Valeant Pharmaceuticals International
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of the earliest event reported): March 28, 2007
Valeant Pharmaceuticals International
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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1-11397
(Commission File Number)
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33-0628076
(I.R.S Employer
Identification No.) |
One Enterprise
Aliso Viejo, California 92656
(Address of principal executive offices) (Zip Code)
(949) 461-6000
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
PETER J. BLOTT
On March 28, 2007, the Compensation Committee of Valeant Pharmaceuticals International
(the Company), in connection with the appointment of Peter J. Blott as Chief Financial
Officer of the Company on March 21, 2007, increased Mr. Blotts annual base salary to
$360,000 and set an annual incentive bonus target of 60%, with a maximum incentive bonus of 120%, of annual base
salary.
On March 28, 2007, the Compensation Committee of the Company also approved an
Executive Severance Agreement (the Agreement), effective as of March 21, 2007, between
the Company and Mr. Blott.
The Agreement expires on December 31, 2010 unless sooner terminated following a
Change in Control (as defined in the Agreement), 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 Mr. Blott that the Agreement will not be extended.
Under the Agreement, upon termination by reason of death or disability, by the Company
for cause, or by Mr. Blott without good reason, Mr. Blott will receive all amounts earned
or accrued through the termination date, as specified in the Agreement. Upon termination by
reason of death or disability, Mr. Blott or his heirs will, in addition, be entitled to a
prorated portion of his annual bonus. Mr. Blott 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 Mr. Blotts employment is terminated by the Company without cause, or by Mr. Blott
with good reason, and Mr. Blott agrees 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) Mr. Blotts annual base salary then in
effect and (d) the lesser of the average of annual incentive program bonuses paid to Mr.
Blott for the five prior years (or such shorter period if Mr. Blott has not been eligible
to participate in the annual incentive program) or Mr. Blotts target bonus at such time.
If the Company terminates Mr. Blotts employment, other than for cause, disability or
death, or by Mr. Blott for good reason, the Company will also pay up to an aggregate of
$20,000 for outplacement services.
If during the period beginning six months prior to a Change in Control and ending
twelve months after a Change in Control, Mr. Blott 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 Mr. Blott for the five prior years
(or such shorter period if Mr. Blott has not been eligible to participate in the annual
incentive program) or Mr. Blotts 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 Mr. Blott and his family with medical, dental and life insurance benefits at least
equal to those which would have been provided had Mr. Blott 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 of the Company, 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.
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The Agreement provides that payments and benefits under the Agreement and all other
related arrangements would otherwise trigger excess parachute payment penalties under
Section 280G of the
Internal Revenue Code of 1986, then such payments and benefits shall be adjusted to
maximize the net amount he would realize after payment of income and excise taxes.
The foregoing summary of the Agreement is qualified in its entirety by the actual
Agreement, a form of which was filed as Exhibit 10.1 to the Companys Form 8-K dated June
16, 2005 and is incorporated herein by reference.
EXECUTIVE INCENTIVE PLAN
On March 28, 2007, the Compensation Committee (the Committee) of the Board of
Directors of Valeant Pharmaceuticals International (the Company or Valeant)
approved the performance bonus program for fiscal year 2007 under the Companys
Executive Incentive Plan.
The Executive Incentive Plan is aimed at recognizing and rewarding the Executives
who significantly influence the strategy, direction and performance of the Company.
Valeants Executive Incentive Plan is built upon the financial and strategic plan of
the Company:
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It is designed to recognize and reward contributions to Valeants success. |
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It provides our Executives with a powerful incentive to achieve financial and strategic
goals. |
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It directly ties pay to performance, based on clearly defined objectives. |
Each bonus award depends on the Executives base salary and grade level, on how well
the Company and the Executives region or division succeed in meeting their
financial goals, and how well the Executive individually performs on his or her
strategic initiatives.
Eligibility for the Plan
The Executive Incentive Plan includes only participants in the Companys Management
Team. An Executive must be hired before October 1 of the plan year to be eligible
for the current years award and must be an employee on the day the award is paid.
The Executive must also have a minimum of meets expectations on his or her annual
performance appraisal. Eligibility to participate in one year does not guarantee
eligibility in succeeding years. At the beginning of each fiscal year, the Chief
Executive Officer will designate those individuals eligible to participate in the
Executive Incentive Plan. But only those individuals with an Annual Incentive Plan
Commitment Summary signed by the CEO will participate.
Participation in the Executive Incentive Plan precludes participation in any other
annual incentive plan, sales compensation plan, or special retention program unless
specifically approved by the CEO of Valeant.
Plan Overview
The Compensation Committee of the Board of Directors has approved Valeants
performance goals for this year based on those business strategies and operating
plans that drive shareholder value:
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EBITDA |
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Revenue |
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Earnings Per Share |
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Working Capital |
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Strategic initiatives (using quantitative measures or key
milestones) |
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To be eligible for an award from the Executive Incentive Plan, an Executive must
meet specific
goals in these areas. In addition, each Executives performance will be weighted
in different areas, depending on his or her position in the Company.
Performance Measures and Weightings
Each Executives award will be based on the following two measures:
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Financial Performance |
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Strategic Initiatives
(Sis) |
Financial Performance Financial measures (other than EPS) are based on the local
currency in which the Participant operates (local currency at plan rates may be
used). An Executives position determines the weight given to financial and
strategic goals. The following are the 2007 performance goal weightings for the
Chief Executive Officer, the Chief Financial Officer and the General Counsel:
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Financials |
CEO and President |
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100% |
CFO |
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100% |
General Counsel |
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100% |
If a financial goal is proposed to be changed during the course of the fiscal year,
an Annual Incentive Plan Exception/Change Request Form must be completed. The
exception or change is not in effect until the CEO signs the form.
Strategic Initiatives Strategic initiatives are project based goals, each of
which may be weighted differently, according to the judgment of the CEO. Specific
weighting for each SI should equal the total of the weighting for the SI portion of
the award opportunity. No more than five (5) SIs are permitted. More than five SIs
indicates a lack of focus which is the opposite of targeted Strategic Initiatives.
If business events occur which will result in the need to change a Strategic
Initiative or replace it with another one, an Annual Incentive Plan Exception/Change
Request Form must be completed. The exception or change is not in effect until the
CEO signs the form.
Discretionary Adjustment On an exception basis, once the formula award has been
calculated, the CEO may recommend to the Compensation Committee an increase (or
decrease) of an Executives award up to 25% of the target award to recognize special
circumstances. In making such a recommendation, the CEO shall present to the
Compensation Committee information regarding such factors as overall company
performance, factors beyond the control of the Plan participant, and facts and
circumstances which were not, and could have not been, anticipated by the Executive.
Such recommendation shall only be implemented upon the further recommendation to, an
approval of, the Board of Directors. A Discretionary Adjustment is not normal and
will be made only as a true exception.
EBITDA Adjustment For a Regional Director whose region exceeds EBITDA Maximum
Goal, they may earn an additional award based on 5% of their regions EBITDA in
excess of their Maximum Goal.
Exception Requests or Changes to Financial Metrics or Strategic Initiatives
All exceptions or changes to Financial Metrics or Strategic Initiatives must be
requested before or shortly after the actual event that creates the need for a
potential exception.
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How Awards are Determined
To receive any payment under the Financial Performance portion of the Executive
Incentive Plan,
a Participant must achieve Threshold of (a) the EBITDA goal for Regional Directors
and (b) EPS for all other participating Executives.
The objective of all Executives is to deliver consistent shareholder value. As a
result, the Board of Directors reserves the right to terminate the Companys
Executive Incentive Plan based on financial performance of Valeant or significant
diminution in the Companys stock price as determined by the Board of Directors of
Valeant.
Incentive payments will not be made to participants of a division, unit or function
that fails to meet Sarbanes Oxley Section 404 standards.
Awards will range from 0 to 200% of the Participants target opportunity as shown:
Financial Performance / Award Payout Scale
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Percent of Target |
Performance Level |
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Opportunity Earned |
Below Threshold |
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0 |
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Threshold |
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10 |
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Mid Point of Target and Threshold |
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55 |
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100% of goal (target) |
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100 |
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Maximum |
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200 |
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Strategic Initiatives / Award Payout Scale
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Percent of Target |
Performance Level |
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Opportunity Earned |
Below Threshold |
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0 |
% |
Threshold |
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50 |
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100% of goal (target) |
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100 |
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Maximum |
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200 |
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Awards are determined by the CEO of Valeant. Strategic Initiatives should reflect
challenges beyond the Executives regular responsibilities and reflect
pay-for-performance. It is expected that such initiatives will be challenging and
that the probability of achievement of any initiative will be as follows:
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Threshold |
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80%-90% |
Target |
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60% |
Maximum |
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10%-20% |
Currency fluctuations will be excluded from goal attainment calculations for
regional and local participants except with respect to EPS metrics. Global
participants in financial measures other than EPS will be assumed to be at Plan
Rates unless otherwise specifically designated in advance on an individual basis.
The EPS metric is based on the Adjusted EPS as presented on the Companys Earnings
Releases further adjusted to reflect ribavirin royalties at Plan levels (including
related tax consequences at the marginal U.S. tax rate). The EPS Metric is based on
assumptions used in the Plan for the year. Any changes in accounting standards,
major acquisitions, major dispositions or other material events shall be considered
in establishing a revised metric and must be approved by the Compensation Committee.
The Board of Directors, upon recommendation of the Compensation Committee, may
adjust the bonus of any one or more of the Executives downward by a maximum of 25%,
for extraordinary
circumstances.
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Payout of Awards
Payments are made in cash (paycheck), in local currency, within 2-1/2 months
following the end of the fiscal year, but not before the release of year-end
results. An Executives award is subject to applicable withholdings.
Changes in an Executives Employment Status
If an Executive Leaves the Company If an Executive leaves Valeant during the
year, eligibility for the Executives award will depend on the reason the Executive
is leaving.
Death, Disability, or Retirement The Executives award will be pro-rated based on
the number of full months the Executive has been employed during the year. The
pro-rated award will be paid at the time Incentive Plan payments are made to all
participants.
Other Reasons If the Executive resigns or is terminated before the awards are
paid, the Executive forfeits his or her award.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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VALEANT PHARMACEUTICALS INTERNATIONAL
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Date: April 2, 2007 |
/s/ Eileen C. Pruette
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Eileen C. Pruette |
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Executive Vice President,
General Counsel |
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EXHIBIT INDEX
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Exhibit No. |
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Description |
10.1
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Form of Executive Severance Agreement between the Company and
Peter J. Blott (such form previously filed as Exhibit 10.1 to
the Companys Current Report on Form 8-K dated June 16, 2005,
which is incorporated herein by reference). |
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