Employment Agreement - ICN Pharmaceuticals Inc. and Robert O'Leary
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of November 4, 2002 (the "Start
Date"), by and between ICN Pharmaceuticals, Inc. (the "Company"), a Delaware
corporation, and Robert O'Leary (the "Executive"), an individual resident of San
Diego County, California (hereinafter the Company and the Executive collectively
referred to as "the parties").
RECITALS
WHEREAS, the Executive is being employed by the Company as its
Chairman of the Board and Chief Executive Officer and is experienced in
management in the health care industry and the Company desires to retain the
services of the Executive on the terms set forth herein.
AGREEMENT
NOW, THEREFORE, for consideration, the value, sufficiency, and
receipt of which is hereby acknowledged, the parties agree as follows.
1. Term. The preliminary term of employment under this Agreement was
for the period commencing on the date hereof, and ended November 3, 2002
("Preliminary Term"); the initial term began on November 4, 2002 and ends
November 3, 2004 (the "Initial Term"); provided, however, that upon written
mutual agreement of the parties 60 days prior to the expiration of the Initial
Term or the subsequent one (1) year term, as applicable, this Agreement may be
extended for one (1) year terms.
2. Employment.
(a) Positions and Duties. (1) The Executive shall be employed as
the Chairman of the Board and Chief Executive Officer of the Company or such
other senior executive capacity as may be mutually agreed to in writing by the
parties. As Chief Executive Officer of the Company, the Executive shall have
active and general supervision and management over the business and affairs of
the Company and shall have full power and authority to act for all purposes for
and in the name of the Company in all matters except where action of the Board
is required by law, the By-laws of the Company, or resolutions of the Board. If
the Executive is removed in whole or part from such named position without Cause
(as defined in Section 8(b)) and if the Company has not installed the Executive
in such other mutually agreeable senior executive capacity within forty-five
(45) days after such removal, the Executive's employment will be deemed
terminated on the forty-sixth (46th) day and the provisions of Section 9(b) will
apply. (2) The Executive shall perform the duties, undertake the
responsibilities and exercise the authority customarily performed, undertaken
and exercised by persons situated in a similar executive capacity. He shall also
promote, by entertainment or otherwise, the business of the Company.
(b) Full Time Commitment. Excluding periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time
<PAGE>
during usual business hours to the business and affairs of the Company to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder. The Executive may (1) serve on corporate, civil or charitable boards
or committees, (2) manage personal investments and (3) deliver lectures and
teach at educational institutions, so long as such activities do not
significantly interfere with the performance of the Executive's responsibilities
hereunder. The Company and Executive agree that Executive's service as a
director for the companies set forth in Exhibit A does not violate the terms of
this Agreement.
(c) Policies and Procedures. The Executive agrees to comply with
all of the Company's standard policies and procedures.
3. Base Salary. The Company agrees to pay or cause to be paid to the
Executive during the term of this Agreement a base salary at the rate of
$400,000 for the Preliminary Term and $835,000 per annum or such larger amount
as the Board of Directors of the Company (the "Board") may from time to time
determine for the Initial Term (hereinafter referred to as the "Base Salary").
The Base Salary will be payable in accordance with the Company's customary
practices applicable to its executives. Such rate of salary, or increased rate
of salary, if any, as the case may be, will be reviewed at least annually by the
Board and may be further increased (but not decreased) in such amounts as the
Board in its discretion may decide.
4. Employee Benefits. The Executive will be entitled to participate in
all employee benefit plans, practices and programs maintained by the Company and
made available to company executives generally including, without limitation all
pension, retirement, profit sharing, savings, severance, change in control,
medical, hospitalization, disability, dental, life or travel accident insurance
benefit plans or arrangements. The Executive's participation in such plans,
practices and programs will be on a basis and on terms at least as favorable to
the Executive as are applicable to any other executive of the Company.
5. Executive Benefits. The Executive will be entitled to participate in
all executive benefit or incentive compensation plans now maintained or
hereafter established by the Company for the purpose of providing compensation
and/or benefits to executives of the Company including, but not limited to, the
Company's 401(k) and Deferred Compensation Plans and any supplemental
retirement, salary continuation, stock option, restricted stock, deferred
compensation, supplemental medical or life insurance or other bonus or incentive
compensation plans. Executive's target bonus shall be established at an annual
rate of $400,000 per year for the Preliminary Term and $835,000 per year for the
Initial Term, with the target bonus to be reevaluated for any additional Term(s)
and, if necessary, such bonuses shall be pro-rated for any particular bonus year
based on the number of months of the Preliminary Term or Initial Term which fell
within that bonus year. The bonus shall be awarded in the sole discretion of the
Board in a range from a minimum of no bonus to a maximum of two hundred percent
of the target bonus, based upon Executive's performance according to criteria
established by the Board. Unless otherwise provided herein, the Executive's
participation in such plans will be on the same basis and terms as other
similarly situated executives of the Company, but in no event on a basis less
favorable in terms of benefit levels or reward opportunities applicable to the
Executive as in effect on the date hereof. No additional compensation provided
under any of such plans will be deemed to modify or otherwise affect the terms
of this Agreement or any of the Executive's entitlements hereunder.
2
<PAGE>
6. Other Benefits.
(a) Fringe Benefits and Perquisites. The Executive will be
entitled to all fringe benefits and perquisites (e.g. Company cars, club dues,
physical examinations, financial planning and tax preparation services)
generally made available by the Company to its executives. The Executive's
spouse shall be permitted to travel with the Executive on a reasonable basis at
Company expense while Executive is traveling on Company business.
(b) Expenses. The Executive will be entitled to receive prompt
reimbursement of all expenses reasonably incurred by him in connection with the
performance of his duties hereunder or for promoting, pursuing or otherwise
furthering the business or interests of the Company. The Company shall pay the
Executive's reasonable attorney's fees incurred in the negotiation and
preparation of this Agreement.
(c) Office and Facilities. The Executive will be provided with an
appropriate office in Costa Mesa, California, or such other place as may be
mutually agreed and with such secretarial and other support facilities as are
commensurate with the Executive's status with the Company and adequate for the
performance of his duties hereunder. The Executive is not required to
permanently relocate his office or residence to Costa Mesa, California.
(d) Stock Options. Upon approval of the Compensation Committee of
the Board, and conditional on commencement of employment, the Executive will
receive one or more stock options to purchase a total of 300,000 shares of the
Company's Common Stock for the Preliminary Term and 800,000 shares of the
Company's Common Stock, in each case, subject to the terms and conditions set
forth in stock option agreements between Company and the Executive and governed
by the applicable stock option plan, except as may be otherwise specifically
provided herein. The Executive's stock option vesting shall continue so long as
he is in continuous service to the Company either as an officer, as a member of
the Board, in a role that is mutually agreed upon between the parties as
provided in Section 9(d) below, or on a leave of absence under applicable
Company rules.
(e) Company Car. The Company will provide the Executive with a car
and driver at the Company's expense.
(f) CEO Benefits. With respect to employee benefits, fringe
benefits and perquisites, and other elements of executive compensation
(including the granting of options), the Company shall provide benefits and
equity compensation benefits in amounts, and on terms and conditions, not less
favorable than provided to any other officer or employee of the Company.
Executive shall be consulted in formulating management's recommendation to the
Compensation Committee (or other relevant Committee of the Board) or to the full
Board with respect to such employee benefits, fringe benefits and perquisites,
or equity compensation.
7. Vacation and Sick Leave. At such reasonable times as the Board will
in its discretion permit, the Executive will be entitled, without loss of pay,
to absent himself voluntarily from the performance of his employment under this
Agreement, under the following conditions:
3
<PAGE>
(a) the Executive will be entitled to annual vacation in
accordance with the policies as periodically established by the Board for
similarly situated executives of the Company, which will in no event be less
than four weeks per year (with unused carryforward amounts subject to cashout
pursuant to applicable Company rules);
(b) in addition to the aforesaid paid vacations, the Board will be
entitled to grant to the Executive a leave or leaves of absence with or without
pay at such time or times and upon such terms and conditions as the Board in its
discretion may determine; and
(c) the Executive will be entitled to sick leave in accordance
with the Company's policies as in effect from time to time.
8. Termination. The Executive's employment hereunder may be terminated
under the following circumstances.
(a) Disability. The Company may terminate the Executive's
employment after having established the Executive's Disability. For purposes of
this Agreement, "Disability" means a physical or mental infirmity which impairs
the Executive's ability to substantially perform his duties under this Agreement
and which continues for a period of at least one hundred eighty (180)
consecutive days, even with reasonable accommodations, and he obtains benefits
under the Company's long-term disability plan. The existence of Disability must
be supported by a report by a competent physician identifying the Disability and
providing reasonable support for the finding. The Executive will be entitled to
all compensation and benefits provided for under this Agreement for any period
during the term of this Agreement and prior to the establishment of the
Executive's Disability during which the Executive is unable to work due to a
physical or mental infirmity. Notwithstanding anything contained in this
Agreement to the contrary, until the Termination Date specified in a Notice of
Termination (as each term is hereinafter defined) relating to the Executive's
Disability, the Executive will be entitled to return to his position with the
Company as set forth in this Agreement in which event no Disability of the
Executive will be deemed to have occurred.
(b) Cause. The Company may terminate the Executive's employment
for "Cause." A termination for Cause is a termination evidenced by a resolution
adopted in good faith by two-thirds (2/3) of the entire Board that the
Executive: (1) willfully and continually failed to substantially perform his
duties with the Company (other than a failure resulting from the Executive's
incapacity due to physical or mental illness), which failure continued for a
period of at least thirty (30) days after the adoption of such resolution, and
which failure amounts to gross neglect in the performance of his duties to the
Company; or (2) willfully engaged in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise; provided, however
that no termination of the Executive's employment will be for Cause as set forth
in clause (2) above until (i) there will have been delivered to the Executive a
copy of a written notice setting forth that the Executive engaged in the conduct
set forth in clause (2) and specifying the particulars thereof in detail and
(ii) the Executive will have been provided an opportunity to be heard by the
Board (with the assistance of the Executive's counsel if the Executive so
desires) and, if applicable, a reasonable period in which to cure the failure or
conduct. Any such written notification must be provided to the Executive within
ninety (90) days of the date on which the Board first became aware of the
conduct or failure which is alleged
4
<PAGE>
to constitute Cause under this Agreement. No act, nor failure to act, on the
Executive's part will be considered "willful" unless he has acted or failed to
act with an absence of good faith and without a reasonable belief that his
action or failure to act was in the best interest of the Company. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board (or a committee thereof) or based upon the written advice of
counsel for the Company will be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interest of the Company,
provided that Executive has not made any material misrepresentations or withheld
material relevant information in connection with such resolution or written
advice. Notwithstanding anything contained in this Agreement to the contrary, no
failure to perform by the Executive after Notice of Termination is given by the
Executive will constitute Cause for purposes of this Agreement.
(c) (1) Good Reason. The Executive may terminate his employment
for "Good Reason." For purposes of this Agreement, Good Reason will mean the
occurrence of any of the following events or conditions described in Subsections
(i) through (ix) hereof:
(i) (A) a change in the Executive's status, title,
position or responsibilities (including reporting responsibilities) which, in
the Executive's reasonable judgment, constitutes a material diminution in his
status, title, position or responsibilities as in effect immediately prior
thereto, except in connection with the termination of his employment for
Disability, Cause, as a result of his death or by the Executive other than for
Good Reason; or (B) the assignment to the Executive of any duties or
responsibilities which, in the Executive's reasonable judgment, are inconsistent
with his status, title, position or responsibilities as in effect immediately
prior thereto;
(ii) (A) a reduction in the Executive's Base Salary
or his target bonus opportunity; or (B) a failure by the Company or the
Subsidiary to increase the Executive's Base Salary within any twelve (12) month
period by the average percentage increase during such period of the base
salaries of the three most senior executives of the Company other than the
Executive;
(iii) the Company's requiring the Executive to be
based at any place other than his principal work location as of the date of this
Agreement, except for reasonably required travel on the Company's business
which, in the event of a Change in Control, is not materially greater than such
travel requirements prior to the Change in Control;
(iv) the failure by the Company to (A) continue in
effect any material compensation or benefit plan in which the Executive was
participating at the time of the Change in Control, including, but not limited
to, the Company's Deferred Compensation Plan, or 401(k) Plan, or (B) provide the
Executive with compensation and benefits at least equal (in terms of benefit
levels and/or reward opportunities) to those provided for under each employee
benefit plan, program and practice as in effect immediately prior to the Change
in Control (or as in effect following the Change in Control, if greater).
(v) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy of the Company;
5
<PAGE>
(vi) any material breach by the Company of any
provision of this Agreement;
(vii) any purported termination of the Executive's
employment for Cause by the Company which does not comply with the terms of
Section 8 of this Agreement;
(viii) the failure of the Company to obtain an
agreement, satisfactory to the Executive, from any successor or assign of the
Company to assume and agree to perform this Agreement, as contemplated in
Section 11 hereof; and
(ix) any breach of the Company's representations set
forth in Section 17(b) which has a material adverse effect on the Company.
(2) Good Reason Arising Prior To Change in Control. Any
event or condition described in Sections 8(c)(i) through (ix) which occurs prior
to a Change in Control, but which (i) was at the request of a third party who
has taken steps reasonably calculated to effect a Change in Control or (ii)
otherwise arose in connection with a Change in Control, will constitute Good
Reason for purposes of this Agreement notwithstanding that it occurred prior to
a Change in Control.
(3) Good Reason Arising During Incapacity. The Executive's
right to terminate his employment pursuant to this Section 8(c) will not be
affected by his incapacity due to physical or mental illness (whether or not
such incapacity constitutes Disability under Section 8(a)).
(d) Voluntary Termination. The Executive may voluntarily terminate
his employment hereunder at any time. If the Executive voluntarily terminates
his employment for any reason or without reason during the 60-day period which
commences on the date which is six (6) months following the date of a Change in
Control, it will be referred to as a "Limited Period Termination."
(e) Change in Control. For purposes of this Agreement, a "Change
in Control" is defined as the first to occur of the following:
(1) the acquisition by any Person (as such term is defined
in Section 13(c) or 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the combined voting power
of the Company's then outstanding voting securities (a "25% Beneficial Owner");
provided, however, that for purposes hereof, the following acquisitions shall
not constitute or give rise to a Change in Control: (A) any acquisition by the
Company or any of its subsidiaries; (B) any acquisition directly from the
Company or any of its subsidiaries; (C) any acquisition by any employee benefit
plan (or related trust or fiduciary) sponsored or maintained by the Company or
any corporation controlled by the Company; (D) any acquisition by any
underwriter temporarily holding securities pursuant to an offering of such
securities; (E) any acquisition by a corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same proportions as
their ownership of stock in the Company; (F) any acquisition in connection with
which, pursuant to Rule 13d-1 promulgated pursuant to the Exchange Act, the
Person is permitted to, and actually
6
<PAGE>
does, report its beneficial ownership on Schedule 13-G (or any successor
Schedule); provided, that, if any such Person subsequently becomes required to
or does report its beneficial ownership on Schedule 13D (or any successor
Schedule), then, for purposes of this paragraph, such Person shall be deemed to
have first acquired, on the first date on which such Person becomes required to
or does so report, beneficial ownership of all of the voting securities of the
Company beneficially owned by it on such date; and (G) any acquisition in
connection with a merger or consolidation which, pursuant to paragraph 8(e)(2)
below, does not constitute a Change in Control; or
(2) there is approved by the Board or the Company's
shareholders a merger or consolidation to which the Company or any direct or
indirect subsidiary of the Company is a party if the merger or consolidation
would result in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or parent thereof) less than 70% of the combined voting power
of the securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation; or
(3) individuals who, as of the beginning of any twenty-four
month period, constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to the beginning of such period whose election or
nomination for election by the Company stockholders was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of members of the Board (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act);
(4) the shareholders of the Company have approved a complete
liquidation or dissolution of the Company or there is consummated an agreement
for the sale or other disposition of all or substantially all of the assets of
the Company.
(f) Notice of Termination. Any purported termination by the
Company or by the Executive will be communicated by written Notice of
Termination to the other. For purposes of this Agreement, a "Notice of
Termination" will mean a notice which indicates the specific termination
provision in this Agreement relied upon and will set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. For purposes of this
Agreement, no such purported termination of employment will be effective without
such Notice of Termination.
(g) Termination Date. "Termination Date" will mean in the case of
the Executive's death, his date of death and, in all other cases, the date
specified in the Notice of Termination, subject to the following:
(i) if the Executive's employment is terminated by
the Company for Cause or due to Disability, the date specified in the Notice of
Termination will be at least
7
<PAGE>
thirty (30) days from the date the Notice of Termination is given to the
Executive; provided that in the case of Disability the Executive will not have
returned to the full-time performance of his duties during such period of at
least thirty (30) days; and
(ii) if the Executive's employment is terminated for
Good Reason or is a Limited Period Termination, the date specified in the Notice
of Termination will not be more than sixty (60) days from the date the Notice of
Termination is given to the Company.
9. Compensation Upon Termination. Upon termination of the Executive's
employment during the term of this Agreement (including any extensions thereof),
the Executive will be entitled to the following benefits:
(a) Termination for Cause, Disability, or Death. If the
Executive's employment is terminated by the Company for Cause or Disability, by
the Executive (other than for Good Reason or a Limited Period Termination), or
by reason of the Executive's death, the Company (or the appropriate Company
employee benefit plan) will pay the Executive all amounts earned or accrued
hereunder through the Termination Date but not paid as of the Termination Date,
including: (i) Base Salary, (ii) reimbursement for any and all monies advanced
or expenses incurred in connection with the Executive's employment for
reasonable and necessary expenses incurred by the Executive on behalf of the
Company for the period ending on the Termination Date, (iii) vacation pay, (iv)
any bonuses or incentive compensation and (v) any previous compensation which
the Executive has previously deferred (including any interest earned or credited
thereon) (collectively, "Accrued Compensation"). In addition to the foregoing,
if the Executive's employment is terminated by the Company for Disability or by
reason of the Executive's death, (A) the Company will pay to the Executive or
his beneficiaries an amount equal to the bonus or incentive award that the
Executive would have been entitled to receive in respect of the fiscal year in
which the Executive's Termination Date occurs had he continued in employment
until the end of such fiscal year, calculated as if all performance targets and
goals (if applicable) had been fully met by the Company and by the Executive, as
applicable, for such year, multiplied by a fraction the numerator of which is
the number of days in such fiscal year through the Termination Date and the
denominator of which is 365 (a "Pro Rata Bonus"); and (B)(i) all unvested stock
options shall immediately vest and become fully exercisable, and shall remain
exercisable until the earlier to occur of (x) the third anniversary of the
Executive's termination of employment; or (y) expiration of the origination term
of such option; provided, however, that at the end of the first year following
Executive's termination of employment Executive has exercised awards equal to at
least one-third of all of Executive's outstanding vested awards, at the end of
the second year following Executive's termination of employment Executive has
exercised awards equal to at least two-thirds of all of Executive's outstanding
vested awards, and at the end of the third year following Executive's
termination of employment Executive has exercised all of Executive's outstanding
vested awards, in each case taking into account prior years' option exercises
during the three-year period; (ii) any unvested pension, retirement or other
employee benefit shall become fully vested to the extent permitted by law; (iii)
any restricted stock or other benefits subject to restrictions shall become free
of such restrictions; and (C) continued coverage under any health, medical,
dental or vision program or policy in which Executive was eligible to
participate as of the time of his employment termination for twenty-four (24
months following such termination on terms no less favorable to Executive and
his dependents (including with respect to payment for the costs thereof) than
those
8
<PAGE>
in effect immediately prior to such termination; provided, however, that the
health care continuation coverage period under Section 4980B(f) of the Code
shall commence at the end of such twenty-four (24) month period. Executive's
entitlement to any other compensation or benefits will be determined in
accordance with the Company's employee benefit plans and other applicable
programs and practices then in effect.
(b) Termination Without Cause, Resignation for Good Reason, or
Limited Period Termination. Except as provided in subsection (c) below
addressing termination in the event of a Change in Control, if the Executive's
employment is terminated (1) by the Company other than for Cause, death or
Disability, (2) by the Executive for Good Reason, then the Executive will be
entitled to the benefits provided below as described in Subsections (i) - (vi):
(i) The Company will pay the Executive all Accrued
Compensation and a Pro Rata Bonus.
(ii) Except as provided in subsection (c) below, the
Company will pay the Executive as severance pay and in lieu of any further
salary for periods subsequent to the Termination Date, in a single payment an
amount in cash equal to three (3) times the sum of (A) the Executive's Base
Salary at the highest rate in effect at any time within the ninety (90) day
period ending on the date the Notice of Termination is given and (B) the "Bonus
Amount" (as defined below). The term "Bonus Amount" will mean the higher of (x)
the average of the cash bonus or incentive compensation received by Executive
for the two fiscal years immediately preceding the Termination Date, and (y) the
target bonus; provided, however, that the period constituting the Preliminary
Term shall be disregarded for purposes of determining the Bonus Amount; and
(iii) For twenty-four (24) months immediately
following the month in which occurs his date of termination, the Company will at
its expense continue on behalf of the Executive and his dependents and
beneficiaries the life insurance, disability, medical, dental and
hospitalization benefits which were being provided to the Executive at the time
Notice of Termination is given (or, if the Executive is terminated following a
Change in Control, the benefits provided to the Executive at the time of the
Change in Control, if greater). The benefits provided in this Section 9(b)(iii)
will be no less favorable to the Executive, in terms of amounts and deductibles
and costs to him, than the coverage provided the Executive under the plans
providing such benefits at the time Notice of Termination is given (or, if the
Executive is terminated following a Change in Control, at the time of the Change
in Control if more favorable to the Executive). The Company's obligation
hereunder with respect to the foregoing benefits will be limited to the extent
that the Executive obtains any such benefits pursuant to a subsequent employer's
benefit plans, in which case the Company may reduce the coverage of any benefits
it is required to provide the Executive hereunder as long as the aggregate
coverage of the combined benefit plans is no less favorable to the Executive, in
terms of amounts and deductibles and costs to him, than the coverage required to
be provided hereunder. This Subsection (iii) will not be interpreted so as to
limit any benefits to which the Executive or his dependents may be entitled
under any of the Company's employee benefit plans, programs or practices
following the Executive's termination of employment, including without
limitation, retiree medical and life
9
<PAGE>
insurance benefits; provided, however, that the health care continuation
coverage period under Section 4980B(f) of the Code shall commence at the time of
such twenty-four (24) month period.
(iv) Except as provided in subsection (v), all
unvested stock options, restricted stock, or other equity-based compensation
awards granted to the Executive shall be forfeited.
(v) All restrictions on the outstanding options
granted by the Company or any other subsidiaries of the Company (including
restricted stock awards) pursuant to Section 6(d) hereof to the Executive shall
lapse and such options shall become fully (100%) vested immediately, and shall
become immediately exercisable; provided, that (A) all such options will be
exercisable for a period of thirty-six (36) months after the Executive's
Termination Date (but in no event longer than the maximum term of such option
specified in the grant thereof and determined without regard to the termination
of the Executive's employment); and (B) at the end of the first year following
Executive's termination of employment Executive has exercised awards equal to at
least one-third of all of Executive's outstanding vested awards, at the end of
the second year following Executive's termination of employment Executive has
exercised awards equal to at least two-thirds of all of Executive's outstanding
vested awards, and at the end of the third year following Executive's
termination of employment Executive has exercised all of Executive's outstanding
vested awards, in each case taking into account prior years' option exercises
during the three-year period.
(c) Termination upon Change in Control. If the Executive's
employment is terminated within the period commencing 6 months prior to a Change
in Control and ending twenty-four (24) months following a Change in Control, (1)
by the Company other than for Cause, death or Disability, or (2) by the
Executive for Good Reason or as a Limited Period Termination; and
(i) If the price per share of Company stock on the
date of the Change in Control (as determined under the applicable change in
control agreement in the event of a Change in Control under Section 8(e)(1) or
(2) hereof and as determined on the principal market on which the Company stock
is traded on the date of the Change in Control under Section 8(e)(3) or (4) or
on such other reasonable basis as the Board shall determine) (the "CIC Stock
Price") is less than 150% of the option exercise price of the options awarded to
Executive in his option grant dated November 4, 2002 (the "Strike Price"), the
Company will pay the Executive as severance pay and in lieu of any further
salary for periods subsequent to the Termination Date, in a single payment an
amount in cash equal to one (1) times the sum of (A) the Executive's Base Salary
at the highest rate in effect at any time within the ninety (90) day period
ending on the date the Notice of Termination is given (or, if the Executive's
employment is terminated after a Change in Control, the Executive's Base Salary
immediately prior to the Change in Control, if greater); and (B) the Bonus
Amount; or
(ii) If the CIC Stock Price is greater than or equal
to 150% but less than 200% of the Strike Price, the Company will pay the
Executive as severance pay and in lieu of any further salary for periods
subsequent to the Termination Date, in a single payment an amount in cash equal
to two (2) times the sum of (A) the Executive's Base Salary at the highest rate
in effect at any time within the ninety (90) day period ending on the date the
Notice of
10
<PAGE>
Termination is given (or, if the Executive's employment is terminated after a
Change in Control, the Executive's Base Salary immediately prior to the Change
in Control, if greater); and (B) the Bonus Amount; or
(iii) If the CIC Stock Price is greater than or equal
to 200% of the Strike Price, the Company will pay the Executive as severance pay
and in lieu of any further salary for periods subsequent to the Termination
Date, in a single payment an amount in cash equal to three (3) times the sum of
(A) the Executive's Base Salary at the highest rate in effect at any time within
the ninety (90) day period ending on the date the Notice of Termination is given
(or, if the Executive's employment is terminated after a Change in Control, the
Executive's Base Salary immediately prior to the Change in Control, if greater);
and (B) the Bonus Amount; and
(iv) The Executive will be entitled to all employee
benefits (other than severance pay or equivalent payments) due to any other ICN
Pharmaceuticals, Inc. senior executive who separated from service in connection
with such Change in Control; and
(v) The foregoing benefits described in this
subsection (c) shall be the exclusive severance payments under this Agreement
that Executive is entitled to upon a Change in Control and in no event shall
Executive be entitled to duplicative benefits or payments under this Agreement.
(d) Non-Renewal of Agreement; Retirement. In the event of
non-renewal by the Company of this Agreement pursuant to Section 1, no severance
payments shall be made to Executive except as otherwise provided in this
subsection (d). In the event of non-renewal, the parties shall negotiate in good
faith for the Executive to continue to provide services to the Company in a role
that is commensurate with Executive's background, experience, and time
availability such that vesting of Executive's equity compensation awards shall
continue under the Company's equity compensation plan. In the event that the
parties cannot reach an agreement, Executive shall be assigned a suitable
position with the Company such that vesting of Executive's equity compensation
awards shall continue under the Company's equity compensation plan. In the event
that the parties are unable to reach an agreement and prior to using the dispute
resolution procedures in Section 12, the Chairman of the Compensation Committee
shall attempt to resolve such dispute.
(i) If non-renewal of this Agreement occurs within
the period commencing six (6) months prior to a Change in Control or ending
twenty-four (24) months following a Change in Control, Executive shall be
entitled to the severance payments under Section 9(b).
(ii) In the event of non-renewal in which Executive
has no ongoing role with the Company, all options granted to the Executive
pursuant to Section 6(d) shall remain exercisable for a period of thirty-six
(36) months from the date of his termination of his service in any and all
capacities with the Company; provided, that at the end of the first year
following Executive's termination of employment Executive has exercised awards
equal to at least one-third of all of Executive's outstanding vested awards, at
the end of the second year following Executive's termination of employment
Executive has exercised awards equal to at least two-thirds of all of
Executive's outstanding vested awards, and at the end of the third year
following
11
<PAGE>
Executive's termination of employment Executive has exercised all of Executive's
outstanding vested awards, in each case taking into account prior years' option
exercises during the three-year period.
(iii) In the event of non-renewal in which Executive
has no ongoing role with the Company, Executive shall forfeit any unvested stock
options, restricted stock, or other equity-based compensation awards.
(e) The amounts provided for in Sections 9(a) and 9(b)(i), (ii)
and (iv) and 9(c) will be paid within five (5) days after the Executive's
Termination Date.
(f) The Executive will not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise and no such payment will be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any subsequent employment,
except as described in Section 9(b)(iii).
(g) In the event that any amount or benefit paid or distributed to
the Executive pursuant to this Agreement, taken together with any amounts or
benefits otherwise paid or distributed to the Executive by the Company or any
affiliated company (collectively, the "Covered Payments"), including, without
limitation any profit realized in respect of the stock options and similar
events, are or become subject to the tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the
Company shall pay to the Executive at the time specified below an additional
amount (the "Tax Reimbursement Payment") such that the net amount retained by
the Executive with respect to such Covered Payments, after deduction of any
Excise Tax on the Covered Payments and any Federal, state and local income tax
and Excise Tax on the Tax Reimbursement Payment provided for by this Section
9(g), but before deduction for any Federal, state or local income or employment
tax withholding on such Covered Payments, shall be equal to the amount of the
Covered Payments. The Company shall reimburse Executive only as a result of
excise taxes imposed under Section 4999 of the Code (or a successor Code
provision of comparable intent).
For purposes of determining whether any of the Covered Payments will
be subject to the Excise Tax and the amount of such Excise Tax,
(A) such Covered Payments will be treated as "parachute payments" within
the meaning of Section 280G of the Code, and all "parachute payments" in excess
of the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be
treated as subject to the Excise Tax, unless, and except to the extent that, in
the good faith judgment of the Company's independent certified public
accountants appointed prior to the date of this Agreement or tax counsel
selected by such Accountants (the "Accountants"), such Covered Payments (in
whole or in part) either do not constitute "parachute payments" or represent
reasonable compensation for personal services actually rendered (within the
meaning of Section 280G(b)(4)(B) of the Code) in excess of the "base amount," or
such "parachute payments" are otherwise not subject to such Excise Tax, and
(B) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accountants in accordance with the principles
of Section 280G of the Code.
12
<PAGE>
For purposes of determining the amount of the Tax Reimbursement
Payment, the Executive shall be deemed to pay:
(A) Federal income taxes at the highest applicable marginal rate of
Federal income taxation for the calendar year in which the Tax Reimbursement
Payment is to be made, and taking into account the effect of loss of the value
of itemized deductions and personal exemptions as a result of Executive's
receipt of the Tax Reimbursement Payment; and
(B) any applicable state and local income taxes at the highest
applicable marginal rate of taxation for the calendar year in which the Tax
Reimbursement Payment is to be made, net of the maximum reduction in Federal
incomes taxes which could be obtained from the deduction of such state or local
taxes if paid in such year.
In the event that the Excise Tax is subsequently determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to be less than the amount taken into account hereunder in
calculating the Tax Reimbursement Payment made, the Executive shall repay to the
Company, at the time that the amount of such reduction in the Excise Tax is
finally determined, the portion of such prior Tax Reimbursement Payment that
would not have been paid if such Excise Tax had been applied in initially
calculating such Tax Reimbursement Payment, plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of the Tax Reimbursement
Payment to be refunded to the Company has been paid to any Federal, state or
local tax authority, repayment thereof shall not be required until actual refund
or credit of such portion has been made to the Executive, and interest payable
to the Company shall not exceed interest received or credited to the Executive
by such tax authority for the period it held such portion. The Executive and the
Company shall mutually agree upon the course of action to be pursued (and the
method of allocating the expenses thereof) if the Executive's good faith claim
for refund or credit is denied.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Tax Reimbursement Payment is made (including, but not limited to, by reason
of any payment the existence or amount of which cannot be determined at the time
of the Tax Reimbursement Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus any interest or penalty
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
The Tax Reimbursement Payment (or portion thereof) provided for in
this Section 9(f) shall be paid to the Executive not later than 10 business days
following the payment of the Covered Payments; provided, however, that if the
amount of such Tax Reimbursement Payment (or portion thereof) cannot be finally
determined on or before the date on which payment is due, the Company shall pay
to the Executive by such date an amount estimated in good faith by the
Accountants to be the minimum amount of such Tax Reimbursement Payment and shall
pay the remainder of such Tax Reimbursement Payment (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined, but in no event later than 45 calendar days after
payment of the related Covered Payment. In the event
13
<PAGE>
that the amount of the estimated Tax Reimbursement Payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan by
the Company to the Executive, payable on the fifth business day after written
demand by the Company for payment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code).
10. Proprietary Information. As a condition of this Agreement, Executive
shall execute and comply with the Company's standard form of proprietary
information and inventions agreement which is attached hereto as Exhibit B.
11. Successors and Assigns.
(a) Company's Successors and Assigns. This Agreement will be
binding upon and will inure to the benefit of the Company, its successors and
assigns, and the Company will require any successor or assign to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession or
assignment had taken place. The term "the Company" as used herein will include
such successors and assigns. The term "successors and assigns" as used herein
will mean a corporation or other entity acquiring all or substantially all the
assets and business of the Company (including this Agreement) whether by
operation of law or otherwise, or any entity employing Executive which has spun
off or split off from the Company.
(b) No Assignment by Executive. Neither this Agreement nor any
right or interest hereunder will be assignable or transferable by the Executive,
his beneficiaries or legal representatives, except by will or by the laws of
descent and distribution. This Agreement will inure to the benefit of and be
enforceable by the Executive's legal personal representative.
12. Dispute Resolution. To ensure rapid and economical resolution of any
disputes which may arise under this Agreement, Executive and the Company agree
that any and all disputes or controversies of any nature whatsoever arising from
or regarding the Executive's employment or the interpretation, performance,
enforcement or breach of this Agreement shall be resolved, to the fullest extent
allowed by law, by confidential, final and binding arbitration conducted before
a single arbitrator with Judicial Arbitration and Mediation Services, Inc.
("JAMS") in Orange County, California, under the then-existing JAMS rules. The
parties acknowledge that by agreeing to this arbitration procedure, they waive
the right to resolve any such dispute through a trial by jury, judge or
administrative proceeding. The arbitration shall be completed within six (6)
months from the date the demand for arbitration is filed with JAMS, provided
that the arbitrator may extend such date for good reason as determined in his
sole discretion. The arbitrator shall: (a) have the authority to compel adequate
discovery for the resolution of the dispute and to award such relief as would
otherwise be permitted by law; and (b) issue a written arbitration decision
including the arbitrator's essential findings and conclusions and a statement of
the award. The Company shall pay all JAMS' arbitration fees. The arbitrator
shall have discretion to award to the prevailing party on any claim recovery of
reasonable attorneys fees and costs; provided, however, that (a) the Executive
shall be liable for such amounts only if the arbitrator finds that the
Executive's position in the matter is frivolous or in bad faith; and (b) the
amount of fees so awarded shall not exceed 1% of the net worth of the paying
party (i.e., the Company or Executive). Nothing in this Agreement is intended to
prevent either the Executive or the Company from obtaining injunctive relief in
court
14
<PAGE>
to prevent irreparable harm pending the conclusion of any such arbitration. The
arbitrator, and not a court, shall be authorized to determine whether the
provisions of this paragraph apply to a dispute, controversy or claim sought to
be resolved in accordance with these arbitration procedures. Notwithstanding the
foregoing, neither party shall be permitted to initiate a demand for arbitration
until it has participated in a non-binding mediation conducted by JAMS, after
providing notice to the other party. Both parties shall participate in such a
mediation with forty-five (45) days of delivery of such notice. If the parties
cannot mutually agree upon a mediator within ten (10) days of such notice, then
a mediator shall be designated by JAMS.
13. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) will be in writing and will be deemed to have been duly given when
personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided that all notices to the Company will be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications will be deemed to have been received on the date of delivery
thereof or on the third (3rd) business day after the mailing thereof, except
that notice of change of address will be effective only upon receipt.
14. Non-exclusivity of Rights. Nothing in this Agreement will prevent or
limit the Executive's continuing or future participation in any written benefit,
bonus, incentive or other plan or program provided by the Company or any of its
subsidiaries and for which the Executive may qualify, and nothing in this
Agreement will limit or reduce such rights as the Executive may have under any
other written agreements with the Company or any of its subsidiaries. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan or program of the Company or any of its subsidiaries will
be payable in accordance with such plan or program, except as explicitly
modified by this Agreement.
15. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder will not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others.
16. Indemnification.
(a) The Company agrees that if the Executive is made a party to or
involved in, or is threatened to be made a party to or otherwise to be involved
in, any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he is or was a
director, officer or employee of the Company or any affiliate or is or was
serving at the request of the Company or any affiliate as a director, officer,
member, employee or agent of another corporation, limited liability corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether or not the basis of such Proceeding
is the Executive's alleged action in an official capacity while serving as a
director, officer, member, employee or agent, the Executive shall be indemnified
and held harmless by the Company and each relevant against any and all
liabilities, losses, expenses, judgments, penalties, fines and amounts
reasonably paid in settlement in connection therewith,
15
<PAGE>
and shall be advanced reasonable expenses (including attorneys' fees) as and
when incurred in connection therewith, to the fullest extent legally permitted
or authorized by Employer's by-laws or, if greater, by the laws of the State of
Delaware, as may be in effect from time to time. The rights conferred on the
Executive by this Section 16(a) shall not be exclusive of any other rights which
the Executive may have or hereafter acquire under any statute, the by-laws,
agreement, vote of stockholders or disinterested directors, or otherwise. In
this regard, Executive shall have full discretion as to choice of counsel in all
matters subject to indemnification under this Agreement. The indemnification and
advancement of expenses provided for by this Section shall continue as to the
Executive after he ceases to be a director, officer or employee and shall inure
to the benefit of his heirs, executors and administrators, and shall survive any
termination or non-renewal of this Agreement. In addition, Executive shall also
be entitled to indemnification from the Company (and its subsidiaries and
affiliates for which executive sums as an officer or director) on terms no less
advantageous to executive as are provided to any officer or director of the
Company. Such provisions shall be memorialized in a separate indemnity agreement
between Executive, the Company and applicable affiliates or subsidiaries,
provided, however, that the entry into such indemnity agreement shall not
constitute a condition precedent to the obligations of the Company or its
subsidiaries or affiliates under this Agreement.
(b) For the Initial Term and thereafter, Executive shall be
covered by any directors' and officers' liability policy maintained by Employer
from time to time.
17. Effect of Other Law; Financial Statements.
(a) Anything herein to the contrary notwithstanding, the terms of
this Agreement shall be modified to the extent required to meet the provisions
of the Sarbanes-Oxley Act of 2002 or other federal law applicable to the
employment arrangements between the Executive and the Company. Any delay in
providing benefits or payments, any failure to provide a benefit or payment, or
any repayment of compensation that is required under the preceding sentence
shall not in and of itself constitute a breach of this Agreement, provided,
however, that the Company shall provide economically equivalent payments or
benefits to Executive to the extent permitted by law.
(b) Financial Statements. The Company represents and warrants
that, to its knowledge, as of the Start Date, all financial statements of the
Company filed within its reports to the Securities and Exchange Commission with
respect to periods prior to the Preliminary Term fairly present in all material
respects the financial position of the Company [in conformity with Generally
Accepted Accounting Principles] as of the applicable reporting dates except, in
the case of quarterly periods, for normal year-end adjustments and the absence
of footnotes.
18. Miscellaneous. No provision of this Agreement may be amended,
modified, or changed unless such amendment, modification or change is agreed to
in writing by the Executive and the Board of the Company. Either party may waive
any breach or non-compliance with any provision or condition in favor of the
waiving party under this Agreement in a writing signed by the party to be
charged. No waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party will be deemed a waiver of such
provision or condition, nor a
16
<PAGE>
waiver of any similar provision or condition, at any prior or subsequent time.
No agreement or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement.
19. Fees and Expenses; Legal Counsel. The Company shall pay all
reasonable legal and advisory fees and related expenses, up to a maximum amount
of $30,000, incurred by Executive in connection with the negotiation of this
Agreement and related employment arrangements. Executive acknowledges that he
has had the opportunity to consult with legal counsel of his choice in
connection with the drafting, negotiation and execution of this Agreement and
related employment arrangements.
20. Governing Law. This Agreement will be governed by and construed and
enforced in accordance with the laws of the State of California without giving
effect to the conflict of law principles thereof.
21. Severability. The provisions of this Agreement will be deemed
severable and the invalidity or unenforceability of any provision will not
affect the validity or enforceability of the other provisions hereof.
22. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior negotiations, agreements (if
any), understandings, promises, representations, and arrangements, oral or
written, between the parties hereto with respect to the subject matter hereof.
* * *
[Signature page follows]
17
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
ICN PHARMACEUTICALS, INC.
By:
--------------------------------------
Title:
-----------------------------------
ATTEST:
------------------------------
Secretary
The "Executive"
By:
--------------------------------------
Robert O'Leary
18
<PAGE>
EXHIBIT A
LIST OF DIRECTORSHIPS
<PAGE>
EXHIBIT B
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT