by the Board. The Board has the authority to
accelerate the vesting of stock acquired pursuant to a
restricted stock award.
Termination of Service. Upon termination of a
participants service, we may reacquire any forfeited
shares of stock that have not vested as of such termination
under the terms of the applicable restricted stock award
agreement.
Restrictions on Transfer. Rights to acquire shares under
a restricted stock award may be transferred only upon such terms
and conditions as determined by the Board.
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Terms of Restricted Stock Unit Awards |
Restricted stock unit awards may be granted under the 2006 Plan
pursuant to restricted stock unit award agreements.
Consideration. The purchase price, if any, for stock unit
awards may be paid in any form of legal consideration acceptable
to the Board.
Settlement of Awards. A stock unit award may be settled
by the delivery of shares of our common stock, in cash, or by
any combination of these means as determined by the Board.
Vesting. Stock unit awards vest at the rate specified in
the restricted stock unit award agreement as determined by the
Board. However, at the time of grant, the Board may impose
additional restrictions or conditions that delay the delivery of
stock or cash subject to the restricted stock unit award after
vesting.
Dividend Equivalents. Dividend equivalent rights may be
credited with respect to shares covered by a restricted stock
unit award.
Termination of Service. Except as otherwise provided in
the applicable award agreement, restricted stock units that have
not vested will be forfeited upon the participants
termination of service.
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Terms of Performance Awards |
The 2006 Plan allows the Board to issue performance stock awards
and performance cash awards (performance awards).
Performance awards may be granted, vest or be exercised based
upon the attainment during a certain period of time of certain
performance goals. All of our employees, directors and
consultants are eligible to receive performance awards under the
2006 Plan. The length of any performance period, the performance
goals to be achieved during the performance period, and the
measure of whether and to what degree such performance goals
have been attained shall be determined by the Board. The maximum
number of shares or value to be granted to any individual in any
calendar year attributable to such performance awards may not
exceed One Million (1,000,000) shares of our common stock in the
case of performance stock awards, or Three Million Dollars
($3,000,000) in the case of performance cash awards. Under the
2003 Plan, the maximum amount to be granted to any individual in
any calendar year attributable to restricted stock awards may
not exceed the value of one hundred thousand (100,000) shares of
common stock.
In granting a performance award, the Board will set a period of
time (a performance period) over which the
attainment of one or more goals (performance goals)
will be measured for the purpose of determining whether the
award recipient has a vested right in or to such performance
award. Within the time period prescribed by Section 162(m)
of the Code (typically before the 90th day of a performance
period), the Board will establish the performance goals, based
upon one or more pre-established criteria (performance
criteria) enumerated in the 2006 Plan and described below.
As soon as administratively practicable following the end of the
performance period, the Board will certify (in writing) whether
the performance goals have been satisfied.
Performance goals under the 2006 Plan shall be established by
the Board, based on one or more of the following performance
criteria: (i) earnings per share; (ii) earnings before
interest, taxes and depreciation; (iii) earnings before
interest, taxes, depreciation and amortization (EBITDA);
(iv) total stockholder return; (v) return on equity;
(vi) return on assets, investment, or capital employed;
(vii) operating margin; (viii) gross margin;
(ix) operating income; (x) net income (before or after
taxes); (xi) net operating income; (xii) net operating
income after tax; (xiii) pre-tax profit;
(xiv) operating cash flow; (xv) sales or revenue
targets; (xvi) increases in revenue or product revenue;
(xvii) expenses and cost reduction goals;
(xviii) improvement in or attainment of working capital
levels; (xix) economic value added (or an equivalent
metric); (xx) market share; (xxi) cash flow;
(xxii) cash flow per share; (xxiii) share price
performance; (xxiv) debt reduction;
(xxv) implementation or completion of projects or
processes; (xxvi) customer satisfaction;
(xxvii) stockholders equity; and (xxviii) to the
extent that an award is not intended to comply with
Section 162(m) of the Code, other measures of performance
selected by the Board.
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The Board is authorized to determine whether, when calculating
the attainment of performance goals for a performance period:
(i) to exclude restructuring and/or other nonrecurring
charges; (ii) to exclude exchange rate effects, as
applicable, for
non-U.S. dollar
denominated net sales and operating earnings; (iii) to
exclude the effects of changes to generally accepted accounting
standards required by the Financial Accounting Standards Board;
(iv) to exclude the effects of any statutory adjustments to
corporate tax rates; and (v) to exclude the effects of any
extraordinary items as determined under generally
accepted accounting principles. In addition, the Board retains
the discretion to reduce or eliminate the compensation or
economic benefit due upon attainment of performance goals.
If this Proposal No. 2 is approved by the
stockholders, compensation attributable to performance awards
under the 2006 Plan will qualify as performance-based
compensation, provided that: (i) the award is granted by a
compensation committee comprised solely of outside
directors, (ii) the award is granted (or exercisable)
only upon the achievement of an objective performance goal
established in writing by the compensation committee while the
outcome is substantially uncertain, and (iii) the
compensation committee certifies in writing prior to the
granting (or exercisability) of the award that the performance
goal has been satisfied.
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Terms of Other Stock Awards |
The Board may grant other stock awards that are valued in whole
or in part by reference to our common stock. Subject to the
provisions of the 2006 Plan, the Board has the authority to
determine the persons to whom and the dates on which such other
stock awards will be granted, the number of shares of common
stock (or cash equivalents) to be subject to each award, and
other terms and conditions of such awards.
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Changes to Capital Structure |
If any change is made to the outstanding shares of our common
stock without our receipt of consideration (whether through a
stock split or other specified change in our capital structure),
appropriate adjustments will be made to: (i) the maximum
number and/or class of securities issuable under the 2006 Plan,
(ii) the maximum number and/or class of securities that may
be issued pursuant to the exercise of incentive stock options,
(iii) the maximum number and/or class of securities for
which any one person may be granted options and/or stock
appreciation rights or performance-based awards per calendar
year pursuant to the limitation under Section 162(m) of the
Code, and (iv) the number and/or class of securities and
the price per share in effect under each outstanding stock award
under the 2006 Plan.
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Corporate Transactions; Changes in Control |
Under the 2006 Plan, unless otherwise provided in a written
agreement between us or any affiliate and the holder of a stock
award, in the event of a corporate transaction (as defined in
the 2006 Plan and described below), all outstanding stock awards
under the 2006 Plan may be assumed, continued or substituted for
by any surviving or acquiring entity (or its parent company). If
the surviving or acquiring entity (or its parent company) elects
not to assume, continue or substitute for such stock awards,
then (i) with respect to any such stock awards that are
held by individuals whose continuous service with us or an
affiliate has not terminated prior to the effective date of the
corporate transaction, the vesting and exercisability provisions
of such stock awards will be accelerated in full and such awards
will terminate if not exercised prior to the effective date of
the corporate transaction, and (ii) with respect to any
stock awards that are held by any other individuals, the vesting
and exercisability provisions of such stock awards will not be
accelerated and such awards will terminate if not exercised
prior to the effective date of the corporate transaction (except
that any reacquisition or repurchase rights held by us with
respect to such stock awards shall not terminate and may
continued to be exercised notwithstanding the corporate
transaction). In the event a stock award will terminate if not
exercised, the Board may provide, in its sole discretion, that
the holder of such stock award may not exercise such stock award
but will receive a payment equal to the excess of the value of
the property the holder would have received upon exercise over
any exercise price.
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For purposes of the 2006 Plan, a corporate transaction will be
deemed to occur in the event of (i) a sale of all or
substantially all of the consolidated assets of Valeant and its
subsidiaries, (ii) the sale of at least 90% of our
outstanding securities, (iii) the consummation of a merger
or consolidation in which we are not the surviving corporation,
or (iv) the consummation of a merger or consolidation in
which we are the surviving corporation but shares of our
outstanding common stock are converted into other property by
virtue of the transaction.
Except as provided otherwise in a written agreement between us
or any affiliate and the holder of the stock award, each stock
award granted under the 2006 Plan will immediately vest and
become exercisable in the event the participants service
with the Company or an affiliate or a successor entity is
terminated without cause (not including death or disability) or
the participant terminates for good reason (as defined in the
2006 Plan) within 6 months before or 12 months after a
change in control (as defined in the 2006 Plan). Upon such
termination of a participants service, the participant may
exercise his or her stock award until the earlier of 1 year
following termination or the expiration of the term of the stock
award.
For purposes of the 2006 Plan, a change in control will be
deemed to occur in the event of (i) the acquisition of
beneficial ownership by any person, entity or group of our
securities representing at least 30% of the combined voting
power of our then outstanding securities; (ii) the
individuals who were members of the Board as of the date the
2006 Plan is approved by our stockholders cease for any reason
to constitute at least a majority of the Board unless the
election, or nomination for election by our stockholders, of any
new director was approved by a vote of at least a majority of
the directors who were directors when the 2006 Plan was approved
by our stockholders; (iii) a merger or consolidation in
which our stockholders, immediately before such merger or
consolidation, do not, as a result of such merger or
consolidation, own, directly or indirectly, more than 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 our voting securities outstanding
immediately before such merger or consolidation; or (iv) a
liquidation, dissolution or sale of substantially all of our
assets. In the event that a change in control affects any award
that is deferred on or after January 1, 2005, then to the
extent necessary to avoid the adverse tax consequences contained
in section 409A(a)(1) of the Code, the term change in
control shall conform to the definition of change in
control under section 409A of the Code.
Under the 2003 Plan, upon a change in control (as defined in the
2003 Plan and as described below), (i) all outstanding
options will become immediately vested and exercisable, and upon
termination of a participants employment or service
following a change in control, his or her options may be
exercised for 1 year after termination, but not beyond the
term of the option, (ii) all outstanding shares of
restricted stock will immediately vest and all restrictions on
such shares will immediately lapse, and (iii) all
outstanding shares of phantom stock will immediately vest and
payment for such shares will be made in accordance with the 2003
Plan.
For purposes of the 2003 Plan, a change in control will be
deemed to occur in the event of (i) the acquisition of
beneficial ownership by any person, entity or group of our
securities representing at least 25% of the combined voting
power of our then outstanding voting securities; (ii) the
individuals who were members of the Board as of January 1,
2003 cease for any reason to constitute at least a majority of
the Board unless the election, or nomination for election by our
stockholders, of any new director was approved by a vote of at
least a 2/3 of directors who were directors on January 1,
2003, or whose election or nomination for election was
previously so approved or recommended; (iii) a merger or
consolidation which would result in our voting securities
immediately prior to such merger or consolidation continuing to
represent 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 (iv) a liquidation, dissolution or sale
of substantially all of our assets.
In the event that the acceleration of the vesting of the award
granted in connection with a change in control results in the
imposition of the parachute payment excise tax under
Section 4999 of the Code, the benefit or payment provided
to the participant will be reduced to the extent necessary to
avoid the imposition
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of the excise tax, but only if the reduction in vesting
acceleration would result in a greater total payment to the
participant taking into account all applicable taxes, including
the excise tax.
The acceleration of vesting of a stock award in the event of a
corporate transaction or change in the ownership or control of
us under the 2006 Plan may be viewed as an anti-takeover
provision, which may have the effect of discouraging a proposal
to acquire or otherwise obtain control of us.
Unless prohibited by the terms of a stock award agreement, we
may satisfy any federal, state or local tax withholding
obligation relating to any award by causing a participant to
tender a cash payment, withholding a portion of the stock
otherwise issuable to the participant, withholding cash from an
award settled in cash, or by such other method as may be set
forth in the award agreement.
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Duration, Termination and Amendment |
The Board may suspend or terminate the 2006 Plan without
stockholder approval or ratification at any time. Unless sooner
terminated, the 2006 Plan will terminate ten years after adopted
by the Board or approved by the stockholders of the Company,
whichever is earlier. The 2003 Plan will terminate on
May 22, 2013 in the event that the stockholders do not
approve this Proposal No. 2.
The Board may amend or modify the 2006 Plan at any time.
However, no amendment shall be effective unless approved by our
stockholders to the extent stockholder approval is necessary to
satisfy applicable law.
The Board also may submit any other amendment to the 2006 Plan
intended to satisfy the requirements of Section 162(m) of
the Code regarding the exclusion of performance-based
compensation from the limitation on the deductibility of
compensation paid to certain employees.
The Board may not, under the 2006 Plan, (i) reprice any
outstanding stock awards under the 2006 Plan or;
(ii) cancel any outstanding stock award under the 2006 Plan
and grant in substitution or exchange therefore a new stock
award under the 2006 Plan or another equity plan of Valeant
covering the same or a different number of shares of common
stock unless the stockholders have approved such an action
within twelve months prior to such an event.
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Federal Income Tax Information |
The following is a summary of the principal United States
federal income taxation consequences to employees and us with
respect to participation in the 2006 Plan. This summary is not
intended to be exhaustive, and does not discuss the income tax
laws of any city, state or foreign jurisdiction in which a
participant may reside.
Incentive Stock Options. Incentive stock options granted
under the 2006 Plan are intended to be eligible for the
favorable federal income tax treatment accorded incentive
stock options under the Code. There generally are no
federal income tax consequences to the participant or us by
reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase
the participants alternative minimum tax liability, if any.
If a participant holds stock acquired through exercise of an
incentive stock option for more than two years from the date on
which the option was granted and more than one year after the
date the option was exercised for those shares, any gain or loss
on a disposition of those shares (a qualifying
disposition) will be a long-term capital gain or loss.
Upon such a qualifying disposition, we will not be entitled to
any income tax deduction.
Generally, if the participant disposes of the stock before the
expiration of either of these holding periods (a
disqualifying disposition), then at the time of
disposition the participant will realize taxable ordinary income
equal to the lesser of (i) the excess of the stocks
fair market value on the date of exercise over the exercise
price, or (ii) the participants actual gain, if any,
on the purchase and sale. The participants
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additional gain or any loss upon the disqualifying disposition
will be a capital gain or loss, which will be long-term or
short-term depending on whether the stock was held for more than
one year.
To the extent the participant recognizes ordinary income by
reason of a disqualifying disposition, generally we will be
entitled (subject to the requirement of reasonableness, the
provisions of Section 162(m) of the Code, and the
satisfaction of a tax reporting obligation) to a corresponding
income tax deduction in the tax year in which the disqualifying
disposition occurs.
Nonstatutory Stock Options. No taxable income is
recognized by a participant upon the grant of a nonstatutory
stock option. Upon exercise of a nonstatutory stock option, the
participant will recognize ordinary income equal to the excess,
if any, of the fair market value of the purchased shares on the
exercise date over the exercise price paid for those shares.
Generally, we will be entitled (subject to the requirement of
reasonableness, the provisions of Section 162(m) of the
Code, and the satisfaction of a tax reporting obligation) to a
corresponding income tax deduction in the tax year in which such
ordinary income is recognized by the participant.
However, if the shares acquired upon exercise of the
nonstatutory stock option are unvested and subject to repurchase
by us in the event of the participants termination of
service prior to vesting in those shares, the participant will
not recognize any taxable income at the time of exercise, but
will have to report as ordinary income, as and when our purchase
right lapses, an amount equal to the excess of (i) the fair
market value of the shares on the date the repurchase right
lapses, over (ii) the exercise price paid for the shares.
The participant may, however, elect under Section 83(b) of
the Code to include as ordinary income in the year of exercise
of the option an amount equal to the excess of (i) the fair
market value of the purchased shares on the exercise date, over
(ii) the exercise price paid for such shares. If the
Section 83(b) election is made, the participant will not
recognize any additional income as and when the repurchase right
lapses.
Upon disposition of the stock, the participant will recognize a
capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any
amount recognized as ordinary income upon acquisition (or
vesting) of the stock. Such gain or loss will be long-term or
short-term depending on whether the stock was held for more than
one year.
Stock Appreciation Rights. No taxable income is realized
upon the receipt of a stock appreciation right. Upon exercise of
the stock appreciation right, the fair market value of the
shares (or cash in lieu of shares) received is recognized as
ordinary income to the participant in the year of such exercise.
Generally, with respect to employees, we are required to
withhold from the payment made on exercise of the stock
appreciation right or from regular wages or supplemental wage
payments an amount based on the ordinary income recognized.
Subject to the requirement of reasonableness,
Section 162(m) of the Code and the satisfaction of a
reporting obligation, we will be entitled to an income tax
deduction equal to the amount of ordinary income recognized by
the participant.
Restricted Stock Awards. Upon receipt of a restricted
stock award, the participant will recognize ordinary income
equal to the excess, if any, of the fair market value of the
shares on the date of issuance over the purchase price, if any,
paid for those shares. We will be entitled (subject to the
requirement of reasonableness, the provisions of
Section 162(m) of the Code, and the satisfaction of a tax
reporting obligation) to a corresponding income tax deduction in
the year in which such ordinary income is recognized by the
participant.
However, if the shares issued upon the grant of a restricted
stock award are unvested and subject to repurchase by us in the
event of the participants termination of service prior to
vesting in those shares, the participant will not recognize any
taxable income at the time of issuance, but will have to report
as ordinary income, as and when our repurchase right lapses, an
amount equal to the excess of (i) the fair market value of
the shares on the date the repurchase right lapses, over
(ii) the purchase price, if any, paid for the shares. The
participant may, however, elect under Section 83(b) of the
Code to include as ordinary income in the year of issuance an
amount equal to the excess of (a) the fair market value of
the shares on the date of issuance, over (b) the purchase
price, if any, paid for such shares. If the Section 83(b)
election is made, the participant will not recognize any
additional income as and when the repurchase right lapses. The
participant and Valeant will
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be required to satisfy certain tax withholding requirements
applicable to such income. We will be entitled to an income tax
deduction equal to the amount of ordinary income recognized by
the participant at the time the shares are issued. In general,
the deduction will be allowed for the taxable year in which such
ordinary income is recognized by the participant.
Upon disposition of the stock acquired upon the receipt of a
restricted stock award, the participant will recognize a capital
gain or loss equal to the difference between the selling price
and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon issuance (or vesting) of the
stock. Such gain or loss will be long-term or short-term
depending on whether the stock was held for more than one year.
Restricted Stock Unit Awards. No taxable income is
recognized upon receipt of a restricted stock unit award. The
participant will recognize ordinary income in the year in which
the shares subject to that unit are actually issued to the
participant in an amount equal to the fair market value of the
shares on the date of issuance. The participant and Valeant will
be required to satisfy certain tax withholding requirements
applicable to such income. Subject to the requirement of
reasonableness, Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, we will be entitled
to an income tax deduction equal to the amount of ordinary
income recognized by the participant at the time the shares are
issued. In general, the deduction will be allowed for the
taxable year in which such ordinary income is recognized by the
participant.
Potential Limitation on Company Deductions.
Section 162(m) of the Code denies a deduction to any
publicly-held corporation for compensation paid to certain
covered employees in a taxable year to the extent
that compensation to each covered employee exceeds $1,000,000.
It is possible that compensation attributable to awards, when
combined with all other types of compensation received by a
covered employee from us, may cause this limitation to be
exceeded in any particular year.
Certain kinds of compensation, including qualified
performance-based compensation, are disregarded for
purposes of the deduction limitation. In accordance with
Treasury Regulations issued under Section 162(m) of the
Code, compensation attributable to stock options and stock
appreciation rights will qualify as performance-based
compensation if such awards are approved by a compensation
committee comprised solely of outside directors and
the plan contains a per-employee limitation on the number of
shares for which such awards may be granted during a specified
period, the per-employee limitation is approved by the
stockholders, and the exercise or strike price of the award is
no less than the fair market value of the stock on the date of
grant.
Compensation attributable to restricted stock awards, restricted
stock unit awards and performance-based awards will qualify as
performance-based compensation, provided that: (i) the
award is approved by a compensation committee comprised solely
of outside directors, (ii) the award is granted
(or exercisable) only upon the achievement of an objective
performance goal established in writing by the compensation
committee while the outcome is substantially uncertain,
(iii) the compensation committee certifies in writing prior
to the granting (or exercisability) of the award that the
performance goal has been satisfied, and (iv) prior to the
granting (or exercisability) of the award, stockholders have
approved the material terms of the award (including the class of
employees eligible for such award, the business criteria on
which the performance goal is based, and the maximum amount, or
formula used to calculate the amount, payable upon attainment of
the performance goal).
44
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Finance and Audit Committee has appointed
PricewaterhouseCoopers LLP to serve as our independent
registered public accounting firm for the fiscal year ending
December 31, 2006. Although the Company is not required to
seek stockholder ratification of this appointment, the Board
believes it is sound corporate governance to do so. If
stockholders do not ratify the appointment of
PricewaterhouseCoopers LLP, the Finance and Audit Committee will
consider the stockholders action in determining whether to
appoint PricewaterhouseCoopers LLP as the Companys
independent accounting firm for 2006. Even if the appointment is
ratified, the Finance and Audit Committee, in its discretion,
may direct the appointment of different independent accounting
firms at anytime during the year if they determine that such
change would be in the best interests of the Company and its
stockholders. A representative of PricewaterhouseCoopers LLP
will be present at the Annual Meeting and will have an
opportunity to make a statement if desired. Further, the
representative will be available to respond to appropriate
Stockholder questions directed to him or her.
The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote
at the Annual Meeting will be required to ratify the appointment
of PricewaterhouseCoopers LLP. Abstentions will be counted
toward the tabulation of votes cast on proposals presented to
the stockholders and will have the same effect as negative
votes. Broker non-votes are counted towards a quorum, but are
not counted for any purpose in determining whether this matter
has been approved.
The Board of Directors of the Company recommends that the
Stockholders vote FOR Proposal No. 3.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
The aggregate fees billed for professional services rendered by
PricewaterhouseCoopers LLP for the fiscal years ended
December 31, 2005 and December 31, 2004 for the audit
of the Companys consolidated annual financial statements
and the reviews of the financial statements included in the
Companys
Forms 10-Q, or
services that are normally provided by PricewaterhouseCoopers
LLP in connection with statutory and regulatory filings or
engagements, including the Companys debt offerings, review
of registration statements and comfort letters for those fiscal
years, and the audits of our internal control over financial
reporting, were approximately $4,047,000 and $4,522,000,
respectively.
The aggregate fees billed for assurance and related services
rendered by PricewaterhouseCoopers LLP during the fiscal years
ended December 31, 2005 and December 31, 2004 that are
reasonably related to the performance of the audit or review of
the Companys financial statements and are not included in
Audit Fees above were $430,000 and $50,000,
respectively.
Audit-related fees related to fees for assistance with the
following: disposition of certain assets, various mergers and
acquisition activities and other accounting research.
The aggregate fees billed for tax compliance, tax advice and tax
planning services rendered by PricewaterhouseCoopers LLP during
the fiscal years ended December 31, 2005 and
December 31, 2004 were $715,000 and $606,000, respectively.
45
In addition to the fees described above, aggregate fees of
$27,000 and $1,000 respectively, were billed by
PricewaterhouseCoopers LLP during the years ended
December 31, 2005, and December 31, 2004 for other
services performed.
All other fees related to fees for assistance with a subpoena
served on the Company and a license fee for access to a global
best practices database.
All fees described above were either approved by the Finance and
Audit Committee or incurred in accordance with the pre-approval
policy adopted by the Finance and Audit Committee.
The Finance and Audit Committee pre-approved the audit and
non-audit services performed by the independent accounting firm
in order to assure that the provision of such services does not
impair the accounting firms independence. These services
include audit services, audit-related services, tax services and
other services. The Finance and Audit Committee has adopted a
policy for the pre-approval of services provided by the
independent accounting firm. Any proposed services exceeding
pre-approved levels were pre-approved by the Finance and Audit
Committee.
OTHER
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
FOR THE 2007 ANNUAL MEETING
The Companys Certificate of Incorporation provides that
stockholders seeking to bring business before an annual meeting
of stockholders, or to nominate candidates for election as
directors at an annual meeting stockholders, must provide timely
notice in writing. To be timely, a stockholders notice
generally must be delivered to, or mailed and received at, our
principal executive offices not less than 60 days nor more
than 90 days prior to the scheduled date of the annual
meeting, regardless of any postponement, deferral or adjournment
of that meeting. However, if less than 70 days notice or
prior public disclosure of the date of the meeting is given or
made to stockholders, then to be timely, notice by the
stockholder must be given not later than the close of business
on the 10th day following the earlier of (i) the day
on which the notice of the date of the meeting was mailed, or
(ii) the day on which such public disclosure was made.
In addition, SEC rules provide that a stockholder wishing to
include a proposal in the proxy statement for the Companys
2007 annual meeting must submit the proposal so that it is
received by the Company at its principal executive offices (3300
Hyland Avenue, Costa Mesa, California 92626, Attention:
Secretary) no later than December 21, 2006 in a form that
complies with applicable regulations. If the date of the 2007
annual meeting is advanced or delayed more than 30 days
from the date of the 2006 annual meeting, stockholder proposals
intended to be included in the proxy statement for the 2007
annual meeting must be received by us within a reasonable time
before the Company begins to print and mail the proxy statement
for the 2007 annual meeting. Upon any determination that the
date of the 2007 annual meeting will be advanced or delayed by
more than 30 days from the date of the 2006 annual meeting,
the Company will disclose the change in the earliest practicable
Quarterly Report on
Form 10-Q.
SEC rules also govern a companys ability to use
discretionary proxy authority with respect to stockholder
proposals that were not submitted by the stockholders in time to
be included in the proxy statement. In the event a stockholder
proposal is not submitted to the Company prior to March 7,
2007, the proxies solicited by the Board of Directors for the
2007 annual meeting of stockholders will confer authority on the
proxyholders to vote the shares in accordance with their best
judgment and discretion if the proposal is presented at the 2007
annual meeting of stockholders without any discussion of the
proposal in the proxy statement for such meeting.
Stockholder proposals and nominations must be submitted in
conformance with the Companys Certificate of Incorporation
and the rules of the Securities and Exchange Commission. The
following is a
46
summary of the requirements for submitting a nomination or a
proposal in accordance with our Certificate of Incorporation.
Our Certificate of Incorporation requires a stockholders
notice of a proposed nomination for director to include the
following:
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the name, age, business address or residence address of each
proposed nominee; |
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the principal occupation or employment of the proposed nominee; |
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the number (and class) of shares of Company stock owned by the
proposed nominee; |
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any other information concerning the proposed nominee that the
Company would be required to include in the proxy statement,
including the proposed nominees written consent to being named
in the proxy statement and to serving as director if elected; |
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the name and address of the stockholder making the nomination,
and any other stockholders known to be supporting the
nomination, as they appear on the Companys books; |
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the number (and class) of shares of Company stock owned by the
stockholder and any other stockholders known to be supporting
the nomination, on the day of the notice; |
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a representation that the holder is a stockholder entitled to
vote his or her shares at the annual meeting and intends to vote
his or her shares in person or by proxy for the person nominated
in the notice; and |
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a description of all arrangements or understandings between the
stockholder(s) supporting the nomination and each nominee. |
Our Certificate of Incorporation requires a stockholders
notice of a proposal to be submitted to the stockholders at an
annual meeting to include the following:
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a summary, in 500 words or less, of the business desired to be
brought before the annual meeting and the reasons for conducting
such business at the annual meeting; |
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the name and address of the stockholder submitting the proposal,
and any other stockholders known to be supporting the proposal,
as they appear on the Companys books; |
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the number (and class) of shares of Company stock owned by the
stockholder and any other stockholders known to be supporting
the proposal, on the date of the notice; |
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a description, in 500 words or less, of any interest of the
stockholder in such proposal; and |
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a representation that the holder is a stockholder entitled to
vote his or her shares at the annual meeting and intends to vote
his or her shares in person or by proxy at the meeting to
present the proposal. |
ANNUAL REPORT
The Annual Report to Stockholders for the year ended
December 31, 2005 (including
Form 10-K) is
being mailed to stockholders with this Proxy Statement. The
Annual Report does not form part of the material for the
solicitation of proxies.
PROXY SOLICITATION
The costs of preparing and mailing this Proxy Statement and
related Notice and the enclosed form of Proxy will be paid by
the Company. In addition to soliciting proxies by mail,
employees of the Company may, at the Companys expense,
solicit proxies in person, by telephone, telegraph, courier
service, advertisement, telecopier or other electronic means.
The Company has retained Georgeson Shareholder Communications
Inc. (GSC) to assist in the solicitation of proxies.
The Company will pay fees to GSC not to exceed $9,000, plus
reasonable
out-of-pocket expenses
incurred by them. The Company will pay brokers, nominees,
47
fiduciaries and other custodians their reasonable fees and
expenses for forwarding solicitation material to principals and
for obtaining their instructions.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and
intermediaries (e.g., brokers) to satisfy the delivery
requirements for proxy statements and annual reports with
respect to two or more stockholders sharing the same address by
delivering a single proxy statement addressed to those
stockholders. This process, which is commonly referred to as
householding, potentially means extra convenience
for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are the
Companys stockholders will be householding our
proxy materials. A single proxy statement will be delivered to
multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders.
Once you have received notice from your broker that they will be
householding communications to your address,
householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you
no longer wish to participate in householding and
would prefer to receive a separate proxy statement and annual
report, please notify your broker, or direct your written
request to Valeant Pharmaceuticals International, Attn: Investor
Relations, 3300 Hyland Avenue, Costa Mesa, California
92626. Stockholders who currently receive multiple copies
of the proxy statement at their address and would like to
request householding of their communications should
contact their broker.
MISCELLANEOUS
If any other matters are properly presented for consideration at
the Annual Meeting, including, among other things, consideration
of a motion to adjourn the meeting to another time or place in
order to solicit additional proxies in favor of the
recommendation of the Board of Directors, the persons named as
Proxyholders and acting thereunder intend to vote the share
represented by the Proxies on such matters in accordance with
the recommendation of the Board and the authority to do so is
included in the Proxy.
As of the date this Proxy Statement goes to press, the Board of
Directors knows of no other matters which are likely to come
before the Annual Meeting.
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By Order of the Board of Directors, |
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![-s- Robert W. O'Leary](a19643da1964301.gif) |
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Robert W. OLeary |
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Chairman of the Board |
Costa Mesa, California
April 21, 2006
THE COMPANY WILL MAIL WITHOUT CHARGE UPON WRITTEN REQUEST A
COPY OF ITS MOST RECENT ANNUAL REPORT ON
FORM 10-K,
INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND A LIST OF
EXHIBITS. REQUESTS SHOULD BE SENT TO: CORPORATE SECRETARY,
VALEANT PHARMACEUTICALS INTERNATIONAL, 3300 HYLAND AVENUE, COSTA
MESA, CALIFORNIA 92626. THE ANNUAL REPORT IS ALSO AVAILABLE FREE
OF CHARGE ON THE COMPANY WEBSITE: WWW.VALEANT.COM
48
ANNEX A
CORPORATE GOVERNANCE GUIDELINES
PURPOSE
The primary objective of Valeant Pharmaceuticals International
(the Company) is to maximize stockholder value over
the long term while adhering to the laws of the jurisdictions
within which it operates and observing the highest ethical
standards.
SELECTION AND COMPOSITION OF THE BOARD
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I. |
Corporate Governance/ Nominating Committee |
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As a permanent part of the structure of the Board of Directors
(the Board) there will be a standing Corporate
Governance/Nominating Committee responsible for
identifying individuals qualified to become Board members,
consistent with criteria approved by the Board, and selecting or
recommending that the Board select, the director nominees for
the next annual meeting of stockholders, as well as developing
and recommending to the Board a set of corporate governance
guidelines applicable to the corporation and overseeing the
evaluation of the Board and management. The Committee shall
review the composition of the Board for the appropriate skills
and characteristics required of members of the Board in the
context of the then current
make-up of the Board.
This assessment should include consideration of issues of
judgment, integrity, diversity and skills, including, but not
limited to, understanding the business of the Company and
possessing a relevant international background all
in the context of an assessment of the perceived needs of the
Board at that point in time. The Committee is open to consider
recommendations from all interested parties. |
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II. |
Compensation Committee |
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As a permanent part of the structure of the Board there will be
a standing Compensation Committee responsible for reviewing and
approving corporate goals and objectives relevant to CEO
compensation, evaluating the CEOs performance in light of
those goals and objectives, and, either as a committee or
together with the other independent directors (as directed by
the Board), determining and approving the CEOs
compensation level based on this evaluation. The Committee shall
also make recommendations to the Board with respect to non-CEO
executive officer compensation, and incentive compensation and
equity-based plans that are subject to board approval.
Additionally, the Committee is responsible for producing a
Compensation Committee report on executive officer compensation
as required by the SEC to be included in the Companys
annual proxy statement or annual report on
Form 10-K filed
with the SEC. |
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III. |
Finance & Audit Committee |
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As a permanent part of the structure of the Board there will be
a standing Finance & Audit Committee responsible for,
at least annually, obtaining and reviewing a report by the
independent registered public accounting firm describing: the
firms internal quality-control procedures; any material
issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities,
within the preceding five years, respecting one or more
independent audits carried out by the firm, and any steps taken
to deal with any such issues; and (to assess the registered
public accounting firms independence) all relationships
between the independent registered public accounting firm and
the Company. In addition, the Committee must meet the
requirements set out in Rule 10-A-3(b)(2), (3),
(4) and (5) of the Exchange Act. |
A-1
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IV. |
Selection and Orientation of New Directors |
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The Board shall be responsible for selecting its own members and
in recommending them for presentation to the stockholders for
election. The Board delegates the screening process involved to
the Corporate Governance/Nominating Committee. The Corporate
Governance/Nominating Committee will recommend to the Board the
names of prospective Board members. The Board will review and
act on these recommendations, forwarding them to the
stockholders where appropriate. The Board and the Company have a
complete orientation process for new Directors that includes
background material, meetings with senior management, and visits
to Company facilities. |
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A Director must attend at least one outside Director Education
session every three years following their election, which
session shall be pre-approved by the Chairman of the Board. In
addition, Directors are strongly encouraged to participate in at
least one accredited, Chairman-approved, Director education
session annually. |
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VI. |
Corporate Governance/ Nominating Committee Review of Board |
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The Corporate Governance/Nominating Committee, after
consultation with the Chairman of the Board and the Chief
Executive Officer, will formally review each Directors
continuation on the Board every three years, preceding
renomination. |
BOARD LEADERSHIP
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VII. |
Chairman, Chief Executive Officer and Lead Director |
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The Board believes it is desirable that the role of Chairman and
Chief Executive Officer should not be combined in one
individual. However, from time to time it may be desirable, in
certain circumstances, to combine these roles in one individual.
Whenever the Chairman and Chief Executive Officer roles are
combined, or whenever circumstances cause the Chairman to be
adjudged non-independent by the Board, then the Board shall
appoint a Lead Director to preside over the non-management
sessions of the Board of Directors. |
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VIII. |
Executive Sessions of Non-Management Directors |
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The Board at its own discretion will conduct executive sessions
of the non-management Directors at each regularly scheduled
Board meeting. The Lead Director will preside over the scheduled
executive sessions without the attendance of management. |
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IX. |
Mix of Management and Independent Directors |
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The Board believes that, as a matter of policy, there should be
a substantial majority of Independent Directors on the Board. |
BOARD COMPOSITION AND PERFORMANCE
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X. |
Board Definition of What Constitutes Independence for
Directors |
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The definition of independent director will be in
accordance with the guidelines of the New York Stock Exchange
(Independent Director). No director will be deemed
independent unless the Board affirmatively determines that the
director has no material relationship with the Company. To
assist in meeting this objective, the Board has adopted certain
specific categorical standards to ascertain whether a director
has a material relationship with the Company, either directly or
as a |
A-2
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partner, stockholder or officer of an organization, its parent
or a consolidated subsidiary that has a relationship with the
Company. |
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The following will be cause for disqualifications of
independence: |
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(a) |
a director who is an employee, or whose immediate family member
is an executive officer, of the Company, its parent or a
consolidated subsidiary (other than employment as interim
Chairman or CEO), until three years after the end of such
employment relationship; |
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(b) |
a director who receives, or whose immediate family member
receives, more than $100,000 per year in direct
compensation from the Company, its parent or a consolidated
subsidiary, other than director and committee fees and pension
or other forms of deferred compensation for prior services
(provided such compensation is not contingent in any way on
continued service) (and other than compensation for service as
interim Chairman or CEO or received by an immediate family
member for service as a non-executive employee), until three
years after he or she ceases to receive more than
$100,000 per year in such compensation; |
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(c) |
a director who is affiliated with or employed, or whose
immediate family member is affiliated with or employed in a
professional capacity, by a present or former internal or
external auditor of the Company, its parent or a consolidated
subsidiary, until three years after the end of the affiliation
or the employment or auditing relationship; |
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(d) |
a director who is an executive officer, or whose immediate
family member is an executive officer, of another company whose
compensation committees membership includes an executive
officer of the Company, its parent or a consolidated subsidiary
is not independent until three years after the end of such
service or the employment relationship; |
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(e) |
a director who is an executive officer or employee, or whose
immediate family member is an executive officer, of a company
that makes payments to, or receives payments from, the Company
for the greater of $1 million, or 2% of such other
companys consolidated gross revenues, is not independent
until three years after falling below such threshold. |
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The following will not be considered a material relationship: |
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(f) |
if a director, within the preceding three years, serves as an
officer, director or trustee of a charitable organization, and
the Companys discretionary charitable contributions to the
organization have not exceeded the greater of $1 million or
2% of such charitable organizations consolidated gross
revenues. |
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For relationships not covered by the aforementioned categorical
standards, the determination of the existence of a material
relationship shall be made by those Board members who satisfy
the independence guidelines as defined above. |
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XI. |
Director Responsibilities |
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The Board represents and oversees the interests of stockholders
of the Company. Director responsibilities include: |
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review, approval and monitoring of critical business, financial
strategies and corporate objectives; |
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assessing major risks facing the Company and providing
strategies to ameliorate those risks; |
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overseeing processes designed to ensure Company compliance with
applicable laws, regulations and corporate policies; |
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adopt policies of ethical conduct and monitor compliance with
those policies; |
A-3
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monitoring the effectiveness of the Companys internal
controls; |
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review, approval and monitoring of major corporate actions; |
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overseeing processes designed to ensure the accuracy and
completeness of the companys financial reporting; |
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overseeing succession planning for the chief executive officer; |
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overseeing the compensation of the Companys principal
officers elected by the Board; and |
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providing counsel and assistance to the Companys
leadership. |
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XII. |
Stock Ownership Requirement for Directors |
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Effective January 1, 2004, each Director must own at least
three times their annual retainer within four years. This amount
is exclusive of any value attributable to options. New Board
members must meet this requirement within four years of their
initial service date. |
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XIII. |
Former Chairman/ Chief Executive Officers Board
Membership |
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The Board believes this arrangement is a matter to be decided in
each individual instance. When the Chairman of the Board or
Chief Executive Officer resigns from that position, he/she
should submit his/her resignation from the Board at the same
time. Whether the individual continues to serve on the Board is
a matter for discussion at that time with the new Chairman of
the Board or Chief Executive Officer and the Board. |
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XIV. |
Director Job Status Change |
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If the occupation, career, or principal business activity of a
director materially changes such that the directors
occupation, career or principal business activity is
significantly different from, or operates at a significantly
reduced level from, the roles and responsibilities described in
the proxy for the year in which the director was last elected as
a board member, the director shall offer to resign from the
Board. The Board shall determine whether to accept the
resignation or ask that the director continue to serve on the
Board. |
XV. Chief Executive
Officer Outside Board Membership
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The Chief Executive Officer shall obtain Board approval prior to
accepting a nomination to the board of directors of any
publicly-traded company. Additionally, the Chief Executive
Officer shall not serve as a member of the board of director of
more than one publicly-traded company other than the Company. |
XVI. Director Membership
on Additional Boards
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It is the policy of the Company that Company Directors do not
serve on the board of directors of more than five public
companies in addition to the Company. The Governance Committee
may recommend an exception to this policy to the Board of
Directors upon application of a Director, which application must
be submitted to the Governance Committee. The Governance/
Nomination Committee shall review the matter and make a
recommendation to the Board, which shall grant or deny the
exception, in its discretion. |
A-4
XVII. Term Limits
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No Director shall be nominated to serve for more than five,
three-year terms. |
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XVIII. |
Board Compensation |
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It is appropriate for the staff of the Company to report
periodically to the Compensation Committee on the status of
Board compensation in relation to other companies. As part of a
Directors total compensation and to create a direct
linkage with corporate performance, the Board believes that a
meaningful portion of a Directors compensation should be
held in restricted stock units (RSUs) or shares of the Company.
Changes in Board compensation, if any, should come at the
suggestion of the Compensation Committee, but with concurrence
by the Board. |
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XIX. |
Boards Interaction with Investors, Media and the
Public |
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The Chief Executive Officer and/or his/her designees are
authorized to speak on behalf of the Company. The Chairman of
the Board or individual Board members may, from time to time, be
asked by the Chief Executive Officer to speak on behalf of the
Company with various constituencies. |
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XX. |
Annual Meeting Participation |
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The Board considers it important for Board members to be present
and available to stockholders at the Companys Annual
Meeting. Directors are expected to attend the Companys
Annual Meeting. |
BOARD RELATIONSHIP TO SENIOR MANAGEMENT
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XXI. |
Regular Attendance of Non-Directors at Board Meetings |
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The Board welcomes the regular attendance at each Board meeting
of non-Board members who are in the most senior management
positions of the Company. |
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XXII. |
Board Access to Senior Management |
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Board members will have complete access to the Companys
management. It is assumed that Board members will use proper
judgment to be sure that this contact is not distracting to the
business operation of the Company. Accordingly, the Board is
encouraged to coordinate these communications with the Chief
Executive Officer. The attendance at Board meetings of
non-members of the Board will be at the discretion of the Board.
In the normal course of business, the Chairman of the Board, in
consultation with the Chief Executive Officer, will invite
appropriate management and non-directors to the meetings. |
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XXIII. |
Selection of Agenda Items for Board Meetings |
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The Chairman, in consultation with the Chief Executive Officer
will establish the agenda for each Board meeting and will review
the agenda with the Lead Director. Each Board member is free to
suggest the inclusion of items on the agenda. |
XXIV. Board Materials Distributed in
Advance
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Information and data that is important to the Boards
understanding of the business to be addressed at the meeting
will be distributed in writing to the Board before the Board
meets. Management will make every attempt to see that this
material is as complete and brief as possible while still
providing the desired information. The material should be
available 5 days in advance of the proposed or scheduled
date of the meeting. |
A-5
COMMITTEE MATTERS
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XXV. |
Number, Structure and Independence of Committees |
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From time to time, the Board may want to form a new committee or
disband a current committee depending upon the circumstances.
Each committee will have a charter approved by the Board of
Directors. The current committees are Finance and Audit,
Corporate Governance/Nominating, Executive, and
Compensation. Membership in the Corporate
Governance/Nominating, Compensation and Finance and Audit
Committees will consist only of Independent Directors. The
Chairman of the Board will be the Chairman of the Executive
Committee. |
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XXVI. |
Assignment and Rotation of Committee Members |
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The Board believes that the corporate governance process is
facilitated by an active and involved committee structure. The
Board believes that the periodic rotation of committee
chairmanship and membership is in the best interests of the
Company and its stockholders. The Chairman of the Board, after
consultation with other members of the Board, the Chief
Executive Officer and the Lead Director, will consider the
assignment of committee memberships and submit his/her nominees
to the full Board for approval. All Board members will
participate in the Committee structure of the Board. |
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The chairman of a committee, in consultation with the
appropriate members of the committee and management, will
develop the committee agendas. |
LEADERSHIP DEVELOPMENT
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XXVIII. |
Formal Evaluation of the Chairman and Chief Executive
Officer |
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The Chairman of the Board, with input from the Lead Director and
all Board members will manage the performance evaluation of the
Chief Executive Officer at least annually and communicate
his/her recommendations in writing to the Compensation
Committee. The Compensation Committee will prepare a written
recommendation for action by the full Board. |
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Similarly, the Lead Director, with input from all Directors,
will manage the performance evaluation of the Chairman of the
Board at least annually. |
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The Corporate Governance/ Nominating Committee will be
responsible for the coordination of an annual self-evaluation of
the Boards performance and procedures to determine whether
it and its committees are functioning effectively, and will
report the results of the evaluation to the Board. The Board
approved the Board Assessment Workplan attached hereto as
Annex B. |
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Succession planning will include policies and principles for CEO
selection and performance review, as well as policies regarding
succession in the event of an emergency or the retirement of the
chief executive officer. Succession planning should also be
considered on a continuing basis for all senior managers in the
event he/she may be unexpectedly unable to serve or found
unqualified for promotion. The Board, through the Governance/
Nominating Committee, will review the succession plans on an
annual basis. |
A-6
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The Board or a committee may seek legal or other expert advice
from a source independent of management. Generally, this
engagement would be with the knowledge of both the Chief
Executive Officer and the Chairman of the Board. |
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XXXII. |
Corporate Reporting and Communications Helpline |
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Any stockholder wishing to communicate with the Board of
Directors or with a specific director, may do so by accessing
the Companys helpline in the United States and Canada by
calling (800) 461-9330, or internationally by dialing
collect to (720) 514-4400. The information will be relayed
to the Companys Chief Governance Officer &
Corporate Secretary for coordination of delivery to the Board or
specific director. |
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The Company has established an anonymous reporting process via
the corporate helpline at (800) 461-9330 in the United
States and Canada, or a collect call can be placed
internationally at (720) 514-4400 for reporting by any
employee or stockholder of concerns relative to unethical or
inappropriate behavior on the part of a Company employee or
matters regarding suspected unethical financial practices. |
REVISION OF GUIDELINES
These guidelines may be altered from time to time by
recommendation of the Governance/ Nominating Committee and the
approval of the full Board.
A-7
ANNEX B
BOARD AND COMMITTEE ASSESSMENT PROCESS AND WORKPLAN
This Workplan has been approved by the Board of Directors to
guide the Board assessment process through various stages. The
plan includes several phases through 2006, which incorporate
enhancements and evolve to expand the scope of the yearly
assessment process. It is anticipated that this Plan will be
reviewed on an on-going basis to ensure that the Plan
encompasses opportunities for improvement as appropriate.
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Focus Group(s) |
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Individual Evaluator(s) |
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Feedback |
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I
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2003 |
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Board
Chairman and Lead Director |
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Board Members
Board Members |
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Full Board
Chairman and Lead Director |
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II
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2004 |
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Board
Board Committees
Chairman and Lead Director |
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Board Members
Members of Respective
Committees
Board Members |
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Full Board
Individual Committees
Chairman and Lead Director |
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III
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2005 |
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Board
Board Committees
Chairman and Lead Director |
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Board Members
Board Members and
Members of Respective
Committees
Board Members |
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Full Board
Full Board and Individual
Committees
Chairman and Lead Director |
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IV
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2006 |
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Board
Board Committees
Chairman and Lead Director
Individual Board Members |
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Board Members
Board Members and
Members of Respective
Committees
Board Members
All Board Members
(Peer Review) |
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Full Board
Full Board and Individual Committees
Full Board, Chairman and
Lead Director
Individual Board Members |
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B-1
ANNEX C
VALEANT PHARMACEUTICALS INTERNATIONAL
2006 EQUITY INCENTIVE PLAN
APPROVED BY BOARD ON: APRIL 14, 2006
APPROVED BY
STOCKHOLDERS: ,
200
TERMINATION DATE: APRIL 13, 2016
(a) Successor to and Continuation of Prior Plan.
This Plan was adopted by the Board on the Adoption Date to be
effective as provided in Section 11 on the Effective Date.
The Plan is intended as the successor to and continuation of the
ICN Pharmaceuticals, Inc. 2003 Equity Incentive Plan (the
Prior Plan). Following the Effective
Date of this Plan, no additional stock awards shall be granted
under the Prior Plan. Any shares remaining available for
issuance pursuant to the exercise of options or settlement of
stock awards under the Prior Plan shall be added to the share
reserve of this Plan and available for issuance pursuant to
Stock Awards granted hereunder. All outstanding stock awards
granted under the Prior Plan shall remain subject to the terms
of the Prior Plan, except that the Board may elect to extend one
or more of the features of the Plan to stock awards granted
under the Prior Plan. Any shares subject to outstanding stock
awards granted under the Prior Plan that expire or terminate for
any reason prior to exercise or settlement shall be added to the
share reserve of this Plan and become available for issuance
pursuant to Stock Awards granted hereunder. All Stock Awards
granted subsequent to the Effective Date of this Plan shall be
subject to the terms of this Plan.
(b) Eligible Award Recipients. The persons eligible
to receive Awards are Employees, Directors and Consultants.
(c) Available Awards. The Plan provides for the
grant of the following Awards: (i) Incentive Stock Options,
(ii) Nonstatutory Stock Options, (iii) Restricted
Stock Awards, (iv) Restricted Stock Unit Awards,
(v) Stock Appreciation Rights, (vi) Performance Stock
Awards, (vii) Performance Cash Awards, and
(viii) Other Stock Awards.
(d) General Purpose. The Company, by means of the
Plan, seeks to secure and retain the services of the group of
persons eligible to receive Awards as set forth in
Section 1(a), to provide incentives for such persons to
exert maximum efforts for the success of the Company and any
Affiliate and to provide a means by which such eligible
recipients may be given an opportunity to benefit from increases
in value of the Common Stock through the granting of Stock
Awards.
(a) Administration by Board. The Board shall
administer the Plan unless and until the Board delegates
administration of the Plan to a Committee or Committees, as
provided in Section 2(c).
(b) Powers of Board. The Board shall have the power,
subject to, and within the limitations of, the express
provisions of the Plan:
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(i) To determine from time to time (A) which of the
persons eligible under the Plan shall be granted Awards;
(B) when and how each Award shall be granted; (C) what
type or combination of types of Award shall be granted;
(D) the provisions of each Award granted (which need not be
identical), including the time or times when a person shall be
permitted to receive cash or Common Stock pursuant to a Stock
Award; and (E) the number of shares of Common Stock with
respect to which a Stock Award shall be granted to each such
person. |
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(ii) To construe and interpret the Plan and Awards granted
under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise
of this power, may correct any defect, omission or inconsistency
in the Plan or in any Stock Award Agreement or in the written |
C-1
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terms of a Performance Cash Award, in a manner and to the extent
it shall deem necessary or expedient to make the Plan or Award
fully effective. |
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(iii) To settle all controversies regarding the Plan and
Awards granted under it. |
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(iv) To accelerate the time at which a Stock Award may
first be exercised or the time during which an Award or any part
thereof will vest in accordance with the Plan, notwithstanding
the provisions in the Award stating the time at which it may
first be exercised or the time during which it will vest. |
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(v) To suspend or terminate the Plan at any time.
Suspension or termination of the Plan shall not impair rights
and obligations under any Stock Award granted while the Plan is
in effect except with the written consent of the affected
Participant. |
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(vi) To amend the Plan in any respect the Board deems
necessary or advisable, including, without limitation, relating
to Incentive Stock Options and certain nonqualified deferred
compensation under 409A of the Code and/or to bring the Plan or
Stock Awards granted under the Plan into compliance therewith,
subject to the limitations, if any, of applicable law. However,
except as provided in Section 9(a) relating to
Capitalization Adjustments, stockholder approval shall be
required for any amendment of the Plan that either
(i) materially increases the number of shares of Common
Stock available for issuance under the Plan,
(ii) materially expands the class of individuals eligible
to receive Awards under the Plan, (iii) materially
increases the benefits accruing to Participants under the Plan
or materially reduces the price at which shares of Common Stock
may be issued or purchased under the Plan, (iv) materially
extends the term of the Plan, or (v) expands the types of
Awards available for issuance under the Plan, but only to the
extent required by applicable law or listing requirements.
Except as provided herein, rights under any Award granted before
amendment of the Plan shall not be impaired by any amendment of
the Plan unless (i) the Company requests the consent of the
affected Participant, and (ii) such Participant consents in
writing. |
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(vii) To submit any amendment to the Plan for stockholder
approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of
(i) Section 162(m) of the Code and the regulations
thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of
compensation paid to Covered Employees,
(ii) Section 422 of the Code regarding Incentive Stock
Options or
(iii) Rule 16b-3. |
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(viii) To approve forms of Award Agreements for use under
the Plan and to amend the terms of any one or more Awards or
stock awards granted under the Prior Plan, including, but not
limited to, amendments to provide terms more favorable than
previously provided in the Award Agreement, subject to any
specified limits in the Plan that are not subject to Board
discretion; provided however, that, the rights under any
Award shall not be impaired by any such amendment unless
(i) the Company requests the consent of the affected
Participant, and (ii) such Participant consents in writing.
Notwithstanding the foregoing, subject to the limitations of
applicable law, if any, and without the affected
Participants consent, the Board may amend the terms of any
one or more Awards if necessary to maintain the qualified status
of the Award as an Incentive Stock Option or to bring the Award
into compliance with Code Section 409A and the related
guidance thereunder. |
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(ix) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the
best interests of the Company and that are not in conflict with
the provisions of the Plan or Awards. |
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(x) To adopt such procedures and sub-plans as are necessary
or appropriate to permit participation in the Plan by Employees,
Directors or Consultants who are foreign nationals or employed
outside the United States. |
(c) Delegation to Committee.
(i) General. The Board may delegate some or all of
the administration of the Plan to a Committee or Committees. If
administration of the Plan is delegated to a Committee, the
Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board that
have been
C-2
delegated to the Committee, including the power to delegate to a
subcommittee of the Committee any of the administrative powers
the Committee is authorized to exercise (and references in this
Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may retain the
authority to concurrently administer the Plan with the Committee
and may, at any time, revest in the Board some or all of the
powers previously delegated.
(ii) Section 162(m) and
Rule 16b-3
Compliance. In the sole discretion of the Board, the
Committee may consist solely of two or more Outside Directors,
in accordance with Section 162(m) of the Code, or solely of
two or more Non-Employee Directors, in accordance with
Rule 16b-3. In
addition, the Board or the Committee, in its sole discretion,
may (A) delegate to a Committee of Directors who need not
be Outside Directors the authority to grant Awards to eligible
persons who are either (I) not then Covered Employees and
are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or
(II) not persons with respect to whom the Company wishes to
comply with Section 162(m) of the Code, or
(B) delegate to a Committee of Directors who need not be
Non-Employee Directors the authority to grant Stock Awards to
eligible persons who are not then subject to Section 16 of
the Exchange Act.
(d) Delegation to an Officer. The Board may delegate
to one or more Officers the authority to do one or both of the
following (i) designate Employees who are not Officers to
be recipients of Options (and, to the extent permitted by
applicable law, other Stock Awards) and the terms thereof, and
(ii) determine the number of shares of Common Stock to be
subject to such Stock Awards granted to such Employees;
provided, however, that the Board resolutions regarding
such delegation shall specify the total number of shares of
Common Stock that may be subject to the Stock Awards granted by
such Officer and that such Officer may not grant a Stock Award
to himself or herself. Notwithstanding anything to the contrary
in this Section 2(d), the Board may not delegate to an
Officer authority to determine the Fair Market Value of the
Common Stock pursuant to Section 13(v)(ii) below.
(e) Effect of Boards Decision. All
determinations, interpretations and constructions made by the
Board in good faith shall not be subject to review by any person
and shall be final, binding and conclusive on all persons.
(f) Cancellation and Re-Grant of Stock Awards.
Neither the Board nor any Committee shall have the authority to:
(i) reprice any outstanding Stock Awards under the Plan, or
(ii) cancel and re-grant any outstanding Stock Awards under
the Plan, unless the stockholders of the Company have approved
such an action within twelve (12) months prior to such an
event.
(g) Arbitration. Any dispute or claim concerning any
Stock Awards granted (or not granted) pursuant to the Plan or
any disputes or claims relating to or arising out of the Plan
shall be fully, finally and exclusively resolved by binding and
confidential arbitration conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association in
Orange County, California. The Company and the Participant shall
each pay 50% of the arbitration fees. In addition to any other
relief, the arbitrator may award to the prevailing party
recovery of its attorneys fees and costs. By accepting a
Stock Award, Participants and the Company waive their respective
rights to have any such disputes or claims tried by a judge or
jury.
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Shares Subject to the
Plan. |
(a) Share Reserve. Subject to the provisions of
Section 9(a) relating to Capitalization Adjustments, the
aggregate number of shares of Common Stock that may be issued
pursuant to Stock Awards after the Effective Date shall consist
of the sum of (i) the number of unallocated shares
remaining available for issuance under the Prior Plan as of the
Effective Date, (ii) an additional four million two hundred
thousand (4,200,000) shares to be approved by the stockholders
at the 2006 Annual Meeting as part of the approval of this Plan
and (iii)the number of shares added to the reserve pursuant to
Section 3(b) (the Share Reserve). For clarity,
the limitation in this subsection 3(a) is a limitation in
the number of shares of the Companys common stock that may
be issued pursuant to the Plan. Accordingly, this
subsection 3(a) does not limit the granting of Stock Awards
except as provided in subsection 7(a). Shares may be issued
in connection with a merger or acquisition as permitted by NASD
Rule 4350(i)(1)(A)(iii) or, if applicable, NYSE Listed
C-3
Company Manual Section 303A.08, or AMEX Company Guide
Section 711 and such issuance shall not reduce the number
of shares available for issuance under the Plan. Furthermore, if
a Stock Award (i) expires or otherwise terminates without
having been exercised in full or (ii) is settled in cash
(i.e., the holder of the Stock Award receives cash rather
than stock), such expiration, termination or settlement shall
not reduce (or otherwise offset) the number of shares of the
Companys common stock that may be issued pursuant to the
Plan.
(b) Additions to the Share Reserve. The share
reserve under the Plan also shall be increased from time to time
by a number of shares equal to the number of shares of Common
Stock that (i) are issuable pursuant to options or stock
awards outstanding under the Prior Plan as of the Effective Date
of the Plan and (ii) but for the termination of the Prior
Plan as of the Effective Date, would otherwise have reverted to
the share reserve of the Prior Plan pursuant to the provisions
thereof.
(c) Reversion of Shares to the Share Reserve. If any
shares of common stock issued pursuant to a Stock Award are
forfeited back to the Company because of the failure to meet a
contingency or condition required to vest such shares in the
Participant, then the shares which are forfeited shall revert to
and again become available for issuance under the Plan. Also,
any shares reacquired by the Company pursuant to
subsection 8(g) or as consideration for the exercise of an
Option shall again become available for issuance under the Plan.
Notwithstanding the provisions of this subsection 3(c), any
such shares shall not be subsequently issued pursuant to the
exercise of Incentive Stock Options.
(d) Incentive Stock Option Limit. Notwithstanding
anything to the contrary in this Section 3(d), subject to
the provisions of Section 9(a) relating to Capitalization
Adjustments the aggregate maximum number of shares of Common
Stock that may be issued pursuant to the exercise of Incentive
Stock Options shall be the number of shares of Common Stock in
the Share Reserve.
(e) Section 162(m) Limitation on Annual Grants.
Subject to the provisions of Section 9(a) relating to
Capitalization Adjustments, at such time as the Company may be
subject to the applicable provisions of Section 162(m) of
the Code, no Employee shall be eligible to be granted during any
calendar year Stock Awards whose value is determined by
reference to an increase over an exercise or strike price of at
least one hundred percent (100%) of the Fair Market Value of the
Common Stock on the date the Stock Award is granted covering
more than One Million (1,000,000) shares of Common Stock.
(f) Source of Shares. The stock issuable under the
Plan shall be shares of authorized but unissued or reacquired
Common Stock, including shares repurchased by the Company on the
market or otherwise.
(a) Eligibility for Specific Stock Awards. Incentive
Stock Options may be granted only to employees of the Company or
a parent corporation or subsidiary corporation (as such terms
are defined in Code Sections 424(e) and (f)). Stock Awards
other than Incentive Stock Options may be granted to Employees,
Directors and Consultants.
(b) Ten Percent Stockholders. A Ten Percent
Stockholder shall not be granted an Incentive Stock Option
unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of the Common Stock
on the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Consultants. A Consultant shall not be eligible
for the grant of a Stock Award only if, at the time of grant, a
Form S-8
Registration Statement under the Securities Act
(Form S-8)
is not available to register either the offer or the sale of the
Companys securities to such Consultant because of the
nature of the services that the Consultant is providing to the
Company, because the Consultant is not a natural person, or
because of any other rule governing the use of
Form S-8.
C-4
Each Option shall be in such form and shall contain such terms
and conditions as the Board shall deem appropriate. All Options
shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and, if
certificates are issued, a separate certificate or certificates
shall be issued for shares of Common Stock purchased on exercise
of each type of Option. If an Option is not specifically
designated as an Incentive Stock Option, then the Option shall
be a Nonstatutory Stock Option. The provisions of separate
Options need not be identical; provided, however, that
each Option Agreement shall include (through incorporation of
provisions hereof by reference in the Option Agreement or
otherwise) the substance of each of the following provisions:
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(a) Term. Subject to the provisions of
Section 4(b) regarding Ten Percent Stockholders, no Option
shall be exercisable after the expiration of ten (10) years
from the date of its grant or such shorter period specified in
the Option Agreement. |
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(b) Exercise Price. Subject to the provisions of
Section 4(b) regarding Ten Percent Stockholders, the
exercise price of each Option shall be not less than one hundred
percent (100%) of the Fair Market Value of the Common Stock
subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Option may be granted with an
exercise price lower than one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Option if such
Option is granted pursuant to an assumption or substitution for
another option in a manner consistent with the provisions of
Section 424(a) of the Code (whether or not such options are
Incentive Stock Options). |
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(c) Consideration. The purchase price of Common
Stock acquired pursuant to the exercise of an Option shall be
paid, to the extent permitted by applicable law and as
determined by the Board in its sole discretion, by any
combination of the methods of payment set forth below. The Board
shall have the authority to grant Options that do not permit all
of the following methods of payment (or otherwise restrict the
ability to use certain methods) and to grant Options that
require the consent of the Company to utilize a particular
method of payment. The methods of payment permitted by this
Section 5(c) are: |
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(i) by cash, check, bank draft or money order payable to
the Company; |
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(ii) pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board
that, prior to the issuance of the stock subject to the Option,
results in either the receipt of cash (or check) by the Company
or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds; |
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(iii) by delivery to the Company (either by actual delivery
or attestation) of shares of Common Stock; |
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(iv) by a net exercise arrangement pursuant to
which the Company will reduce the number of shares of Common
Stock issued upon exercise by the largest whole number of shares
with a Fair Market Value that does not exceed the aggregate
exercise price; provided, however, that the Company shall
accept a cash or other payment from the Participant to the
extent of any remaining balance of the aggregate exercise price
not satisfied by such reduction in the number of whole shares to
be issued; provided, further, that shares of Common Stock
will no longer be outstanding under an Option and will not be
exercisable thereafter to the extent that (A) shares are
used to pay the exercise price pursuant to the net
exercise, (B) shares are delivered to the Participant
as a result of such exercise, and (C) shares are withheld
to satisfy tax withholding obligations; or |
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(v) in any other form of legal consideration that may be
acceptable to the Board. |
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(d) Transferability of Options. The Board may, in
its sole discretion, impose such limitations on the
transferability of Options as the Board shall determine. In the
absence of such a determination by the Board to the contrary,
the following restrictions on the transferability of Options
shall apply: |
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(i) Restrictions on Transfer. An Option shall not be
transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the
Optionholder only by |
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the Optionholder; provided, however, that the Board may, in its
sole discretion, permit transfer of the Option in a manner
consistent with applicable tax and securities laws upon the
Optionholders request. |
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(ii) Domestic Relations Orders. Notwithstanding the
foregoing, an Option may be transferred pursuant to a domestic
relations order, provided, however, that an Incentive
Stock Option may be deemed to be a Nonqualified Stock Option as
a result of such transfer. |
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(iii) Beneficiary Designation. Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to
the Company, in a form provided by or otherwise satisfactory to
the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to
exercise the Option. |
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(e) Vesting Generally. The total number of shares of
Common Stock subject to an Option may vest and therefore become
exercisable in periodic installments that may or may not be
equal. The Option may be subject to such other terms and
conditions on the time or times when it may or may not be
exercised (which may be based on the satisfaction of Performance
Goals or other criteria) as the Board may deem appropriate. The
vesting provisions of individual Options may vary. The
provisions of this Section 5(e) are subject to any Option
provisions governing the minimum number of shares of Common
Stock as to which an Option may be exercised. |
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(f) Termination of Continuous Service. Except as
otherwise provided in the applicable Option Agreement or other
agreement between the Optionholder and the Company, in the event
that an Optionholders Continuous Service terminates (other
than for Cause or upon the Optionholders death or
Disability), the Optionholder may exercise his or her Option (to
the extent that the Optionholder was entitled to exercise such
Option as of the date of termination of Continuous Service) but
only within such period of time ending on the earlier of
(i) the date three (3) months following the
termination of the Optionholders Continuous Service (or
such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after
termination of Continuous Service, the Optionholder does not
exercise his or her Option within the time specified herein or
in the Option Agreement (as applicable), the Option shall
terminate. |
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(g) Disability of Optionholder. In the event that an
Optionholders Continuous Service terminates as a result of
the Optionholders Disability, the Optionholder may
exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of
termination of Continuous Service), but only within such period
of time ending on the earlier of (i) the date twelve
(12) months following such termination of Continuous
Service (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after
termination of Continuous Service, the Optionholder does not
exercise his or her Option within the time specified herein or
in the Option Agreement (as applicable), the Option shall
terminate. |
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(h) Death of Optionholder. In the event that
(i) an Optionholders Continuous Service terminates as
a result of the Optionholders death, or (ii) the
Optionholder dies within the period (if any) specified in the
Option Agreement after the termination of the
Optionholders Continuous Service for a reason other than
death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date
of death) by the Optionholders estate, by a person who
acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the option
upon the Optionholders death, but only within the period
ending on the earlier of (i) the date twelve
(12) months following the date of death (or such longer or
shorter period specified in the Option Agreement), or
(ii) the expiration of the term of such Option as set forth
in the Option Agreement. If, after the Optionholders
death, the Option is not exercised within the time specified
herein or in the Option Agreement (as applicable), the Option
shall terminate. |
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(i) Extension of Termination Date. Unless otherwise
provided in an Optionholders Option Agreement, if the
exercise of the Option following the termination of the
Optionholders Continuous |
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Service (other than for Cause) would be prohibited at any time
solely because the issuance of shares of Common Stock would
violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the
expiration of a period equal to the post-termination exercise
period described in Section 5(f), 5(g) or 5(h) above after
the termination of the Optionholders Continuous Service
during which the exercise of the Option would not be in
violation of such registration requirements, or (ii) the
expiration of the term of the Option as set forth in the Option
Agreement. In addition, unless otherwise provided in an
Optionholders Option Agreement, if the sale of the Common
Stock received upon exercise of an Option following the
termination of the Optionholders Continuous Service (other
than for Cause) would violate the Companys insider trading
policy, then the Option shall terminate on the earlier of
(i) the expiration of a period equal to the
post-termination exercise period described in Section 5(f),
5(g) or 5(h) above after the termination of the
Optionholders Continuous Service during which the exercise
of the Option would not be in violation of the Companys
insider trading policy, (ii) the 15th day of the third
month after the date on which the Option would cease to be
exercisable but for this Section 5(i), or such longer
period as would not cause the Option to become subject to
Section 409A(a)(1) of the Code; or (iii) the
expiration of the term of the Option as set forth in the Option
Agreement. |
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(j) Termination for Cause. Except as explicitly
provided otherwise in an Optionholders Option Agreement,
in the event that an Optionholders Continuous Service is
terminated for Cause, the Option shall terminate upon the
termination date of such Optionholders Continuous Service,
and the Optionholder shall be prohibited from exercising his or
her Option from and after the time of such termination of
Continuous Service. |
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(k) Non-Exempt Employees. No Option granted to an
Employee that is a non-exempt employee for purposes of the Fair
Labor Standards Act shall be first exercisable for any shares of
Common Stock until at least six months following the date of
grant of the Option. The foregoing provision is intended to
operate so that any income derived by a non-exempt employee in
connection with the exercise or vesting of an Option will be
exempt from his or her regular rate of pay. |
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6. |
Provisions of Stock
Awards other than Options. |
(a) Restricted Stock Awards. Each Restricted Stock
Award Agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. To the
extent consistent with the Companys Bylaws, at the
Boards election, shares of Common Stock may be
(x) held in book entry form subject to the Companys
instructions until any restrictions relating to the Restricted
Stock Award lapse; or (y) evidenced by a certificate, which
certificate shall be held in such form and manner as determined
by the Board. The terms and conditions of Restricted Stock Award
Agreements may change from time to time, and the terms and
conditions of separate Restricted Stock Award Agreements need
not be identical, provided, however, that each Restricted
Stock Award Agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:
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(i) Consideration. A Restricted Stock Award may be
awarded in consideration for (A) past or future services
actually rendered to the Company or an Affiliate, or
(B) any other form of legal consideration that may be
acceptable to the Board in its sole discretion and permissible
under applicable law. |
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(ii) Vesting. Shares of Common Stock awarded under
the Restricted Stock Award Agreement may be subject to
forfeiture to the Company in accordance with a vesting schedule
to be determined by the Board. |
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(iii) Termination of Participants Continuous
Service. In the event a Participants Continuous
Service terminates, the Company may receive via a forfeiture
condition, any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination
of Continuous Service under the terms of the Restricted Stock
Award Agreement. |
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(iv) Transferability. Rights to acquire shares of
Common Stock under the Restricted Stock Award Agreement shall be
transferable by the Participant only upon such terms and
conditions as are set forth in the Restricted Stock Award
Agreement, as the Board shall determine in its sole discretion,
so long as Common Stock awarded under the Restricted Stock Award
Agreement remains subject to the terms of the Restricted Stock
Award Agreement. |
(b) Restricted Stock Unit Awards. Each Restricted
Stock Unit Award Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of Restricted Stock Unit
Award Agreements may change from time to time, and the terms and
conditions of separate Restricted Stock Unit Award Agreements
need not be identical, provided, however, that each
Restricted Stock Unit Award Agreement shall include (through
incorporation of the provisions hereof by reference in the
Agreement or otherwise) the substance of each of the following
provisions:
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(i) Consideration. At the time of grant of a
Restricted Stock Unit Award, the Board will determine the
consideration, if any, to be paid by the Participant upon
delivery of each share of Common Stock subject to the Restricted
Stock Unit Award. The consideration to be paid (if any) by the
Participant for each share of Common Stock subject to a
Restricted Stock Unit Award may be paid in any form of legal
consideration that may be acceptable to the Board in its sole
discretion and permissible under applicable law. |
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(ii) Vesting. At the time of the grant of a
Restricted Stock Unit Award, the Board may impose such
restrictions or conditions to the vesting of the Restricted
Stock Unit Award as it, in its sole discretion, deems
appropriate. |
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(iii) Payment. A Restricted Stock Unit Award may be
settled by the delivery of shares of Common Stock, their cash
equivalent, any combination thereof or in any other form of
consideration, as determined by the Board and contained in the
Restricted Stock Unit Award Agreement. |
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(iv) Additional Restrictions. At the time of the
grant of a Restricted Stock Unit Award, the Board, as it deems
appropriate, may impose such restrictions or conditions that
delay the delivery of the shares of Common Stock (or their cash
equivalent) subject to a Restricted Stock Unit Award to a time
after the vesting of such Restricted Stock Unit Award. |
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(v) Dividend Equivalents. Dividend equivalents may
be credited in respect of shares of Common Stock covered by a
Restricted Stock Unit Award, as determined by the Board and
contained in the Restricted Stock Unit Award Agreement. At the
sole discretion of the Board, such dividend equivalents may be
converted into additional shares of Common Stock covered by the
Restricted Stock Unit Award in such manner as determined by the
Board. Any additional shares covered by the Restricted Stock
Unit Award credited by reason of such dividend equivalents will
be subject to all the terms and conditions of the underlying
Restricted Stock Unit Award Agreement to which they relate. |
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(vi) Termination of Participants Continuous
Service. Except as otherwise provided in the applicable
Restricted Stock Unit Award Agreement, such portion of the
Restricted Stock Unit Award that has not vested will be
forfeited upon the Participants termination of Continuous
Service. |
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(vii) Compliance with Section 409A of the Code.
Notwithstanding anything to the contrary set forth herein, any
Restricted Stock Unit Award granted under the Plan that is not
exempt from the requirements of Section 409A of the Code
shall contain such provisions so that such Restricted Stock Unit
Award will comply with the requirements of Section 409A of
the Code. Such restrictions, if any, shall be determined by the
Board and contained in the Restricted Stock Unit Award Agreement
evidencing such Restricted Stock Unit Award. For example, such
restrictions may include, without limitation, a requirement that
any Common Stock that is to be issued in a year following the
year in which the Restricted Stock Unit Award vests must be
issued in accordance with a fixed pre-determined schedule. |
(c) Stock Appreciation Rights. Each Stock
Appreciation Right Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem
appropriate. Stock Appreciation Rights may
C-8
be granted as stand-alone Stock Awards or in tandem with other
Stock Awards. The terms and conditions of Stock Appreciation
Right Agreements may change from time to time, and the terms and
conditions of separate Stock Appreciation Right Agreements need
not be identical; provided, however, that each Stock
Appreciation Right Agreement shall include (through
incorporation of the provisions hereof by reference in the
Agreement or otherwise) the substance of each of the following
provisions:
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(i) Term. No Stock Appreciation Right shall be
exercisable after the expiration of ten (10) years from the
date of its grant or such shorter period specified in the Stock
Appreciation Right Agreement. |
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(ii) Strike Price. Each Stock Appreciation Right
will be denominated in shares of Common Stock equivalents. The
strike price of each Stock Appreciation Right shall not be less
than one hundred percent (100%) of the Fair Market Value of the
Common Stock equivalents subject to the Stock Appreciation Right
on the date of grant. |
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(iii) Calculation of Appreciation. The appreciation
distribution payable on the exercise of a Stock Appreciation
Right will be not greater than an amount equal to the excess of
(A) the aggregate Fair Market Value (on the date of the
exercise of the Stock Appreciation Right) of a number of shares
of Common Stock equal to the number of share of Common Stock
equivalents in which the Participant is vested under such Stock
Appreciation Right, and with respect to which the Participant is
exercising the Stock Appreciation Right on such date, over
(B) the strike price that will be determined by the Board
at the time of grant of the Stock Appreciation Right. |
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(iv) Vesting. At the time of the grant of a Stock
Appreciation Right, the Board may impose such restrictions or
conditions to the vesting of such Stock Appreciation Right as
it, in its sole discretion, deems appropriate. |
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(v) Exercise. To exercise any outstanding Stock
Appreciation Right, the Participant must provide written notice
of exercise to the Company in compliance with the provisions of
the Stock Appreciation Right Agreement evidencing such Stock
Appreciation Right. |
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(vi) Payment. The appreciation distribution in
respect to a Stock Appreciation Right may be paid in Common
Stock, in cash, in any combination of the two or in any other
form of consideration, as determined by the Board and contained
in the Stock Appreciation Right Agreement evidencing such Stock
Appreciation Right. |
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(vii) Termination of Continuous Service. In the
event that a Participants Continuous Service terminates
(other than for Cause), the Participant may exercise his or her
Stock Appreciation Right (to the extent that the Participant was
entitled to exercise such Stock Appreciation Right as of the
date of termination) but only within such period of time ending
on the earlier of (A) the date three (3) months
following the termination of the Participants Continuous
Service (or such longer or shorter period specified in the Stock
Appreciation Right Agreement), or (B) the expiration of the
term of the Stock Appreciation Right as set forth in the Stock
Appreciation Right Agreement. If, after termination, the
Participant does not exercise his or her Stock Appreciation
Right within the time specified herein or in the Stock
Appreciation Right Agreement (as applicable), the Stock
Appreciation Right shall terminate. |
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(viii) Extension of Termination Date. Unless
otherwise provided in a Participants Stock Appreciation
Right Agreement, if the exercise of the Stock Appreciation Right
following the termination of the Participants Continuous
Service (other than for Cause) would be prohibited at any time
solely because the issuance of shares of Common Stock would
violate the registration requirements under the Securities Act,
then the Stock Appreciation Right shall terminate on the earlier
of (i) the expiration of a period equal to the
post-termination exercise period described in
Section 6(c)(vii) above after the termination of the
Participants Continuous Service during which the exercise
of the Stock Appreciation Right would not be in violation of
such registration requirements, or (ii) the expiration of
the term of the Stock Appreciation Right as set forth in the
Stock Appreciation Right Agreement. In addition, unless
otherwise provided in a Participants Stock Appreciation
Right Agreement, if the sale of the Common Stock received upon
exercise of a Stock Appreciation Right following the termination
of the Participants Continuous Service (other than for
Cause) would violate the Companys insider trading policy,
then the |
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Stock Appreciation Right shall terminate on the earlier of
(i) the expiration of a period equal to the
post-termination exercise period described in
Section 6(c)(vii) above after the termination of the
Participants Continuous Service during which the exercise
of the Stock Appreciation Right would not be in violation of the
Companys insider trading policy, (ii) the
15th day of the third month after the date on which the
Stock Appreciation Right would cease to be exercisable but for
this Section 6(c)(viii), or such longer period as would not
cause the Stock Appreciation Right to become subject to
Section 409A(a)(1) of the Code; or (iii) the
expiration of the term of the Stock Appreciation Right as set
forth in the Stock Appreciation Right Agreement. |
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(ix) Termination for Cause. Except as explicitly
provided otherwise in an Participants Stock Appreciation
Right Agreement, in the event that a Participants
Continuous Service is terminated for Cause, the Stock
Appreciation Right shall terminate upon the termination date of
such Participants Continuous Service, and the Participant
shall be prohibited from exercising his or her Stock
Appreciation Right from and after the time of such termination
of Continuous Service. |
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(x) Compliance with Section 409A of the Code.
Notwithstanding anything to the contrary set forth herein, any
Stock Appreciation Rights granted under the Plan that are not
exempt from the requirements of Section 409A of the Code
shall contain such provisions so that such Stock Appreciation
Rights will comply with the requirements of Section 409A of
the Code. Such restrictions, if any, shall be determined by the
Board and contained in the Stock Appreciation Right Agreement
evidencing such Stock Appreciation Right. For example, such
restrictions may include, without limitation, a requirement that
a Stock Appreciation Right that is to be paid wholly or partly
in cash must be exercised and paid in accordance with a fixed
pre-determined schedule. |
(d) Performance Awards.
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(i) Performance Stock Awards. A Performance Stock
Award is a Stock Award that may be granted, may vest, or may be
exercised based upon the attainment during a Performance Period
of certain Performance Goals. A Performance Stock Award may, but
need not, require the completion of a specified period of
Continuous Service. The length of any Performance Period, the
Performance Goals to be achieved during the Performance Period,
and the measure of whether and to what degree such Performance
Goals have been attained shall be conclusively determined by the
Committee in its sole discretion. The maximum number of shares
that may be granted to any Participant in a calendar year
attributable to Stock Awards described in this
Section 6(d)(i) shall not exceed One Million (1,000,000)
shares of Common Stock. In addition, to the extent permitted by
applicable law and the applicable Award Agreement, the Board may
determine that cash may be used in payment of Performance Stock
Awards. |
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(ii) Performance Cash Awards. A Performance Cash
Award is a cash award that may be granted upon the attainment
during a Performance Period of certain Performance Goals. A
Performance Cash Award may also require the completion of a
specified period of Continuous Service. The length of any
Performance Period, the Performance Goals to be achieved during
the Performance Period, and the measure of whether and to what
degree such Performance Goals have been attained shall be
conclusively determined by the Committee in its sole discretion.
The maximum value that may be granted to any Participant in a
calendar year attributable to cash awards described in this
Section 6(d)(i) shall not exceed Three Million dollars
($3,000,000). The Board may provide for or, subject to such
terms and conditions as the Board may specify, may permit a
Participant to elect for, the payment of any Performance Cash
Award to be deferred to a specified date or event. The Committee
may specify the form of payment of Performance Cash Awards,
which may be cash or other property, or may provide for a
Participant to have the option for his or her Performance Cash
Award, or such portion thereof as the Board may specify, to be
paid in whole or in part in cash or other property. In addition,
to the extent permitted by applicable law and the applicable
Award Agreement, the Board may determine that Common Stock
authorized under this Plan may be used in payment of Performance
Cash Awards, including additional shares in excess of the
Performance Cash Award as an inducement to hold shares of Common
Stock. |
C-10
(e) Other Stock Awards. Other forms of Stock Awards
valued in whole or in part by reference to, or otherwise based
on, Common Stock may be granted either alone or in addition to
Stock Awards provided for under Section 5 and the preceding
provisions of this Section 6. Subject to the provisions of
the Plan, the Board shall have sole and complete authority to
determine the persons to whom and the time or times at which
such Other Stock Awards will be granted, the number of shares of
Common Stock (or the cash equivalent thereof) to be granted
pursuant to such Other Stock Awards and all other terms and
conditions of such Other Stock Awards.
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7. |
Covenants of the
Company. |
(a) Availability of Shares. During the terms of the
Stock Awards, the Company shall keep available at all times the
number of shares of Common Stock required to satisfy such Stock
Awards.
(b) Securities Law Compliance. The Company shall
seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to
grant Stock Awards and to issue and sell shares of Common Stock
upon exercise of the Stock Awards; provided, however,
that this undertaking shall not require the Company to register
under the Securities Act the Plan, any Stock Award or any Common
Stock issued or issuable pursuant to any such Stock Award. If,
after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority that
counsel for the Company deems necessary for the lawful issuance
and sale of Common Stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell Common
Stock upon exercise of such Stock Awards unless and until such
authority is obtained.
(c) No Obligation to Notify. The Company shall have
no duty or obligation to any holder of a Stock Award to advise
such holder as to the time or manner of exercising such Stock
Award. Furthermore, the Company shall have no duty or obligation
to warn or otherwise advise such holder of a pending termination
or expiration of a Stock Award or a possible period in which the
Stock Award may not be exercised. The Company has no duty or
obligation to minimize the tax consequences of a Stock Award to
the holder of such Stock Award.
(a) Use of Proceeds from Sales of Common Stock.
Proceeds from the sale of shares of Common Stock pursuant to
Stock Awards shall constitute general funds of the Company.
(b) Corporate Action Constituting Grant of Stock
Awards. Corporate action constituting a grant by the Company
of a Stock Award to any Participant shall be deemed completed as
of the date of such corporate action, unless otherwise
determined by the Board, regardless of when the instrument,
certificate, or letter evidencing the Stock Award is
communicated to, or actually received or accepted by, the
Participant.
(c) Stockholder Rights. No Participant shall be
deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares of Common Stock subject to
such Stock Award unless and until such Participant has exercised
the Stock Award pursuant to its terms and the Participant shall
not be deemed to be a stockholder of record until the issuance
of the Common Stock pursuant to such exercise has been entered
into the books and records of the Company.
(d) No Employment or Other Service Rights. Nothing
in the Plan, any Stock Award Agreement or other instrument
executed thereunder or in connection with any Award granted
pursuant to the Plan shall confer upon any Participant any right
to continue to serve the Company or an Affiliate in the capacity
in effect at the time the Stock Award was granted or shall
affect the right of the Company or an Affiliate to terminate
(i) the employment of an Employee with or without notice
and with or without cause, (ii) the service of a Consultant
pursuant to the terms of such Consultants agreement with
the Company or an Affiliate, or (iii) the service of a
Director pursuant to the Bylaws of the Company or an Affiliate,
and any applicable provisions of the corporate law of the state
in which the Company or the Affiliate is incorporated, as the
case may be.
C-11
(e) Incentive Stock Option $100,000 Limitation. To
the extent that the aggregate Fair Market Value (determined at
the time of grant) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of
the Company and any Affiliates) exceeds one hundred thousand
dollars ($100,000), the Options or portions thereof that exceed
such limit (according to the order in which they were granted)
shall be treated as Nonstatutory Stock Options, notwithstanding
any contrary provision of the applicable Option Agreement(s).
(f) Investment Assurances. The Company may require a
Participant, as a condition of exercising or acquiring Common
Stock under any Stock Award, (i) to give written assurances
satisfactory to the Company as to the Participants
knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced
in financial and business matters and that he or she is capable
of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock
Award; and (ii) to give written assurances satisfactory to
the Company stating that the Participant is acquiring Common
Stock subject to the Stock Award for the Participants own
account and not with any present intention of selling or
otherwise distributing the Common Stock. The foregoing
requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (x) the issuance of
the shares upon the exercise or acquisition of Common Stock
under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act, or
(y) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities
laws. The Company may, upon advice of counsel to the Company,
place legends on stock certificates issued under the Plan as
such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to,
legends restricting the transfer of the Common Stock.
(g) Withholding Obligations. Unless prohibited by
the terms of a Stock Award Agreement, the Company may, in its
sole discretion, satisfy any federal, state or local tax
withholding obligation relating to an Award by any of the
following means (in addition to the Companys right to
withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) causing the
Participant to tender a cash payment; (ii) withholding
shares of Common Stock from the shares of Common Stock issued or
otherwise issuable to the Participant in connection with the
Award; (iii) withholding cash from an Award settled in
cash; or (iv) by such other method as may be set forth in
the Award Agreement.
(h) Electronic Delivery. Any reference herein to a
written agreement or document shall include any
agreement or document delivered electronically or posted on the
Companys intranet.
(i) Deferrals. To the extent permitted by applicable
law, the Board, in its sole discretion, may determine that the
delivery of Common Stock or the payment of cash, upon the
exercise, vesting or settlement of all or a portion of any Award
may be deferred and may establish programs and procedures for
deferral elections to be made by Participants. Deferrals by
Participants will be made in accordance with Section 409A
of the Code. Consistent with Section 409A of the Code, the
Board may provide for distributions while a Participant is still
an employee. The Board is authorized to make deferrals of Stock
Awards and determine when, and in what annual percentages,
Participants may receive payments, including lump sum payments,
following the Participants termination of employment or
retirement, and implement such other terms and conditions
consistent with the provisions of the Plan and in accordance
with applicable law.
(j) Compliance with 409A. To the extent that the
Board determines that any Award granted under the Plan is
subject to Section 409A of the Code, the Award Agreement
evidencing such Award shall incorporate the terms and conditions
necessary to avoid the consequences specified in
Section 409A(a)(1) of the Code. To the extent applicable,
the Plan and Award Agreements shall be interpreted in accordance
with Section 409A of the Code and Department of Treasury
regulations and other interpretive guidance issued thereunder,
including without limitation any such regulations or other
guidance that may be issued or amended after the Effective Date.
Notwithstanding any provision of the Plan to the contrary, in
the event that following the Effective Date the Board determines
that any Award may be subject to Section 409A of the Code
and related Department of Treasury guidance (including such
Department of Treasury guidance as may be issued after the
Effective Date), the Board may adopt such amendments to the Plan
and the applicable
C-12
Award Agreement or adopt other policies and procedures
(including amendments, policies and procedures with retroactive
effect), or take any other actions, that the Board determines
are necessary or appropriate to (1) exempt the Award from
Section 409A of the Code and/or preserve the intended tax
treatment of the benefits provided with respect to the Award, or
(2) comply with the requirements of Section 409A of
the Code and related Department of Treasury guidance.
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9. |
Adjustments upon
Changes in Common Stock; Other Corporate Events. |
(a) Capitalization Adjustments. In the event of a
Capitalization Adjustment, the Board shall appropriately adjust:
(i) the class(es) and maximum number of securities subject
to the Plan pursuant to Section 3(a), (ii) the
class(es) and maximum number of securities that may be issued
pursuant to the exercise of Incentive Stock Options pursuant to
Section 3(d), (iii) the class(es) and maximum number
of securities that may be awarded to any person pursuant to
Section 3(e) and 6(d)(i), and (iv) the class(es) and
number of securities and price per share of stock subject to
outstanding Stock Awards. The Board shall make such adjustments,
and its determination shall be final, binding and conclusive.
(b) Corporate Transaction. The following provisions
shall apply to Stock Awards in the event of a Corporate
Transaction unless otherwise provided in the instrument
evidencing the Stock Award or any other written agreement
between the Company or any Affiliate and the holder of the Stock
Award or unless otherwise expressly provided by the Board at the
time of grant of a Stock Award.
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(i) Stock Awards May Be Assumed. Except as otherwise
stated in the Stock Award Agreement, in the event of a Corporate
Transaction, any surviving corporation or acquiring corporation
(or the surviving or acquiring corporations parent
company) may assume or continue any or all Stock Awards
outstanding under the Plan or may substitute similar stock
awards for Stock Awards outstanding under the Plan (including
but not limited to, awards to acquire the same consideration
paid to the stockholders of the Company pursuant to the
Corporate Transaction), and any reacquisition or repurchase
rights held by the Company in respect of Common Stock issued
pursuant to Stock Awards may be assigned by the Company to the
successor of the Company (or the successors parent
company, if any), in connection with such Corporate Transaction.
A surviving corporation or acquiring corporation (or its parent)
may choose to assume or continue only a portion of a Stock Award
or substitute a similar stock award for only a portion of a
Stock Award. The terms of any assumption, continuation or
substitution shall be set by the Board in accordance with the
provisions of Section 2. |
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(ii) Stock Awards Held by Current Participants.
Except as otherwise stated in the Stock Award Agreement, in the
event of a Corporate Transaction in which the surviving
corporation or acquiring corporation (or its parent company)
does not assume or continue such outstanding Stock Awards or
substitute similar stock awards for such outstanding Stock
Awards, then with respect to Stock Awards that have not been
assumed, continued or substituted and that are held by
Participants whose Continuous Service has not terminated prior
to the effective time of the Corporate Transaction (referred to
as the Current Participants), the
vesting of such Stock Awards (and, if applicable, the time at
which such Stock Awards may be exercised) shall (contingent upon
the effectiveness of the Corporate Transaction) be accelerated
in full to a date prior to the effective time of such Corporate
Transaction as the Board shall determine (or, if the Board shall
not determine such a date, to the date that is five
(5) days prior to the effective time of the Corporate
Transaction), and such Stock Awards shall terminate if not
exercised (if applicable) at or prior to the effective time of
the Corporate Transaction, and any reacquisition or repurchase
rights held by the Company with respect to such Stock Awards
shall lapse (contingent upon the effectiveness of the Corporate
Transaction). |
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(iii) Stock Awards Held by Persons other than Current
Participants. Except as otherwise stated in the Stock Award
Agreement, in the event of a Corporate Transaction in which the
surviving corporation or acquiring corporation (or its parent
company) does not assume or continue such outstanding Stock
Awards or substitute similar stock awards for such outstanding
Stock Awards, then with respect to Stock Awards that have not
been assumed, continued or substituted and that are held by
persons other than Current Participants, the vesting of such
Stock Awards (and, if applicable, the time at which such Stock |
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Award may be exercised) shall not be accelerated and such Stock
Awards (other than a Stock Award consisting of vested and
outstanding shares of Common Stock not subject to the
Companys right of repurchase) shall terminate if not
exercised (if applicable) prior to the effective time of the
Corporate Transaction; provided, however, that any
reacquisition or repurchase rights held by the Company with
respect to such Stock Awards shall not terminate and may
continue to be exercised notwithstanding the Corporate
Transaction. |
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(iv) Payment for Stock Awards in Lieu of Exercise.
Notwithstanding the foregoing, in the event a Stock Award will
terminate if not exercised prior to the effective time of a
Corporate Transaction, the Board may provide, in its sole
discretion, that the holder of such Stock Award may not exercise
such Stock Award but will receive a payment, in such form as may
be determined by the Board, equal in value to the excess, if
any, of (A) the value of the property the holder of the
Stock Award would have received upon the exercise of the Stock
Award, over (B) any exercise price payable by such holder
in connection with such exercise. |
(c) Change in Control. Except as specifically
provided otherwise in the Stock Award Agreement covering a Stock
Award or other written agreement between the Company or any
Affiliate and the Participant and notwithstanding any other
provisions of the Plan to the contrary, if (i) a Change in
Control occurs and (ii) within the period beginning six
(6) months before such Change in Control and ending twelve
(12) months after the effective date of such Change in
Control a Participants Continuous Service (including
service with a successor to the Company or an Affiliate)
terminates due to an involuntary termination (not including
death or Disability) without Cause or due to a voluntary
termination for Good Reason, then, as of the date of such
termination, (x) each Stock Award held by such Participant
shall automatically become fully vested (and any reacquisition
or repurchase rights held by the Company with respect to the
shares of Common Stock subject to such acceleration shall lapse
in full, as appropriate) and, if applicable, each such Stock
Award shall become immediately exercisable in full, and
(y) the Participant may exercise his or her Option or Stock
Appreciation Right until the earlier of (i) the date one
(1) year following such termination, or (ii) the
expiration of the term of the Option or Stock Appreciation Right
as set forth in the applicable Award Agreement. In addition, a
Stock Award may be subject to additional acceleration of vesting
and exercisability upon or after a Change in Control as may be
provided in the Stock Award Agreement for such Stock Award or as
may be provided in any other written agreement between the
Company or any Affiliate and the Participant.
(d) Potential Reduction of Parachute Payments.
(i) If the acceleration of the vesting and exercisability
of Stock Awards provided for in Sections 9(b) and 9(c),
together with payments and other benefits of a Participant
(collectively, the Payment)
(i) constitute a parachute payment within the
meaning of Section 280G of the Code, or any comparable
successor provisions, and (ii) but for this
Section 9(d) would be subject to the excise tax imposed by
Section 4999 of the Code, or any comparable successor
provisions (the Excise Tax), then such
Payment shall be either (1) provided to such Participant in
full, or (2) provided to such Participant as to such lesser
extent that would result in no portion of such Payment being
subject to the Excise Tax, whichever of the foregoing amounts,
when taking into account applicable federal, state, local and
foreign income and employment taxes, the Excise Tax, and any
other applicable taxes, results in the receipt by such
Participant, on an after-tax basis, of the greatest amount of
the Payment, notwithstanding that all or some portion of the
Payment may be subject to the Excise Tax.
(ii) The Company shall appoint a nationally recognized
independent accounting firm or consulting firm (the
Accountant) to make the determinations
required hereunder, which accounting firm shall not then be
serving as accountant or auditor for the individual, entity or
group that effected the Change in Control. The Company shall
bear all costs and expenses with respect to the determinations
the Accountant may reasonably incur in connection with any
calculations contemplated by this Section 9(d).
(iii) Unless the Company and such Participant otherwise
agree in writing, any determination required under this
Section 9(d) shall be made in writing in good faith by the
Accountant. If a reduction in the Payment is to be made as
provided above, reductions shall occur in the following order
unless the Participant
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elects in writing a different order (provided, however,
that such election shall be subject to Company approval if made
on or after the date that triggers the Payment or a portion
thereof):(A) reduction of cash payments; (B) cancellation
of accelerated vesting of Options and other Stock Awards; and
(C) reduction of other benefits paid to the Participant. If
acceleration of vesting of Stock Awards is to be reduced, such
acceleration of vesting shall be cancelled in the reverse order
of date of grant of the Stock Awards (i.e., the earliest
granted Stock Award cancelled last) unless the Participant
elects in writing a different order for cancellation.
(iv) For purposes of making the calculations required by
this Section 9(d), the Accountant may make reasonable
assumptions and approximations concerning applicable taxes and
may rely on reasonable, good faith interpretations concerning
the application of the Code and other applicable legal
authority. The Company and the Participant shall furnish to the
Accountant such information and documents as the Accountant may
reasonably request in order to make such a determination.
(v) If, notwithstanding any reduction described above, the
Internal Revenue Service (the IRS)
determines that the Participant is liable for the Excise Tax as
a result of the Payment, then the Participant shall be obligated
to pay back to the Company, within thirty (30) days after a
final IRS determination or, in the event that the Participant
challenges the final IRS determination, a final judicial
determination, a portion of the Payment (the
Repayment Amount). The Repayment
Amount with respect to the Payment shall be the smallest such
amount, if any, as shall be required to be paid to the Company
so that the Participants net after-tax proceeds with
respect to the Payment (after taking into account the payment of
the Excise Tax and all other applicable taxes imposed on the
Payment) shall be maximized. The Repayment Amount with respect
to the Payment shall be zero if a Repayment Amount of more than
zero would not result in the Participants net after-tax
proceeds with respect to the Payment being maximized. If the
Excise Tax is not eliminated pursuant to this paragraph, the
Participant shall pay the Excise Tax.
(vi) Notwithstanding any other provision of this
Section 9(d), if (A) there is a reduction in the
Payment as described above, (B) the IRS later determines
that the Participant is liable for the Excise Tax, the payment
of which would result in the maximization of the
Participants net after-tax proceeds of the Payment
(calculated as if the Payment had not previously been reduced),
and (C) the Participant pays the Excise Tax, then the
Company shall pay or otherwise provide to the Participant that
portion of the Payment that was reduced pursuant to this
Section 9(d) contemporaneously or as soon as
administratively possible after the Participant pays the Excise
Tax so that the Participants net after-tax proceeds with
respect to the Payment are maximized.
If the Participant either (A) brings any action to enforce
rights pursuant to this Section 9(d), or (B) defends
any legal challenge to his or her rights under this
Section 9(d), the Participant shall be entitled to recover
attorneys fees and costs incurred in connection with such
action, regardless of the outcome of such action; provided,
however, that if such action is commenced by the
Participant, the court finds that the action was brought in good
faith.
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10. |
Termination or
Suspension of the Plan. |
(a) Plan Term. Unless sooner terminated by the Board
pursuant to Section 3, the Plan shall automatically
terminate on the day before the tenth (10th) anniversary of the
date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Awards may
be granted under the Plan while the Plan is suspended or after
it is terminated.
(b) No Impairment of Rights. Termination of the Plan
shall not impair rights and obligations under any Award granted
while the Plan is in effect except with the written consent of
the affected Participant.
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11. |
Effective Date of
Plan. |
This Plan shall become effective on the Effective Date. Prior to
the Effective Date, the Prior Plan is unaffected by the Plan,
and Stock Awards shall continue to be granted from the Prior
Plan. If the Plan has not been approved by the stockholders of
the Company by the first anniversary of the Adoption Date, the
adoption of the Plan shall be null and void and the Prior Plan
shall continue unaffected by the adoption of the Plan. If
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the Plan is so approved, (i) the Prior Plan shall be deemed
merged into the Plan and to cease their separate existence and
(ii) outstanding options and other awards granted pursuant
to the Prior Plan shall automatically become Stock Awards.
Notwithstanding that the Prior Plan is merged into the Plan, the
terms of the Prior Plan shall continue to govern any Stock
Awards granted prior to the Effective Date.
The law of the State of California shall govern all questions
concerning the construction, validity and interpretation of this
Plan, without regard to such states conflict of laws rules.
As used in the Plan, the definitions contained in this
Section 13 shall apply to the capitalized terms indicated
below:
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(a) Adoption Date means April 14,
2006, the date the Plan was adopted by the Board. |
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(b) Affiliate means, at the time of
determination, any parent or subsidiary
as such terms are defined in Rule 405 of the Securities
Act. The Board shall have the authority to determine the time or
times at which parent or subsidiary
status is determined within the foregoing definition. |
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(c) Award means a Stock Award or a
Performance Cash Award. |
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(d) Board means the Board of Directors
of the Company. |
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(e) Capitalization Adjustment means any
change that is made in, or other events that occur with respect
to, the Common Stock subject to the Plan or subject to any Stock
Award after the Effective Date without the receipt of
consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split,
liquidating dividend, combination of shares, exchange of shares,
change in corporate structure or other transaction not involving
the receipt of consideration by the Company. Notwithstanding the
foregoing, the conversion of any convertible securities of the
Company shall not be treated as a transaction without
receipt of consideration by the Company. |
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(f) Cause means with respect to a
Participant, the occurrence of any of the following events:
(i) such Participants commission of any felony or any
crime involving fraud or moral turpitude under the laws of the
United States or any state thereof; (ii) such
Participants attempted commission of, or participation in,
a fraud or act of dishonesty against the Company;
(iii) such Participants intentional, material
violation of any contract or agreement between the Participant
and the Company or of any statutory duty owed to the Company;
(iv) such Participants intentional unauthorized use
or intentional disclosure of the Companys confidential
information or trade secrets; or (v) such
Participants gross misconduct. The determination that a
termination of the Participants Continuous Service is
either for Cause or without Cause shall be made by the Company
in good faith in its sole discretion. Any determination by the
Company that the Continuous Service of a Participant was
terminated by reason of dismissal without Cause for the purposes
of outstanding Awards held by such Participant shall have no
effect upon any determination of the rights or obligations of
the Company or such Participant for any other purpose. |
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(g) A Change in Control, with respect to
Awards granted on or after the Effective Date, will be deemed to
have occurred upon the first to occur of an event set forth in
any one of the following paragraphs: |
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(i) 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 1934 Act) of thirty percent (30%) or
more of the combined voting power of the Companys then
outstanding voting securities; |
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(ii) the individuals who, as of the Effective Date, 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 Companys 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 Plan, be considered as a member of the
Incumbent Board; or |
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(iii) the closing of: |
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(1) 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 |
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(2) 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 solely because thirty percent (30%) or more of
the combined voting power of the Companys 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.
For the avoidance of doubt, the term Change in Control shall not
include a sale of assets, merger or other transaction effected
exclusively for the purpose of changing the domicile of the
Company.
Notwithstanding the foregoing or any other provision of this
Plan, the definition of Change in Control (or any analogous
term) in an individual written agreement between the Company or
any Affiliate and the Participant shall supersede the foregoing
definition with respect to Awards subject to such agreement;
provided, however, that if no definition of Change in
Control or any analogous term is set forth in such an individual
written agreement, the foregoing definition shall apply.
In the event that a Change in Control affects any Award that is
deferred on or after January 1, 2005, then to the extent
necessary to avoid the adverse tax treatment contained in Code
Section 409A(a)(1), the term Change in
Control shall conform to the definition of Change
of Control under Section 409A of the Code, as amended, and
the Treasury Department or Internal Revenue Service Regulations
or Guidance issued thereunder.
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(h) Code means the Internal Revenue Code
of 1986, as amended. |
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(i) Committee means a committee of one
(1) or more Directors to whom authority has been delegated
by the Board in accordance with Section 2(c). |
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(j) Common Stock means the common stock
of the Company. |
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(k) Company means Valeant
Pharmaceuticals International., a Delaware corporation. |
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(l) Consultant means any person,
including an advisor, who is (i) engaged by the Company or
an Affiliate to render consulting or advisory services and is
compensated for such services, or (ii) serving as a member
of the board of directors of an Affiliate and is compensated for
such services. However, service solely as a Director, or payment
of a fee for such service, shall not cause a Director to be
considered a Consultant for purposes of the Plan. |
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(m) Continuous Service means that the
Participants service with the Company or an Affiliate,
whether as an Employee, Director or Consultant, is not
interrupted or terminated. A change in the capacity in which the
Participant renders service to the Company or an Affiliate as an
Employee, |
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Consultant or Director or a change in the entity for which the
Participant renders such service, provided that there is no
interruption or termination of the Participants service
with the Company or an Affiliate, shall not terminate a
Participants Continuous Service. For example, a change in
status from an employee of the Company to a consultant to an
Affiliate or to a Director shall not constitute an interruption
of Continuous Service. To the extent permitted by law, the Board
or the chief executive officer of the Company, in that
partys sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave
of absence approved by that party, including sick leave,
military leave or any other personal leave. Notwithstanding the
foregoing, a leave of absence shall be treated as Continuous
Service for purposes of vesting in a Stock Award only to such
extent as may be provided in the Companys leave of absence
policy, in the written terms of any leave of absence agreement
or policy applicable to the Participant, or as otherwise
required by law. |
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(n) Corporate Transaction means the
occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events: |
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(i) a sale or other disposition of all or substantially
all, as determined by the Board in its sole discretion, of the
consolidated assets of the Company and its Subsidiaries; |
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(ii) a sale or other disposition of at least ninety percent
(90%) of the outstanding securities of the Company; |
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(iii) the consummation of a merger, consolidation or
similar transaction following which the Company is not the
surviving corporation; or |
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(iv) the consummation of a merger, consolidation or similar
transaction following which the Company is the surviving
corporation but the shares of Common Stock outstanding
immediately preceding the merger, consolidation or similar
transaction are converted or exchanged by virtue of the merger,
consolidation or similar transaction into other property,
whether in the form of securities, cash or otherwise. |
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(o) Covered Employee shall have the
meaning provided in Section 162(m)(3) of the Code and the
regulations promulgated thereunder. |
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(p) Director means a member of the Board. |
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(q) Disability means, with respect to a
Participant, the inability of such Participant to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous
period of not less than 12 months, as provided in
Section 22(e)(3) and 409A(a)(2)(c)(i) of the Code. |
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(r) Effective Date means the effective
date of this Plan document, which is the date of the annual
meeting of stockholders of the Company held in 2006 provided
this Plan is approved by the Companys stockholders at such
meeting. |
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(s) Employee means any person employed
by the Company or an Affiliate. However, service solely as a
Director, or payment of a fee for such services, shall not cause
a Director to be considered an Employee for purposes
of the Plan. |
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(t) Entity means a corporation,
partnership, limited liability company or other entity. |
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(u) Exchange Act means the Securities
Exchange Act of 1934, as amended. |
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(v) Fair Market Value means, as of any
date, the value of the Common Stock determined as follows: |
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(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Common
Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the date of
determination, as reported in The Wall Street Journal or
such |
C-18
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other source as the Board deems reliable. Unless otherwise
provided by the Board, if there is no closing sales price (or
closing bid if no sales were reported) for the Common Stock on
the date of determination, then the Fair Market Value shall be
the closing selling price (or closing bid if no sales were
reported) on the last preceding date for which such quotation
exists. |
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(ii) In the absence of such markets for the Common Stock,
the Fair Market Value shall be determined by the Board in good
faith. |
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(w) Good Reason means, with respect to a
particular Participant, the occurrence of any of the following
events, conditions or actions taken by the Company without Cause
and without such Participants consent:
(i) Participants duties or responsibilities are
materially diminished (and not simply a change in title or
reporting relationships); provided, however, that the
Participant shall not have Good Reason to terminate
if the Company is retained as a separate legal entity or
business unit following the effective date of a Change of
Control and the Participant holds the same position in such
legal entity or business unit as the eligible employee held
before the effective date of such Change of Control,
(ii) any reduction in such Participants level of base
salary (except for salary decreases generally applicable to the
Companys other similarly-situated employees),
(iii) any significant reduction, in the aggregate, in the
employee benefit programs made available to the Participant
other than a reduction in such employee benefit programs
affecting all employees of the Company substantially equally, or
(iv) an increase in the Participants one-way driving
distance from the Participants principal personal
residence to the principal office or business location at which
the Participant is required to perform services of more than
20 miles, except for required travel for the Companys
business to an extent substantially consistent with the
Participants prior business travel obligations;. |
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(x) Incentive Stock Option means an
Option that is intended to be, and qualifies as, an
incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated
thereunder. |
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(y) Non-Employee Director means a
Director who either (i) is not a current employee or
officer of the Company or an Affiliate, does not receive
compensation, either directly or indirectly, from the Company or
an Affiliate for services rendered as a consultant or in any
capacity other than as a Director (except for an amount as to
which disclosure would not be required under Item 404(a) of
Regulation S-K
promulgated pursuant to the Securities Act
(Regulation S-K)),
does not possess an interest in any other transaction for which
disclosure would be required under Item 404(a) of
Regulation S-K,
and is not engaged in a business relationship for which
disclosure would be required pursuant to Item 404(b) of
Regulation S-K; or
(ii) is otherwise considered a non-employee
director for purposes of
Rule 16b-3. |
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(z) Nonstatutory Stock Option means any
Option that does not qualify as an Incentive Stock Option. |
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(aa) Officer means a person who is an
officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated
thereunder. |
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(bb) Option means an Incentive Stock
Option or a Nonstatutory Stock Option to purchase shares of
Common Stock granted pursuant to the Plan. |
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(cc) Option Agreement means a written
agreement between the Company and an Optionholder evidencing the
terms and conditions of an Option grant. Each Option Agreement
shall be subject to the terms and conditions of the Plan. |
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(dd) Optionholder means a person to whom
an Option is granted pursuant to the Plan or, if permitted under
the terms of this Plan, such other person who holds an
outstanding Option. |
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(ee) Other Stock Award means an award
based in whole or in part by reference to the Common Stock which
is granted pursuant to the terms and conditions of
Section 6(d). |
C-19
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(ff) Other Stock Award Agreement means a
written agreement between the Company and a holder of an Other
Stock Award evidencing the terms and conditions of an Other
Stock Award grant. Each Other Stock Award Agreement shall be
subject to the terms and conditions of the Plan. |
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(gg) Outside Director means a Director
who either (i) is not a current employee of the Company or
an affiliated corporation (within the meaning of
Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an
affiliated corporation who receives compensation for
prior services (other than benefits under a tax-qualified
retirement plan) during the taxable year, has not been an
officer of the Company or an affiliated corporation,
and does not receive remuneration from the Company or an
affiliated corporation, either directly or
indirectly, in any capacity other than as a Director, or
(ii) is otherwise considered an outside
director for purposes of Section 162(m) of the Code. |
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(hh) Own, Owned,
Owner, Ownership A person or Entity
shall be deemed to Own, to have Owned,
to be the Owner of, or to have acquired
Ownership of securities if such person or Entity,
directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares voting
power, which includes the power to vote or to direct the voting,
with respect to such securities. |
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(ii) Participant means a person to whom
an Award is granted pursuant to the Plan or, if applicable, such
other person who holds an outstanding Stock Award. |
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(jj) Performance Cash Award means an
award of cash granted pursuant to the terms and conditions of
Section 6(d)(ii). |
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(kk) Performance Criteria means the one
or more criteria that the Board shall select for purposes of
establishing the Performance Goals for a Performance Period. The
Performance Criteria that shall be used to establish such
Performance Goals may be based on any one of, or combination of,
the following: (i) earnings per share; (ii) earnings
before interest, taxes and depreciation; (iii) earnings
before interest, taxes, depreciation and amortization;
(iv) total stockholder return; (v) return on equity;
(vi) return on assets, investment, or capital employed;
(vii) operating margin; (viii) gross margin;
(ix) operating income; (x) net income (before or after
taxes); (xi) net operating income; (xii) net operating
income after tax; (xiii) pre-tax profit;
(xiv) operating cash flow; (xv) sales or revenue
targets; (xvi) increases in revenue or product revenue;
(xvii) expenses and cost reduction goals;
(xviii) improvement in or attainment of working capital
levels; (xix) economic value added (or an equivalent
metric); (xx) market share; (xxi) cash flow;
(xxii) cash flow per share; (xxiii) share price
performance; (xxiv) debt reduction;
(xxv) implementation or completion of projects or
processes; (xxvi) customer satisfaction;
(xxvii) stockholders equity; and (xxviii) to the
extent that an Award is not intended to comply with
Section 162(m) of the Code, other measures of performance
selected by the Board. Partial achievement of the specified
criteria may result in the payment or vesting corresponding to
the degree of achievement as specified in the Stock Award
Agreement or the written terms of a Performance Cash Award. The
Board shall, in its sole discretion, define the manner of
calculating the Performance Criteria it selects to use for such
Performance Period. |
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(ll) Performance Goals means, for a
Performance Period, the one or more goals established by the
Board for the Performance Period based upon the Performance
Criteria. Performance Goals may be based on a Company-wide
basis, with respect to one or more business units, divisions,
Affiliates, or business segments, and in either absolute terms
or relative to the performance of one or more comparable
companies or the performance of one or more relevant indices. At
the time of the grant of any Award, the Board is authorized to
determine whether, when calculating the attainment of
Performance Goals for a Performance Period: (i) to exclude
restructuring and/or other nonrecurring charges; (ii) to
exclude exchange rate effects, as applicable, for
non-U.S. dollar
denominated net sales and operating earnings; (iii) to
exclude the effects of changes to generally accepted accounting
standards required by the Financial Accounting Standards Board;
(iv) to exclude the effects of any statutory adjustments to
corporate tax rates; and (v) to exclude the effects of any
extraordinary items as determined under |
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generally accepted accounting principles. In addition, the Board
retains the discretion to reduce or eliminate the compensation
or economic benefit due upon attainment of Performance Goals. |
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(mm) Performance Period means the period
of time selected by the Board over which the attainment of one
or more Performance Goals will be measured for the purpose of
determining a Participants right to and the payment of a
Stock Award or a Performance Cash Award. Performance Periods may
be of varying and overlapping duration, at the sole discretion
of the Board. |
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(nn) Performance Stock Award means a
Stock Award granted under the terms and conditions of
Section 6(d)(i). |
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(oo) Plan means this Valeant
Pharmaceuticals International 2006 Equity Incentive Plan. |
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(pp) Restricted Stock Award means an
award of shares of Common Stock which is granted pursuant to the
terms and conditions of Section 6(a). |
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(qq) Restricted Stock Award Agreement
means a written agreement between the Company and a holder
of a Restricted Stock Award evidencing the terms and conditions
of a Restricted Stock Award grant. Each Restricted Stock Award
Agreement shall be subject to the terms and conditions of the
Plan. |
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(rr) Restricted Stock Unit Award means a
right to receive shares of Common Stock which is granted
pursuant to the terms and conditions of Section 6(b). |
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(ss) Restricted Stock Unit Award Agreement
means a written agreement between the Company and a holder
of a Restricted Stock Unit Award evidencing the terms and
conditions of a Restricted Stock Unit Award grant. Each
Restricted Stock Unit Award Agreement shall be subject to the
terms and conditions of the Plan. |
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(tt) Rule 16b-3
means
Rule 16b-3
promulgated under the Exchange Act or any successor to
Rule 16b-3, as in
effect from time to time. |
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(uu) Securities Act means the Securities
Act of 1933, as amended. |
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(vv) Stock Appreciation Right means a
right to receive the appreciation on Common Stock that is
granted pursuant to the terms and conditions of
Section 6(c). |
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(ww) Stock Appreciation Right Agreement
means a written agreement between the Company and a holder
of a Stock Appreciation Right evidencing the terms and
conditions of a Stock Appreciation Right grant. Each Stock
Appreciation Right Agreement shall be subject to the terms and
conditions of the Plan. |
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(xx) Stock Award means any right to
receive Common Stock granted under the Plan, including an
Incentive Stock Option, a Nonstatutory Stock Option, a
Restricted Stock Award, a Restricted Stock Unit Award, a Stock
Appreciation Right, a Performance Stock Award or any Other Stock
Award. |
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(yy) Stock Award Agreement means a
written agreement between the Company and a Participant
evidencing the terms and conditions of a Stock Award grant. Each
Stock Award Agreement shall be subject to the terms and
conditions of the Plan. |
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(zz) Subsidiary means, with respect to
the Company, (i) any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary
voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, stock of
any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, Owned by
the Company, and (ii) any partnership in which the Company
has a direct or indirect interest (whether in the form of voting
or participation in profits or capital contribution) of more
than fifty percent (50%). |
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(aaa) Ten Percent Stockholder means a person
who Owns (or is deemed to Own pursuant to Section 424(d) of
the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the
Company or any Affiliate. |
C-21
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
VALEANT PHARMACEUTICALS INTERNATIONAL
3300 HYLAND AVENUE, COSTA MESA, CALIFORNIA 92626
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON MAY 23, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
VALEANT PHARMACEUTICALS INTERNATIONAL
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P R O X Y
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The undersigned hereby appoints each of Robert W. OLeary and Christina de Vaca, together and
separately, as Proxyholders, each with the power to appoint his or her substitute, and hereby
authorizes each of them to represent and to vote, without duplication, as designated below, all the
shares of common stock of Valeant Pharmaceuticals International (the Company) held of record by
the undersigned on April 11, 2006 at the Annual Meeting of Stockholders to be held at 1:00 p.m.,
local time, on May 23, 2006, and any adjournments or postponements thereof. |
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This proxy when properly executed will be voted in the manner directed herein by the undersigned
stockholder. If no instructions are indicated herein, this proxy will be treated as a grant of
authority to vote FOR the nominees to the Board of Directors listed on the reverse side of this
proxy card, FOR the approval of the Companys 2006 Equity Incentive Plan, and FOR the
ratification of the appointment of PricewaterhouseCoopers LLP as independent registered public
accounting firm for the Company, to the extent authorized by Rule 14a-4(c) promulgated under the
Securities Exchange Act of 1934, as amended. This proxy confers discretionary authority to vote on
any other matter, if any, presented at the meeting, notice of which is received by the Company on
or before March 23, 2006. This proxy shall be voted in accordance with the recommendations of the
Board of Directors with respect to such other matters that may be properly brought before the
annual meeting or any continuation, adjournment or postponement thereof, to the extent authorized by Rule 14a-4(c) promulgated under the Securities Exchange Act of 1934, as amended.
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This proxy revokes all prior proxies given by the undersigned with respect to matters covered by
this proxy and the voting of shares of common stock at the 2006 Annual Meeting of Stockholders. |
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(Continued, and to be signed, on the reverse side.) |
THERE ARE THREE WAYS TO VOTE YOUR PROXY
TELEPHONE VOTING
This method of voting is available for residents of the U.S. and Canada. On a touch tone telephone,
call TOLL FREE 1-877-381-4017, 24 hours a day, 7 days a week. Have this proxy card ready, then
follow the prerecorded instructions. Your vote will be confirmed and cast as you have directed.
Available until 5:00 p.m., Eastern Daylight Time, on May 22, 2006.
INTERNET VOTING
Visit the Internet voting Web site at http://proxy.georgeson.com. Have this proxy card ready and
follow the instructions on your screen. You will incur only your usual Internet charges. Available
until 5:00 p.m., Eastern Daylight Time, on May 22, 2006.
VOTING BY MAIL
Simply sign and date your proxy card and return it in the postage-paid envelope to Georgeson
Shareholder Communications, Wall Street Station, P.O. Box 1100, New York, NY 10269-0646. If you are
voting by telephone or the Internet, please do not mail your proxy card.
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
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Please mark votes as in this example. |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITS NOMINEES
TO THE BOARD OF DIRECTORS, AND FOR PROPOSALS 2 AND 3.
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1.
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Election of three
persons to the
Board of Directors
of the Company.
Nominees: Robert A.
Ingram, Lawrence N.
Kugelman and Theo
Melas-Kyriazi
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FOR ALL
NOMINEES LISTED
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WITHHOLD
AUTHORITY FOR
ALL NOMINEES
LISTED |
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£
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£ |
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Instruction: To
withhold authority
to vote for any
individual
nominee(s), write
the name(s) of such
nominee(s) in the
following space. |
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FOR
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AGAINST
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ABSTAIN |
2.
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Approval of the
Companys 2006
Equity Incentive
Plan.
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£
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£
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£ |
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FOR
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AGAINST
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ABSTAIN |
3.
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Ratification of the
appointment of
PricewaterhouseCoopers LLP as
independent
registered public
accounting firm for
the Company.
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£
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£
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£ |
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4. |
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Other Business. In the Proxyholders discretion, to vote on any other
matter as properly may come before the meeting and any continuation,
postponement or adjournment thereof. |
The undersigned acknowledges receipt of the copy of the Notice of Annual Meeting and Proxy
Statement (with enclosures and attachments) of the Company relating to the 2006 Annual Meeting of
Stockholders.
The board of directors recommends that you vote FOR the election of each of the nominees in
Proposal No. 1, FOR the approval of the Companys 2006 Equity Incentive Plan in Proposal
No. 2, and FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm in Proposal No. 3, to the extent authorized
by Rule 14a-4(c) promulgated under the Securities Exchange Act of 1934, as amended. All proposals
to be acted upon are proposals of the Company. If any other business is properly presented at the
meeting, including, among other things, consideration of a motion to adjourn the meeting to another
time or place in order to solicit additional proxies in favor of the recommendations of the board
of directors, this proxy shall be voted by the proxyholders in accordance with the recommendations
of the board of directors. At the date this proxy statement went to press, we did not anticipate
any other matters would be raised at the annual meeting.
THE BOARD OF DIRECTORS OF THE COMPANY
RECOMMENDS THAT YOU SIGN,
DATE AND MAIL THIS PROXY CARD TODAY.
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Date
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,2006 |
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Signature(s) |
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Signature(s) |
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Please date this Proxy and sign exactly as your name appears herein. When there is more than
one owner, all must sign. When signing as an attorney, executor, administrator, trustee, guardian,
corporate officer or partner, sign full title as such. If a corporation, please sign in full
corporate name by duly authorized officer. If a partnership, please sign in partnership name by a
duly authorized person.