def14a
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant
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Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Definitive 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 Additional Materials |
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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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Fee not required. |
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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Proposed maximum aggregate value of transaction:
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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Date Filed:
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April 22, 2005
To the Stockholders of
Valeant Pharmaceuticals International:
It is my privilege as Valeants Chairman to personally
invite you to the Companys 2005 Annual Meeting of
Stockholders to be held on Tuesday, May 24, 2005, at
9:00 a.m., local time, at our corporate headquarters at
3300 Hyland Avenue, Costa Mesa, California 92626.
At this years meeting, stockholders will be asked to vote
on the following proposals:
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1. The election of three directors. |
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2. The ratification of PricewaterhouseCoopers LLPs
appointment as the Companys independent registered public
accounting firm. |
Details regarding these proposals and the business to be
conducted at the meeting are more fully described in the
accompanying Proxy Statement.
Our Board of Directors continues its positive strides toward
enhancing governance practices. We have highlighted our efforts
in this area at several investor conferences this past year as
well as internationally at a global governance conference held
in Rio de Janeiro.
The Companys 2004 Annual Report and Form 10-K
accompany this Proxy Statement.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU
OWN. ON BEHALF OF YOUR BOARD OF DIRECTORS, I URGE YOU TO
COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD AS SOON AS
POSSIBLE, EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL
MEETING. The completing, signing, dating and mailing of the
enclosed proxy card will not prevent you from voting in person
but will assure that your vote is counted if you are unable to
attend the meeting. The proxy may be revoked at any time before
its exercise.
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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 24, 2005
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 24, 2005, at 9:00 a.m., local
time, for the following purposes:
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1. To elect three directors to hold office until the 2008
Annual Meeting of Stockholders or until their respective
successors are elected and qualified. |
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2. 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, 2005. |
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3. To transact such other business as may properly come
before the meeting or any adjournments or postponements thereof. |
Only stockholders of record at the close of business on
April 12, 2005 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.
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 22, 2005.
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 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.
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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Christina de Vaca |
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Secretary |
Dated: April 22, 2005
TABLE OF CONTENTS
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i
VALEANT PHARMACEUTICALS INTERNATIONAL
3300 Hyland Avenue
Costa Mesa, California 92626
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2005
This Proxy Statement is being mailed on or about April 22,
2005 to stockholders of record at the close of business on
April 12, 2005 (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 24,
2005, 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 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 23,
2005. Robert W. OLeary and Christina de Vaca 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. |
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 or, if no direction is indicated, the Proxy
will be voted FOR the election of the Board of
Directors nominees, FOR the ratification of
the appointment of PricewaterhouseCoopers LLP, as independent
registered public accounting firm for the fiscal year ending
December 31, 2005, 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. 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.
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
1
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 12, 2005 (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 12,
2005, there were outstanding 92,539,768 shares of the
Companys common stock, par value $.01 per share (the
Common Stock), held of record by approximately 5,910
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.
In the election of directors, the candidates receiving the
highest number of votes, up to the number of directors to be
elected, will be elected. Our Amended and Restated Certificate
of Incorporation and 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 Amended and Restated Certificate
of Incorporation and Bylaws do not permit cumulative voting.
Each proposal described in this Proxy Statement, other than the
election of directors, requires the affirmative vote of a
majority of the outstanding shares of Common Stock present, in
person or by proxy, and entitled to vote at the Annual Meeting.
An abstention on any proposal submitted to the Stockholders,
other than the election of directors, will be included in the
number of votes cast on that proposal and, accordingly, will
have the effect of a vote AGAINST the proposal.
However, a broker non-vote with respect to a proposal will not
be included in the number of shares counted as being present for
the purpose of voting on that proposal and, accordingly, will
have the effect of reducing the number of affirmative votes
required to approve the proposal.
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 other proposals without specific
instructions from the beneficial owner. When a broker or nominee
votes a clients shares on some but not all proposals, the
missing votes are referred to as broker non-votes.
If you hold Common Stock in street name and you fail
to instruct your broker or nominee as to how to vote such
shares, your broker or nominee may, in its discretion, vote such
shares FOR the election of the Board of
Directors nominees and FOR the ratification of
the appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation
(Certificate of Incorporation) of the Company
provides that the Board of Directors be divided into three
classes of directors. Three directors can be elected at the
Annual Meeting, each to serve until the 2008 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
nominates for election as directors at the Annual Meeting:
2
Richard H. Koppes, Robert W. OLeary and Randy H. Thurman.
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
designate. The Board of Directors has no reason to believe that
any nominee will be unavailable for election or unable to serve.
The three nominees for election at the Annual Meeting who
receive the highest number of affirmative votes will be elected.
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 are provided under the
caption Other Stockholder Proposals and
Director Nominations for the 2006 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: Richard H. Koppes, Robert
W. OLeary and Randy H. Thurman.
INFORMATION CONCERNING COMPANY NOMINEES AND DIRECTORS
The Board of Directors presently consists of nine members. 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 same class as 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.
Each of Richard H. Koppes, Robert W. OLeary and Randy H.
Thurman has served as a director of the Company since 2002 and
is standing for election for a term expiring in 2008.
Robert A. Ingram, Lawrence N. Kugelman and Theo Melas-Kyriazi
are serving until the 2006 Annual Meeting of Stockholders.
Edward A. Burkhardt, Timothy C. Tyson and Elaine Ullian are
serving until the 2007 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.
The Corporate Governance/ Nominating Committee made its report
to the Board of Directors on February 22, 2005. Following
that report, the Board determined that it would be in the best
interests of the Company and its Stockholders to nominate
Messrs. Koppes, OLeary and Thurman as directors to be
elected at the Annual Meeting. Messrs. Koppes, OLeary
and Thurman each recused himself as to his own nomination.
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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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RICHARD H. KOPPES(a)(b)
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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58 |
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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(c)
Mr. OLeary has been the Chairman of the Company since
June 19, 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.
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61 |
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2002 |
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Thermo Electron Corporation (Chairman of Nominating and
Corporate Governance Committee); Smiths Group plc (member of
Audit Committee and Remuneration Committee); Viasys Healthcare
Inc. |
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RANDY H. THURMAN(c)(d)
Mr. Thurman has been the Chairman, President and Chief
Executive Officer of Viasys Healthcare Inc., a provider of
medical equipment and systems to the healthcare industry, since
April 2001. From July 1997 to April 2001, Mr. Thurman
served as Chairman and Chief Executive Officer of Strategic
Reserves LLC, a privately held company he founded to provide
funding and strategic direction to healthcare technology
companies. From July 1993 to July 1997, Mr. Thurman was
Chairman of the Board and Chief Executive Officer of Corning
Life Sciences Inc. From September 1984 to July 1993,
Mr. Thurman was President and Chief Executive Officer of
Rhone Poulenc Rorer Pharmaceuticals, Inc.
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2002 |
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Viasys Healthcare Inc. (Chairman); Closure Medical Corporation
(Chairman of Compensation Committee and Chairman of Stock Option
Committee) |
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Directors Whose Terms Expire in 2006
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ROBERT A. INGRAM(b)(e)
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); Misys plc (member of Audit 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 (member
of Science and Technology Committee) |
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LAWRENCE N. KUGELMAN(e)(f)
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 HMO 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. |
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THEO MELAS-KYRIAZI(a)
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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2003 |
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Cyberkinetics Neurotechnology Systems, Inc. (Audit Committee and
Compensation Committee) |
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Directors Whose Terms Expire in 2007
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EDWARD A. BURKHARDT(a)(e)
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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Poly Medica Corporation (member of Audit Committee and
Governance Committee) |
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TIMOTHY C. TYSON(c)
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 general 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 sales force.
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2004 |
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ELAINE ULLIAN(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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Member of the Finance and Audit Committee. |
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Member of the Corporate Governance/ Nominating Committee. |
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Member of the Executive Committee. |
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(d) |
|
Mr. Thurman serves as Lead Director pursuant to the
Companys corporate governance guidelines. |
|
(e) |
|
Member of the Compensation Committee. |
|
(f) |
|
Mr. Kugelman serves as Board Litigation Liaison. |
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 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. In addition, our governance guidelines
are updated to comply with the rules and regulations of the
Securities and Exchange Commission (the SEC) and the
listing standards of the New York Stock Exchange (the
NYSE).
|
|
|
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 and financial affairs and the
complexities of business organizations.
Additionally, the Corporate Governance/ Nominating Committee
will consider stockholder candidates submitted to the attention
of the Corporate Secretary, together with appropriate
biographical information as outlined under the caption
Other Stockholder Proposal and Director
Nominations for the 2006 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 nominees 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 outside director upon
request.
Communications that include information better addressed by the
complaint hotline supervised by the Finance and Audit Committee
will be forwarded to the hotline.
This communications process has been approved by the Board of
Directors and is available on the Company website referenced
below.
7
|
|
|
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 Meeting. All of our Board members were in
attendance at the 2004 annual meeting except for the two
directors whose terms were expiring and who were not standing
for re-election.
The Lead Director chairs the Board of Directors regularly
scheduled non-management executive sessions. Additionally, the
Lead Director works with the Chairman to establish Board of
Directors agendas and is empowered to act as an
intermediary between non-management directors and management in
the event of unique circumstances or communications.
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 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 NYSE listing standards
and are set forth in the Corporate Governance Guidelines, which
are included as Annex A to this Proxy Statement.
The Board has determined that the following directors are
independent as defined in the NYSE 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 NYSE director independence standards. The
members of our Finance and Audit Committee are also
independent as defined under the applicable SEC
rules.
|
|
|
|
|
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). |
|
|
|
Formal Chief Executive Officer Succession Plan. The Board
monitored a highly successful Chief Executive Officer transition
to separate the roles of the Chairman of the Board and the Chief
Executive Officer. |
|
|
|
Formal Chief Executive Officer Evaluation Process. For
the second 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. |
|
|
|
Lead Director. The Lead Director organized and held
sessions with non-management directors at each regularly
scheduled meeting of the Board of Directors since the last
annual meeting. |
|
|
|
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.
8
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 and information regarding stockholder
communications with the Board can be found on the Companys
website at www.valeant.com. 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 2004. 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. The charters of the Finance
and Audit, Compensation and Corporate Governance/ Nominating
Committees are attached as Annex C, D and E to this Proxy
Statement.
9
|
|
|
|
|
|
Committee/Members |
|
Primary Responsibilities |
|
Meetings Held |
|
FINANCE AND AUDIT
Edward Burkhardt
(Chairman) Richard
Koppes1
Theo Melas-Kyriazi
1 Mr. Koppes
replaced Mr. Fogleman on the committee in May 2004 |
|
Oversee the Companys financial controls and
reporting processes
Select independent accounting firm and review the
scope and timing of the audits
Review of annual financial statements and audit
results
Review of 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 |
|
Ten |
|
COMPENSATION
Lawrence Kugelman
(Chairman) Edward
Burkhardt2
Robert Ingram
2 Mr. Burkhardt
replaced Mr. Lee on the committee in May 2004 |
|
Administer the Companys annual incentives,
equity 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 |
|
Nine |
|
CORPORATE GOVERNANCE/
NOMINATING3
Richard Koppes
(Chairman) Robert Ingram Elaine
Ullian
3 This
committee was formed in May 2004 by combining the Nominating
Committee and the Corporate Governance Committee |
|
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 |
|
Five |
|
EXECUTIVE
Robert OLeary
(Chairman) Randy Thurman Timothy
Tyson4
4 Mr. Tyson replaced Mr. Burkhardt on the
Committee in May 2004 |
|
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 |
|
Three |
|
The Board of Directors met nine times during 2004. All of the
directors attended at least 75% of the Board meetings. 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 |
|
|
| |
|
|
Robert W. OLeary
|
|
|
61 |
|
|
Chairman |
Timothy C. Tyson
|
|
|
53 |
|
|
President and Chief Executive Officer |
Bary G. Bailey
|
|
|
46 |
|
|
Executive Vice President and Chief Financial Officer |
Kim D. Lamon, M.D., Ph.D.
|
|
|
53 |
|
|
President and Chief Scientific Officer of Valeant Research and
Development |
Eileen C. Pruette
|
|
|
46 |
|
|
Executive Vice President and General Counsel |
Wesley P. Wheeler
|
|
|
48 |
|
|
President, North America |
Charles J. Bramlage
|
|
|
44 |
|
|
President, Europe |
John I. Cooper
|
|
|
49 |
|
|
Executive Vice President of Global Manufacturing and Supply |
ROBERT W. OLEARY has been our Chairman of the Board since
June 19, 2002. From June 2002 until December 2004,
Mr. OLeary was the Companys Chief Executive
Officer. 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.
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 general
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 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. has been our President and
Chief Scientific Officer of Valeant Research and Development
since August 2003. 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.
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,
11
Ms. Pruette served at GlaxoSmithKline, where she provided
legal support for commercial operations while rendering
regulatory, commercial and employment law counsel.
WESLEY P. WHEELER has been the President of our North American
operations and Global Commercial Development since February
2003. Mr. Wheeler is responsible for the Companys
regional operations in the United States, Canada and Puerto
Rico. 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. 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
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.
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 beneficial owners of more than 5%
of the outstanding shares of the Common Stock as of
March 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares | |
|
|
|
|
and Nature of | |
|
|
|
|
Beneficial | |
|
Percentage of | |
Identity of Owner or Group |
|
Ownership | |
|
Class(1) | |
|
|
| |
|
| |
Iridian Asset Management, LLC
|
|
|
9,036,682 |
(2) |
|
|
9.8 |
% |
|
276 Post Road West, Westport, CT 06880
|
|
|
|
|
|
|
|
|
Franklin Mutual Advisers, LLC
|
|
|
5,846,653 |
(3) |
|
|
6.3 |
% |
|
51 John F. Kennedy Parkway, Short Hills, NJ 07078
|
|
|
|
|
|
|
|
|
T. Rowe Price Associates, Inc.
|
|
|
5,402,000 |
(4) |
|
|
5.8 |
% |
|
100 E. Pratt Street, Baltimore, MD 21202
|
|
|
|
|
|
|
|
|
Perry Corp.
|
|
|
4,823,500 |
(5) |
|
|
5.2 |
% |
|
599 Lexington Avenue, New York, NY 10022
|
|
|
|
|
|
|
|
|
Citigroup Inc. and Citigroup Global Markets Holdings Inc.
|
|
|
4,515,540 |
(6) |
|
|
4.9 |
% |
|
399 Park Avenue, New York, NY 10013
|
|
|
|
|
|
|
|
|
|
|
(1) |
Based on 92,539,768 shares of Common Stock outstanding on
March 31, 2005. |
|
(2) |
Includes 9,036,682 shares over which each of the following
parties has shared voting and shared dispositive power: Iridian
Asset Management LLC, the Governor and Company of the Bank of
Ireland, IBI Interfunding, BancIreland/ First Financial, Inc and
BIAM (US) Inc. |
|
(3) |
Includes 5,846,653 shares owned by one or more open-end
investment companies or other managed accounts which, pursuant
to advisory contract, are advised by Franklin Mutual Advisers,
LLC (FMA), which is deemed to have sole voting and
dispositive power of such shares. FMA disclaims economic
interest in or beneficial ownership of such shares. |
|
(4) |
Includes 5,402,000 shares over which T. Rowe Price
Associates, Inc. holds sole dispositive power and
954,700 shares over which T. Rowe Price Associates, Inc.
has sole voting power. T. Rowe Price Associates, Inc. disclaims
beneficial ownership of these shares. |
|
(5) |
Includes 4,823,500 shares over which Perry Corp. and
Mr. Richard C. Perry hold sole voting and sole dispositive
power. Mr. Perry disclaims beneficial ownership interest of
the shares held by any funds over which Perry Corp. acts as the
general partner and/or investment advisor, except the portion of
such shares that relate to his economic interest in such shares. |
|
(6) |
Includes 4,515,540 shares over which Citigroup Inc. holds
shared voting and shared dispositive power, and
4,430,057 shares over which Citigroup Global Markets
Holding Inc. holds shared voting and shared dispositive power.
This includes shares over which these entities disclaim
beneficial ownership. |
13
OWNERSHIP BY MANAGEMENT
The following table sets forth, as of March 31, 2005,
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
|
|
|
314,677 |
(2) |
|
|
* |
|
Edward A. Burkhardt
|
|
|
257,500 |
(3) |
|
|
* |
|
Robert A. Ingram
|
|
|
|
|
|
|
* |
|
Richard H. Koppes
|
|
|
10,000 |
(4) |
|
|
* |
|
Lawrence N. Kugelman
|
|
|
5,000 |
(5) |
|
|
* |
|
Kim D. Lamon
|
|
|
251,350 |
(6) |
|
|
* |
|
Theo Melas-Kyriazi
|
|
|
|
|
|
|
* |
|
Robert W. OLeary
|
|
|
739,946 |
(7) |
|
|
* |
|
Eileen C. Pruette
|
|
|
93,196 |
(8) |
|
|
* |
|
Randy H. Thurman
|
|
|
10,500 |
(9) |
|
|
* |
|
Timothy C. Tyson
|
|
|
633,546 |
(10) |
|
|
* |
|
Elaine Ullian
|
|
|
|
|
|
|
* |
|
Directors and executive officers of the Company as a group
(15 persons)
|
|
|
2,574,581 |
(11) |
|
|
2.5 |
% |
|
|
|
|
* |
Less than 1% of the outstanding Common Stock. |
|
|
|
|
(1) |
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 298,231 shares of Valeant common stock, which
Mr. Bailey has the right to acquire within 60 days
upon the exercise of stock options. |
|
|
(3) |
Includes 7,500 shares of Valeant common stock, which
Mr. Burkhardt has the right to acquire within 60 days
upon the exercise of stock options. |
|
|
(4) |
Includes 7,500 shares of Valeant common stock, which
Mr. Koppes has the right to acquire within 60 days
upon the exercise of stock options. |
|
|
(5) |
Includes 5,000 shares of Valeant common stock, which
Mr. Kugelman has the right to acquire within 60 days
upon the exercise of stock options. |
|
|
(6) |
Includes 244,904 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. |
|
|
(7) |
Includes 719,500 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. |
|
|
(8) |
Includes 89,750 shares of Valeant common stock, which
Ms. Pruette has the right to acquire within 60 days
upon the exercise of stock options and 2,000 shares held by
trust. |
|
|
(9) |
Includes 7,500 shares of Valeant common stock, which
Mr. Thurman has the right to acquire within 60 days
upon the exercise of stock options. |
14
|
|
(10) |
Includes 621,750 shares of Valeant common stock, which
Mr. Tyson has the right to acquire within 60 days upon
the exercise of stock options. |
|
(11) |
Includes 2,253,135 shares of Valeant common stock, which
Directors and executive officers of the Company as a group (15
persons) have the right to acquire within 60 days upon the
exercise of stock options. |
|
(12) |
Based on 92,539,768 shares of Common Stock outstanding on
March 31, 2005 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, 2005. |
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.
Based on its review of the copies of such forms it received, or
written representations from certain reporting persons that no
such forms were required for those persons, the Company believes
that during fiscal year 2004, all filing requirements applicable
to its executive officers, directors and ten percent beneficial
owners were timely satisfied, except that
Messrs. Burkhardt, Ingram, Koppes, Melas-Kyriazi and
Thurman and Ms. Ullian each filed between two and four late
Forms 4 that were all reported on timely Forms 5
covering dividend equivalent shares accrued on phantom stock. In
addition, Mr. Ingram and Ms. Ullian each filed a late
Form 4 covering phantom stock received in lieu of cash for
Board and Committee meeting fees.
15
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 2004 and
(ii) the four most highly paid executive officers of the
Company who were serving as executive officers at
December 31, 2004 (together, the Named Executive
Officers) for services rendered to the Company in all
capacities during the years ended December 31, 2004, 2003
and 2002.
|
|
|
|
|
|
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|
|
Long-term | |
|
|
|
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|
|
Compensation | |
|
|
|
|
|
|
Annual Compensation | |
|
| |
|
|
|
|
|
|
| |
|
Restricted | |
|
Securities | |
|
|
|
|
|
|
|
|
Other Annual | |
|
Stock | |
|
Underlying | |
|
All Other | |
|
|
|
|
Salary | |
|
Bonus | |
|
Compensation | |
|
Awards | |
|
Options | |
|
Compensation | |
Name and Principal Position |
|
Year | |
|
($) | |
|
($)(1) | |
|
($)(2) | |
|
($) | |
|
(#)(3) | |
|
($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Robert W. OLeary
|
|
|
2004 |
|
|
|
864,225 |
|
|
|
1,108,899 |
|
|
|
134,664 |
(4) |
|
|
|
|
|
|
250,000 |
|
|
|
24,522 |
(5) |
|
Chairman and
|
|
|
2003 |
|
|
|
835,000 |
|
|
|
1,391,000 |
|
|
|
62,114 |
(6) |
|
|
|
|
|
|
678,000 |
|
|
|
84,326 |
(7) |
|
Chief Executive Officer*
|
|
|
2002 |
|
|
|
283,135 |
|
|
|
500,000 |
|
|
|
|
|
|
|
|
|
|
|
1,100,000 |
|
|
|
1,176 |
(8) |
Timothy C. Tyson
|
|
|
2004 |
|
|
|
621,000 |
|
|
|
603,325 |
|
|
|
76,132 |
(9) |
|
|
|
|
|
|
400,000 |
|
|
|
8,958 |
(10) |
|
President and |
|
|
2003 |
|
|
|
600,000 |
|
|
|
1,101,500 |
(11) |
|
|
89,513 |
(12) |
|
|
|
|
|
|
487,000 |
|
|
|
29,527 |
(13) |
|
Chief Operating Officer*
|
|
|
2002 |
|
|
|
95,769 |
|
|
|
202,500 |
|
|
|
|
|
|
|
|
|
|
|
1,000,000 |
|
|
|
|
|
Bary G. Bailey
|
|
|
2004 |
|
|
|
415,000 |
|
|
|
374,138 |
|
|
|
|
|
|
|
|
|
|
|
140,000 |
|
|
|
12,490 |
(14) |
|
Executive Vice President |
|
|
2003 |
|
|
|
400,000 |
|
|
|
610,564 |
(15) |
|
|
|
|
|
|
|
|
|
|
305,461 |
|
|
|
16,854 |
(16) |
|
and Chief Financial Officer |
|
|
2002 |
|
|
|
24,359 |
|
|
|
400,000 |
|
|
|
|
|
|
|
|
|
|
|
400,000 |
|
|
|
|
|
Kim D. Lamon
|
|
|
2004 |
|
|
|
438,000 |
|
|
|
567,648 |
|
|
|
109,880 |
(17) |
|
|
|
|
|
|
85,000 |
|
|
|
15,840 |
(18) |
|
President and |
|
|
2003 |
|
|
|
400,912 |
|
|
|
935,000 |
(19) |
|
|
67,847 |
(20) |
|
|
|
|
|
|
552,055 |
|
|
|
25,471 |
(21) |
|
Chief Scientific Officer
|
|
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eileen C. Pruette
|
|
|
2004 |
|
|
|
320,000 |
|
|
|
316,416 |
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
12,062 |
(22) |
|
Executive Vice President |
|
|
2003 |
|
|
|
240,961 |
|
|
|
330,564 |
(23) |
|
|
121,512 |
(24) |
|
|
|
|
|
|
234,000 |
|
|
|
10,461 |
(25) |
|
and General Counsel
|
|
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Mr. OLeary served as the Companys Chairman and
Chief Executive Officer during 2004. As of January 1, 2005,
in addition to continuing to serve as the Companys
President, Mr. Tyson became the Companys Chief
Executive Officer, and Mr. OLeary continued to serve
as the Companys Chairman. |
|
|
|
|
(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. Previously,
performance bonus amounts were reported in the year paid rather
than with respect to the year earned. |
|
|
(2) |
These numbers include the cost to the Company of providing
perquisites and other personal benefits. SEC rules require us to
break-out each perquisite or personal benefit that exceeds 25%
of the total we report for each named executive. |
|
|
(3) |
Includes grants of options to purchase shares of Common Stock
granted under the Companys 2003 Equity Incentive Plan (the
Incentive Plan), which is an amendment and
restatement of its Amended and Restated 1998 Stock Option Plan. |
|
|
(4) |
Includes the following perquisites: travel benefits ($54,350)
and driver paid for by the Company ($50,770). |
|
|
(5) |
Consisted of the following: group term life insurance ($11,868);
whole life insurance ($4,344); executive life insurance
($2,160); and 401(k) match ($6,150). |
|
|
(6) |
Includes the following perquisite: driver paid for by the
Company ($45,255). |
|
|
(7) |
Consisted of the following: group term life insurance ($11,868);
whole life insurance ($4,344); executive life insurance
($1,188); and vacation pay-out ($66,926). |
|
|
(8) |
Consisted of the following: group term life insurance ($1,068)
and executive life insurance ($108). |
|
|
(9) |
Includes the following perquisites: travel benefits ($32,864)
and automobile allowance ($22,493). |
16
|
|
(10) |
Consisted of the following: group term life insurance ($4,710);
whole life insurance ($2,088); and executive life insurance
($2,160). |
|
(11) |
Includes $212,500, which Mr. Tyson was paid in connection
with his employment agreement. |
|
(12) |
Includes the following perquisites: automobile allowance
($22,493) and relocation expenses ($46,325). |
|
(13) |
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). |
|
(14) |
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). |
|
(15) |
Includes $15,564, which Mr. Bailey was paid in connection
with the sale of the Companys Russian subsidiaries. |
|
(16) |
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). |
|
(17) |
Includes the following perquisites: travel benefits ($31,333)
and housing expense ($42,447). |
|
(18) |
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). |
|
(19) |
Includes $400,000, which Dr. Lamon was paid in connection
with the commencement of his employment with the Company. |
|
(20) |
Includes the following perquisite: relocation expenses ($50,596). |
|
(21) |
Consisted of the following: group term life insurance ($1,232);
whole life insurance ($576); executive life insurance ($990);
and vacation pay-out ($22,673). |
|
(22) |
Consisted of the following: group term life insurance ($2,788);
whole life insurance ($1,200); executive life insurance
($2,074); and 401(k) match ($6,000). |
|
(23) |
Includes $115,564, which Ms. Pruette was paid in connection
with the commencement of her employment with the Company
($100,000) and the sale of the Companys Russian
subsidiaries ($15,564). |
|
(24) |
Includes the following perquisite: relocation expenses ($95,929). |
|
(25) |
Consisted of the following: group term life insurance ($2,043);
whole life insurance ($895); executive life insurance ($792);
and vacation pay-out ($6,731). |
OPTION GRANT INFORMATION
The following table sets forth information with respect to
options to purchase shares of Common Stock granted to the Named
Executive Officers in 2004.
Option Grants In Last Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Percent of | |
|
|
|
|
|
|
|
|
Securities | |
|
Total Options | |
|
Exercise | |
|
|
|
Grant Date | |
|
|
Underlying | |
|
Granted to | |
|
Price | |
|
Expiration | |
|
Present | |
Name |
|
Options(1) | |
|
Employees(2) | |
|
($/Share) | |
|
Date | |
|
Value($)(3) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Robert W. OLeary
|
|
|
250,000 |
|
|
|
9.4 |
% |
|
|
23.92 |
|
|
|
11/26/14 |
|
|
|
2,883,800 |
|
Timothy C. Tyson
|
|
|
400,000 |
|
|
|
15.0 |
% |
|
|
23.92 |
|
|
|
11/26/14 |
|
|
|
4,614,080 |
|
Bary G. Bailey
|
|
|
140,000 |
|
|
|
5.3 |
% |
|
|
23.92 |
|
|
|
11/26/14 |
|
|
|
1,614,928 |
|
Kim D. Lamon
|
|
|
85,000 |
|
|
|
3.2 |
% |
|
|
23.92 |
|
|
|
11/26/14 |
|
|
|
980,492 |
|
Eileen C. Pruette
|
|
|
60,000 |
|
|
|
2.3 |
% |
|
|
23.92 |
|
|
|
11/26/14 |
|
|
|
692,112 |
|
17
|
|
(1) |
All options were granted under the Incentive 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. |
|
(2) |
Options to purchase a total of 2,665,500 shares were
granted to employees, including the Named Executive Officers
(but excluding non-employee directors), during 2004. |
|
(3) |
Based on the Black-Scholes option pricing model adapted for use
in valuing executive stock options using the following
assumptions: expected volatility (63%), risk-free interest rate
(3.80%), dividend per share ($0.31) and weighted-average life
(4.2 years). The actual value, if any, an executive may
realize will depend on the excess of the stock price on the date
the option is exercised over the exercise price. There is no
assurance the value realized by an executive will be at or near
the value estimated by the Black-Scholes model. |
Aggregated Option Exercises
In 2004 and December 31, 2004 Option Values(1)
The following table sets forth information regarding
(i) stock option exercises by the Named Executive Officers
during 2004 and (ii) unexercised stock options held by the
Named Executive Officers at December 31, 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
|
|
|
|
|
|
|
Securities Underlying | |
|
Value of Unexercised | |
|
|
|
|
|
|
Unexercised Options | |
|
In-the-Money Options | |
|
|
Shares | |
|
Value | |
|
at December 31, 2004(#) | |
|
at December 31, 2004($)(1) | |
|
|
Acquired on | |
|
Realized | |
|
| |
|
| |
Name |
|
Exercise(#) | |
|
($) | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Robert W. OLeary
|
|
|
|
|
|
|
|
|
|
|
719,500 |
|
|
|
1,308,500 |
|
|
|
10,979,100 |
|
|
|
14,230,800 |
|
Timothy C. Tyson
|
|
|
|
|
|
|
|
|
|
|
621,750 |
|
|
|
1,265,250 |
|
|
|
9,914,650 |
|
|
|
12,785,950 |
|
Bary G. Bailey
|
|
|
|
|
|
|
|
|
|
|
276,366 |
|
|
|
569,095 |
|
|
|
3,829,262 |
|
|
|
5,599,946 |
|
Kim D. Lamon
|
|
|
|
|
|
|
|
|
|
|
143,640 |
|
|
|
504,665 |
|
|
|
1,884,149 |
|
|
|
5,675,543 |
|
Eileen C. Pruette
|
|
|
|
|
|
|
|
|
|
|
58,500 |
|
|
|
235,500 |
|
|
|
771,925 |
|
|
|
2,461,575 |
|
|
|
(1) |
Based upon the fair market value of the shares of Common Stock
on December 31, 2004 ($26.35, which was the NYSE closing
price for the Companys Common Stock on December 31,
2004), 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 2004, 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. The
Companys Board Litigation Liaison received an additional
annual fee of $7,500, 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-
18
Scholes option pricing model. In 2004, the Lead Director
received an additional 2,271 restricted stock units as
compensation for his added responsibilities as Lead Director.
Mr. OLeary also received compensation in his capacity
as Chief Executive Officer of the Company. See Summary
Compensation Table.
CERTAIN EMPLOYMENT AGREEMENTS
Chairman
On March 21, 2005 and effective as of January 1, 2005,
the Company entered into an Amended and Restated Employment
Agreement with Mr. OLeary (the OLeary
Employment Agreement). The OLeary Employment
Agreement provides that Mr. OLeary shall serve as
Executive Chairman, and no longer as Chief Executive Officer, as
of January 1, 2005. The term of the OLeary Employment
Agreement expires on December 31, 2005. During the term,
Mr. OLeary receives a base salary at the rate of
$432,000 per year, and is eligible to receive a bonus of up
to 100% of his base salary per year. The agreement also provides
that all stock options and other equity granted to
Mr. OLeary continue to vest as long as
Mr. OLeary continues to provide services to the
Company as an officer or member of the Board of Directors.
The OLeary Employment Agreement provides that the Company
may terminate Mr. OLearys employment upon his
death or disability, or with or without cause (as defined in the
agreement), and that Mr. OLeary may terminate his
employment 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. OLeary without
good reason, Mr. OLeary 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. OLeary or his heirs will, in
addition, be entitled to a prorated portion of his annual bonus,
immediate vesting of all stock options (which remain exercisable
on a prorated basis for up to three years), pension, retirement
or other employee benefits, and restricted stock or other
restricted benefits, and continued health and medical coverage
for two years. If Mr. OLearys employment is
terminated by the Company without cause, or by
Mr. OLeary for good reason, Mr. OLeary
will receive all accrued compensation plus a severance payment
equal to 150% of salary and bonus, immediate vesting of all
stock options (which remain exercisable on a prorated basis for
up to three years), and certain employee benefits for
twenty-four months. However, if such termination occurs during
the term of the agreement and following a change in
control, Mr. OLeary will receive a severance
payment of three times salary and bonus.
For purposes of Mr. OLearys Employment
Agreement, a change in control generally means any
of the following events:
|
|
|
|
|
the acquisition by any person of beneficial ownership of more
than 25% of the combined voting power of the Companys
outstanding voting securities, other than an acquisition
(i) by or directly from the Company; (ii) by an
employee benefit plan sponsored or maintained by the Company,
(iii) by an underwriter temporarily holding securities
pursuant to an offering, (iv) by a corporation owned by the
Companys stockholders in substantially the same
proportions as their ownership of the Company, or (v) by a
person properly reported on Schedule 13-G promulgated under
the Securities Exchange Act of 1934; |
|
|
|
the closing of a merger or consolidation involving the Company
or any subsidiary if it would result in the Companys
voting securities immediately before the merger or consolidation
continuing to represent less than 50% of the combined voting
power of the then outstanding voting securities of the Company,
the surviving entity or any parent thereof immediately after the
merger or consolidation; |
|
|
|
the individuals serving on the board of directors of the Company
at the beginning of any twenty-four month period and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened Board
election contest) whose election by the Board or nomination for
election by the Companys stockholders was approved by a
vote of at least a majority of the directors then in office who
either were directors at the beginning of the twenty-four month
period |
19
|
|
|
|
|
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; or |
|
|
|
the closing of a complete liquidation or dissolution of the
Company, or the consummation of an agreement for the sale or
other disposition of all or substantially all of the assets of
the Company. |
The OLeary Employment Agreement also provides for certain
gross-up payments if Mr. OLeary is
subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code with respect to payments and benefits
under his agreement or otherwise.
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 a one-year term 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 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:
|
|
|
|
|
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; |
|
|
|
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 |
20
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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 a one-year term 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 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 employment agreements with its
senior executive officers.
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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 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
22
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. |
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).
Mr. 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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Pruette Employment and Severance Agreements |
The terms under which Eileen Pruette serves as Executive Vice
President and General Counsel are set forth in an offer letter
of the Company dated March 3, 2003 (the Pruette
Employment Agreement).
The Pruette Employment Agreement provides for employment on an
at-will basis and an initial base salary of $300,000 per
year, subject to merit review beginning January 1, 2004.
Ms. Pruette also is eligible to receive a bonus of from 0%
to 100% of her annual base salary, subject to future adjustment
by the Board of Directors.
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Pursuant to the Pruette Employment Agreement, Ms. Pruette
received options to purchase 125,000 shares of Common
Stock under the Companys 2003 Equity Incentive Plan. The
options vest 25% per year over a four-year period, but will
immediately become exercisable upon a change in control.
Ms. Pruette and the Company have also entered into an
Executive Severance Agreement dated as of April 22, 2005
(the Pruette Severance Agreement). The Pruette
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 Ms. Pruette that the agreement will
not be extended.
Under the Pruette Severance Agreement, upon termination by
reason of death or disability, by the Company for cause, or by
Ms. Pruette without good reason, Ms. Pruette will
receive all amounts earned or accrued through the termination
date, as specified in the agreement. Upon termination by reason
of death or disability, Ms. Pruette or her heirs will, in
addition, be entitled to a prorated portion of her annual bonus.
Ms. Pruette or her 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 Ms. Pruettes employment is terminated by the
Company without cause, or by Ms. Pruette with good reason,
and Ms. Pruette agrees to not to engage in certain
activities that might compete with the Company for a period of
one year after termination, she 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) Ms. Pruettes annual base salary then
in effect and (d) the lesser of the average of annual
incentive program bonuses paid to Ms. Pruette for the five
prior years (or such shorter period if Ms. Pruette has not
been eligible to participate in the annual incentive program) or
Ms. Pruettes target bonus at such time. If
Ms. Pruette is terminated by the Company, other than for
cause, disability or death, or by Ms. Pruette for good
reason, the Company will also pay up to an aggregate of $20,000
for outplacement services.
Under the Pruette 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 the Pruette 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 the
Pruette Severance Agreement 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; 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. |
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If during the period beginning six months prior to a change in
control and ending twelve months after a change in control,
Ms. Pruette is terminated by the Company without cause, or
terminates her employment with good reason, and she agrees not
to engage in prohibited activities for a period of one year
following termination, she will be entitled to a payment equal
to two times the sum of (a) her annual base salary plus
(b) the higher of average of annual incentive program
bonuses paid to Ms. Pruette for the five prior years (or
such shorter period if Ms. Pruette has not been eligible to
participate in the annual incentive program) or
Ms. Pruettes 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 Ms. Pruette and her family with
medical, dental and life insurance benefits at least equal to
those which would have been provided had Ms. Pruette 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.
Ms. Pruettes agreement provides that payments and
benefits under her agreement and all other related arrangements
will not exceed the maximum amount that may be paid to her
without triggering golden parachute penalties under
Section 280G of the Internal Revenue Code of 1986, but only
if this would increase the net amount she 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.
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, approves the
compensation levels for all other executive officers. The
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 with respect to executive officers, and
performs such duties as the Board of Directors may from time to
time request.
Each of the three Directors who serve as a 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) stock ownership. In the aggregate, the
compensation philosophy is to be competitive in base salary and
benefits and provide opportunities for above-competitive pay
when specific goals are exceeded and there are incremental
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improvements in stockholder value. 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 in the
median range of compensation paid for similar positions in
comparable companies. Salary grades levels are updated to
reflect changes in the marketplace. The salary of an executive
generally reflects individual performance, level of
responsibility and position in the Company and is reviewed on an
annual basis by one or more supervisory managers and the
Compensation Committee. 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 compensation, the
supervisor assesses a performance grade based on the pre-set
performance objectives. This assessment is used to determine
base salary for the following year.
The initial salaries for Messrs. OLeary, 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. OLearys salary was
also increased in 2004 over 2003 by a factor approximating
cost-of-living. Mr. Tysons agreement provided for his
salary to be increased in connection with his appointment as
Chief Executive Officer on January 1, 2005.
Mr. OLearys new agreement as executive Chairman
of the Board provides that his fixed base salary be
substantially reduced on the basis of his new role for 2005 and
he will not receive a base pay increase during 2005.
The incentive bonus plan is intended to provide a means of
annually rewarding certain key employees, including executive
officers, based on the performance of the Company. The plan is
based on target goals of growth in revenues, EBITDA, and in the
case of the top officers, earnings per share, and certain
individually defined strategic initiatives, and actual
individual performance is compared against the target goals
established. Recommendations are made by individual supervisors
and reviewed and considered for final approval by the
Compensation Committee. Target goals are presented to the
Committee and approved at the beginning of the year. The
Compensation Committee evaluates the performance of the Chief
Executive Officer and determines his award.
The Compensation Committee sets 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. 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 60% 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 a bonus payment.
Bonuses 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 a
maximum cash bonus of 200% and 160% of base salary,
respectively, based on performance by the executive and the
Company and within the discretion of the Board.
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Certain officers and employees of the Company received bonuses
during 2004 and 2005 for services performed during 2003 and
2004, respectively. The Compensation Committee considered and
approved these bonuses, which were all based on 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 (Incentive 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 Incentive 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 Incentive Plan, 500,000 shares may be issued as
phantom stock awards or restricted stock awards. The amount of
options granted to any executive is generally tied to level of
responsibility, position, salary, individual performance,
company financial performance and competitive practices. 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 option pool for
grants to all employees. Management recommends to the
Compensation Committee those executives to whom options should
be granted and the number of options to be granted to them. The
Compensation Committee determines the awards for the Chief
Executive 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. The Compensation Committee
is currently considering the use of other forms of long-term
incentives for future grants. The 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 Incentive Plan.
Participation is limited to those employees who are not eligible
to participate in the Incentive 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 a least (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
2004 was $13,000, but employees over the age of 50 can
contribute an additional $3,000. 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 591/2
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.
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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 physical is also provided through the
University of California at Irvine Corporate Health Services
Center.
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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. Tyson became the Companys Chief Executive Officer
on January 1, 2005. However, this report addresses the
compensation for Mr. OLeary who served as the
Companys Chief Executive Officer through December 31,
2004. Mr. OLearys compensation is set forth in
his employment agreement, which was negotiated by the
Compensation Committee and approved by the Board of Directors.
The Compensation Committee consulted with various independent
advisors and reviewed studies provided by an outside
compensation consultant.
The Compensation Committee has determined that in 2004
Mr. OLearys leadership performance delivered
strong Company results that exceeded the financial targets
established for him in the beginning of the year. The Committee
also took into consideration: the highly successful Chief
Executive Officer transition led by Mr. OLeary to
separate the roles of Chairman and Chief Executive Officer;
Mr. OLearys leadership in driving continued
progress on improving revenue growth; the successful acquisition
and integration of synergy-related growth opportunity
transactions; and the timely attainment of his previously
established strategic goals in a challenging and dynamic
environment.
In 2005, Mr. OLeary received a cash bonus in the
amount of $1,108,899 to recognize his performance for 2004. The
amount was approved by this Committee and the Board of Directors.
The Compensation Committee recommended and, on November 26,
2004, Mr. OLeary was granted, options to
purchase 250,000 shares of Common Stock with a per
share exercise price of $23.92, which represents the fair market
value of the Common Stock on the date of grant. These grants
were determined by the Compensation Committee based on the
Companys overall performance, Mr. OLearys
individual performance and the compensation of similarly
situated executives at comparable corporations.
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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
the executive compensation programs 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
28
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 |
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
|
|
|
13,336,000 |
|
|
$ |
17.93 |
|
|
|
9,016,000 |
(1) |
Equity Compensation Plans Not Approved By Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
13,336,000 |
|
|
$ |
17.93 |
|
|
|
9,016,000 |
|
|
|
(1) |
Includes 6,805,000 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, 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 2004 within the
meaning of the SECs proxy rules.
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 are
independent Directors as required by the listing standards of
the New York Stock Exchange. 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 Board of Directors has revised the Finance and Audit
Committees charter, a copy of which is attached as
Annex C to this Proxy Statement. This charter will be
reviewed annually in order to ensure compliance with new
regulatory mandates. The Committee is composed entirely of
non-management directors who meet both the independence and
experience requirements of the NYSE listing standards as well as
the additional SEC audit committee requirements.
During the year 2004, at each of its regularly scheduled
meetings, the Committee met with the senior members of the
Companys financial management team, 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
Committees chairman and senior financial executives.
Executive sessions with
29
the Companys independent accounting firm and internal
auditors without management present were held at least once
quarterly during the Committees meetings, which included
open and frank discussions regarding financial management and
reporting, and internal accounting controls.
The Committee engaged PricewaterhouseCoopers LLP as the
Companys independent accounting firm for the year ended
December 31, 2004. The Committee, in conjunction with the
Companys financial executives and independent accounting
firm, oversaw the scope of audit plans as well as internal and
external audit examinations, internal accounting controls and
financial reporting standards.
Management has 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 Committee,
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. In addressing the
quality of managements accounting judgments, members of
the Committee asked for managements representations and
reviewed certifications prepared by the Chief Executive Officer
and Chief Financial Officer, that the unaudited quarterly and
audited consolidated financial statements of the Company fairly
present, in all material respects, the financial condition and
results of operations of the Company.
The Committee discussed with PricewaterhouseCoopers LLP the
matters required to be discussed 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.
The Finance and Audit Committee pre-approves 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
all other services. The Finance and Audit Committee has adopted
a policy for the pre-approval of services provided by the
independent accounting firm. Unless a type of service to be
provided by the independent accounting firm has received general
pre-approval pursuant to this policy, the service must be
specifically pre-approved by the Finance and Audit Committee.
Any proposed services exceeding pre-approved cost levels will
require specific pre-approval by the Finance and Audit Committee.
The Finance and Audit Committee annually reviews services that
may be provided by the independent accounting firm without
obtaining specific approval in advance from the Committee and
ensures continued compliance with the Sarbanes-Oxley Act of 2002
and other regulatory requirements. The Finance and Audit
Committee may revise the list of general pre-approved services
from time to time, based on subsequent determinations. The
Committee does not delegate its responsibilities under the
Securities Exchange Act of 1934 to pre-approve services
performed by the independent accounting firm to management.
Under the policy, pre-approval is generally provided for work
associated with statutory audits or financial audits of the
Company and for subsidiaries or affiliates of the Company (with
internal controls attestation and review of quarterly financial
statements); services associated with SEC registration
statements, periodic reports and other documents filed with the
SEC or other documents issued in connection with securities
offers (for example, comfort letters or consents) and assistance
in responding to SEC comment letters; consultations by the
Companys management as to the accounting or disclosure
treatment of transactions or events and/or actual or potential
impact of final or proposed rules, standards or interpretations
by the SEC, FASB or other regulatory or standard setting bodies;
due diligence services pertaining to potential business
acquisitions or dispositions; agreed-upon or expanded audit
procedures related to accounting and/or billing records required
to respond to or comply with financial, accounting or regulatory
reporting matters; monitoring of preparation activities with
respect to the Companys obligations under Section 404
of the Sarbanes-Oxley Act of 2002; U.S. federal, state,
local and international tax planning, advice and compliance such
as assistance with tax audits and appeals, tax advice related to
mergers and acquisitions, employee benefit plans, requests for
ruling on technical advice from tax authorities and general tax
planning; professional services or products not prohibited under
SEC rules.
30
Pre-approved fee levels for all services to be provided by the
independent accounting firm are established annually by the
Committee. Any proposed services exceeding these levels require
specific pre-approval by the Committee.
Requests or applications to provide services that require
specific approval by the Committee are submitted to the
Committee by both the independent accounting firm and the Chief
Financial Officer, and must include a joint statement as to
whether, in their view, the request or application is consistent
with the SECs rules on accounting firm independence before
the Committee will consider approval of the requested services.
In performing all of these functions, the Finance and Audit
Committee acts only in an oversight capacity. The Committee
reviews the Companys quarterly and annual reports on
Form 10-Q and Form 10-K prior to filing with the SEC.
The Committee also reviews quarterly earnings announcements in
advance of their issuance with management and representatives of
the independent accounting firm. In its oversight role, the
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, 2004, is fairly stated, in all material
respects, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
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, 2004, for filing with the SEC.
|
|
|
Finance and Audit Committee |
|
Edward A. Burkhardt, Chairman |
|
Richard H. Koppes |
|
Theo Melas-Kyriazi |
31
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, 2004. 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, 1999 and that all
dividends were reinvested.
Based on reinvestment of $100 beginning December 31,
1999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 99 | |
|
Dec 00 | |
|
Dec 01 | |
|
Dec 02 | |
|
Dec 03 | |
|
Dec 04 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Valeant Pharmaceuticals International
|
|
$ |
100 |
|
|
$ |
123 |
|
|
$ |
136 |
|
|
$ |
45 |
|
|
$ |
106 |
|
|
$ |
113 |
|
S&P Mid Cap 400 Index
|
|
|
100 |
|
|
|
116 |
|
|
|
114 |
|
|
|
97 |
|
|
|
130 |
|
|
|
149 |
|
Composite Index (10 Stocks)
|
|
|
100 |
|
|
|
152 |
|
|
|
184 |
|
|
|
142 |
|
|
|
218 |
|
|
|
168 |
|
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 most recent 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 $150,759 in salary and bonus. In addition,
Mr. Cunningham received relocation expenses in the amount
of $12,364. He also received 10,000 stock options granted at the
fair market value at date of grant price of $23.92.
32
PROPOSAL NO. 2
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, 2005. 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. 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 Board of Directors of the Company recommends that the
Stockholders vote FOR Proposal No. 2.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
The aggregate fees billed for professional services rendered by
PricewaterhouseCoopers LLP for the fiscal years ended
December 31, 2004 and December 31, 2003 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, were approximately
$4,522,000 and $2,738,000, respectively. In 2004, the amount
billed also included fees for the audit of our internal controls
in compliance with the Sarbanes-Oxley Act of 2002.
The aggregate fees billed for assurance and related services
rendered by PricewaterhouseCoopers LLP during the fiscal years
ended December 31, 2004 and December 31, 2003 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 $50,000 and $329,000,
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, 2004 and
December 31, 2003 were $606,000 and $811,010, respectively.
In addition to the fees described above, aggregate fees of
$1,000 and $15,000 respectively, were billed by
PricewaterhouseCoopers LLP during the years ended
December 31, 2004, and December 31, 2003 for other
services performed.
The Finance and Audit Committee has not approved any services
under the procedures provided in Item 2-01(c)(7)(i)(C) of
Regulation S-X.
33
OTHER
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
FOR THE 2006 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
2006 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 22, 2005 in a form that
complies with applicable regulations. If the date of the 2006
annual meeting is advanced or delayed more than 30 days
from the date of the 2005 annual meeting, stockholder proposals
intended to be included in the proxy statement for the 2006
annual meeting must be received by us within a reasonable time
before the Company begins to print and mail the proxy statement
for the 2006 annual meeting. Upon any determination that the
date of the 2006 annual meeting will be advanced or delayed by
more than 30 days from the date of the 2005 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,
2006, the proxies solicited by the Board of Directors for the
2006 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 2006
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 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:
|
|
|
|
|
the name, age, business address or residence address of each
proposed nominee; |
|
|
|
the principal occupation or employment of the proposed nominee; |
|
|
|
the number (and class) of shares of Company stock owned by the
proposed nominee; |
|
|
|
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; |
|
|
|
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; |
|
|
|
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; |
34
|
|
|
|
|
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 |
|
|
|
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:
|
|
|
|
|
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; |
|
|
|
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; |
|
|
|
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; |
|
|
|
a description, in 500 words or less, of any interest of the
stockholder in such proposal; and |
|
|
|
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, 2004 (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, fiduciaries and other custodians
their reasonable fees and expenses for forwarding solicitation
material to principals and for obtaining their instructions.
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.
35
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.
|
|
|
By Order of the Board of Directors, |
|
|
|
|
Robert W. OLeary |
|
Chairman of the Board |
Costa Mesa, California
April 22, 2005
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
36
ANNEX A
CORPORATE GOVERNANCE GUIDELINES
PURPOSE
The primary objective of Valeant Pharmaceuticals International
(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
|
|
I. |
Corporate Governance/ Nominating Committee |
|
|
|
As a permanent part of the structure of the Board of Directors
(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. |
|
|
II. |
Compensation Committee |
|
|
|
As a permanent part of the structure of the Board of Directors
(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. |
|
|
III. |
Finance & Audit Committee |
|
|
|
As a permanent part of the structure of the Board of Directors
(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
|
|
IV. |
Selection and Orientation of New Directors |
|
|
|
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. |
|
|
|
To encourage Board member participation in continuing Director
education, the Company will pay reasonable education expenses. |
|
|
VI. |
Corporate Governance/ Nominating Committee Review of Board |
|
|
|
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
|
|
VII. |
Chairman, Chief Executive Officer and Lead Director |
|
|
|
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. |
|
|
VIII. |
Executive Sessions of Non-Management Directors |
|
|
|
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. |
|
|
IX. |
Mix of Management and Independent Directors |
|
|
|
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
|
|
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 partner, stockholder or officer of an organization, its
parent or a consolidated subsidiary that has a relationship with
the Company. |
A-2
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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 auditor
or external accounting firm 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; |
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monitoring the effectiveness of the Companys internal
controls; |
A-3
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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; |
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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. |
Chief Executive Officer Outside Board Membership |
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The Chief Executive Officer is required to obtain Board approval
prior to accepting a nomination to the Board of Directors of any
publicly-traded company. |
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Retirement age is 72 for Directors. |
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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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XVII. |
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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XVIII. |
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. |
A-4
BOARD RELATIONSHIP TO SENIOR MANAGEMENT
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XIX. |
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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XX. |
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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XXI. |
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. |
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XXII. |
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. |
COMMITTEE MATTERS
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XXIII. |
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 Corporate Governance/
Nominating, Executive, Compensation, Finance and Audit and
Succession Planning. 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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XXIV. |
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. |
A-5
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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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XXVI. |
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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XXVIII. |
Succession Planning |
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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 Corporate
Governance/ Nominating Committee, will review the succession
plans on an annual basis. |
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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. |
XXX. 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 Corporate Governance/ Nominating Committee
and the approval of the full Board.
A-6
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
CHARTER OF THE FINANCE AND AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS
OF
VALEANT PHARMACEUTICALS INTERNATIONAL
(a Delaware corporation)
Function
The primary function of the Finance and Audit Committee (the
Committee) is to assist the Board of Directors in
monitoring (1) the integrity of the Companys
financial statements, (2) the independent registered public
accounting firms (the accounting firm)
qualifications and independence, (3) the performance of the
Companys internal audit function and independent
accounting firm, and (4) the Companys compliance with
legal and regulatory requirements.
The Committees mandate includes free and open
communication between it and the Companys independent
accounting firm, internal auditors and financial management. The
Companys independent accounting firm is ultimately
accountable to the Board of Directors and the Committee, and the
Committee shall have the authority to approve, change, retain
and otherwise control the relationship between the Company and
the independent accounting firm.
Composition
The Board of Directors shall designate three or more directors
to serve on the Committee, with one member appointed as Chair of
the Committee. Members of the Committee shall meet the
independence requirements and other qualifications prescribed by
the New York Stock Exchange and the Securities and Exchange
Commission (the SEC). Members of the Committee shall
not serve on the audit committee of more than a total of three
public companies.
Authority
In carrying out its responsibilities, the Committee may conduct
investigations relating to the Companys financial affairs,
records, accounts, reports, controls or activities as the
Committee, in its discretion, deems desirable or as the Board of
Directors may, from time to time, request.
The Committee will have free (and, if requested by the
Committee, private) access to the Companys independent
accounting firm and its internal auditing, financial management
and legal counsel staffs, and any other personnel requested by
the Committee, in order for the Committee to perform its duties
and satisfy its responsibilities. The Committee may also employ
any outside experts, legal counsel or other personnel deemed by
the Committee in its collective judgment to be reasonably
necessary, and in the best interest of the Company, to enable
the Committee to ably perform its duties and satisfy its
responsibilities. Fees and expenses of any such personnel shall
be paid by the Company in accordance with such arrangements as
the Committee may make.
Responsibilities
The Committee has the following responsibilities:
1. Independent Accounting Firm
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(A) |
Appoint and replace the Companys independent accounting
firm who shall report directly to the Committee. Review and
evaluate the lead partner, and ensure rotation of the lead and
concurring audit partners every five years. |
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(B) |
Review and discuss with the independent accounting firm the
scope and timing of their audit, including the coordination of
procedures and locations to be visited by the independent |
C-1
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accounting firm and internal auditors. In conducting this
review, the Committee will review with the independent
accounting firm, internal auditors and Company financial
management the risk assessments used in determining the audit
scope. |
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(C) |
Except as otherwise permitted by applicable regulations,
pre-approve all audit and permitted non-audit services
(including the fees and terms thereof) by the independent
accounting firm. Establish policies and procedures to govern
managements engagement of the independent accounting firm
for any permitted non-audit services. |
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(D) |
Review with management and the independent accounting firm the
actual annual fees and expenses for the audit and for any other
permitted services performed by the independent accounting firm.
The Committee shall be directly responsible for approving the
fees and expenses to be paid to the independent accountants. |
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(E) |
Discuss with the independent accounting firm the matters
included in the annual written communication that the
independent accounting firm is required to submit to the Company
by the Independence Standards Board. Such discussions should
include any relationships between the independent accounting
firm and the Company that may impact the objectivity and
independence of the independent accounting firm. Recommend that
the Board of Directors take action, if appropriate, in response
to the independent accounting firms communication. |
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(F) |
At least annually, obtain and review a report by the independent
accounting firm and consider, among other matters, the following: |
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the competency and qualifications of the individuals involved in
the audit, |
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the quality of the audit process, |
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responsiveness and service levels, |
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appropriate audit firm executive involvement in the audit, |
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the firms and the engagement teams independence with
respect to all relationships between the independent accounting
firm and the Company and its management, |
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the independent accounting firms quality control
procedures, and |
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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 government or professional
authorities, within the preceding five years, with respect to
one or more independent audits carried out by the independent
accounting firm, and any steps taken to address any such issues. |
2. Annual Financial Statements and Audit Results
After the completion of each annual audit:
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(A) |
Review the Companys accounting policies and practices and
the annual financial statements to be included in the
Companys Annual Report on Form 10-K and the related
Managements Discussion and Analysis of Results of
Operations and Financial Condition with the Companys
financial management and the independent accounting firm.
Recommend to the Board of Directors whether the audited
financial statements should be included in the Companys
Form 10-K. |
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(B) |
Meet with the independent accounting firm to review the results
of their examination, including their opinion and any related
comments. Discuss with the independent accounting firm the
matters required to be discussed by Statement on Auditing
Standards No. 61 and 90 relating to the conduct of the
audit. |
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(C) |
Secure the independent accounting firms views about the
appropriateness, not just the acceptability, of the
Companys accounting policies and practices and the clarity
of the financial disclosures used by management. |
C-2
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(D) |
Secure the independent accounting firms views about
whether managements choices of accounting policies are
conservative, moderate or aggressive and as to whether
alternative choices of policies would present a materially
different financial position and results of operations. Resolve
any disagreements between the independent accountants and
management. |
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(E) |
Review with the independent accounting firm any audit problems
or difficulties and managements response. Determine that
no restrictions were placed by management on the scope of their
examination or its implementation and that there was a free
exchange of information. |
3. Quarterly Financial Statements and Press Releases
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Review with the Companys financial management and
independent accounting firm the quarterly financial statements
to be included in the Companys quarterly reports on
Form 10-Q and the related Managements Discussion and
Analysis of Results of Operations and Financial Condition.
Review and discuss with management the earnings press releases,
and financial information and earnings guidance provided to
securities analysts and ratings agencies. Review quarterly
reports from the independent accounting firm required by
applicable laws, regulations, or accounting standards. |
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(A) |
Review with the independent accounting firm, the internal
auditors and the Companys financial management the
adequacy and effectiveness of the Companys internal
controls and elicit any recommendations they may have for
improvement. |
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(B) |
Review the adequacy of the internal audit function, including a
review of the scope and results of its program, and the
organizational structure, budget, staffing and qualifications of
the internal audit department. |
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(C) |
Review any internal control deficiencies, disclosure policy
deficiencies and management or employee fraud identified in
connection with the Chief Executive Officer and Chief Financial
Officer certifications provided to the SEC and with respect to
Managements Report on Internal Control over Financial
Reporting, which is included in the Annual Report on
Form 10-K. |
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(D) |
Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting,
internal accounting controls or auditing matters and for the
confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters. |
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5. |
Compliance Matters. Review the processes and procedures
established by the Company periodically to ensure that the
Company complies with applicable legal and regulatory
requirements, and monitor, as the Committee determines to be
appropriate under the circumstances, the Companys
adherence to such requirements. Discuss with management the
status and performance of the Companys compliance programs. |
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6. |
External Communications. Oversee the Companys
external communications policy. |
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7. |
Conflicts of Interest. Conduct a review of transactions
or proposed transactions in which a member of the Board of
Directors, an executive officer of the Company or a senior
financial officer of the Company has an interest that conflicts
with the Companys interests and make recommendations to
the Board of Directors regarding any such transaction. |
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8. |
Risk Management. Discuss with management the
Companys major financial risk exposures and the steps
management has taken to monitor and control such exposures,
including the Companys risk assessment and risk management
policies. |
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9. |
Hiring Policies. Set clear hiring policies for employees
or former employees of the independent accounting firm. |
C-3
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10. |
Separate Meeting Sessions. Periodically, meet separately
with management, with the internal auditors and with the
independent accounting firm privately. |
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11. |
Reporting. Report regularly to the Board of Directors
with respect to the Committees activities. Prepare the
Committee report that is required by the SEC to be included in
the Companys proxy statement. |
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12. |
Charter. Annually review the adequacy of the Committee
charter, and request and obtain the approval of the Board of
Directors for any proposed changes. |
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13. |
Annual Evaluation. Annually review the performance of the
Committee. |
C-4
ANNEX D
CHARTER OF THE COMPENSATION COMMITTEE
OF THE
BOARD OF DIRECTORS
OF
VALEANT PHARMACEUTICALS INTERNATIONAL
(a Delaware corporation)
Purpose and Duties
The Compensation Committee, as delegated by the Board of
Directors (the Board), develops and administers a
system of employee long-term and short-term compensation and
performance-oriented incentives that are appropriate,
competitive and properly reflect the objectives of the Company.
The duties of the Committee include:
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Administration of the Companys annual incentives, equity
and long-term incentive plans. |
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Adoption and review of major compensation plans including Board
compensation. |
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Approval of compensation for the chief executive officer,
corporate officers and certain senior management. |
Composition and Qualifications
The Committee will report to the Board of Directors and will
consist of at least three members who will be appointed or
removed as appropriate by the Board. Each member of the
Committee must meet the requirements to qualify as an outside
director under section 162(m) of the Internal Revenue Code
and a non-employee director under Section 16 of the
Securities Exchange Act of 1934 as well as the independence
rules as defined in the New York Stock Exchange Listing
Standards. No person may be a member of the Committee if the
directors service on the Committee would violate any
restriction the Internal Revenue Code, or any rule imposed by
the Securities and Exchange Commission or any exchange on which
shares of the common stock of the Company are traded. Desirable
qualifications for Committee members include experience in
executive management and or human resource management.
Meetings and Operations
The Committee will meet at least four times each year and more
frequently if circumstances warrant. The Committee may ask
members of management or others whose advice and counsel are
relevant to the issues then being considered by the Committee,
to attend any meetings and to provide such pertinent information
as the Committee may request. The Committee will keep written
minutes of its meetings, which minutes will be recorded or filed
with the books and records of the Company.
In its sole discretion, the Committee will have the authority to
delegate any of its responsibilities to subcommittees as
appropriate.
The Committee will have sole authority to retain and/or
terminate such compensation consultants or compensation
consulting firms as the Committee may deem appropriate. The
Committee will have sole authority to approve related fees and
retention terms.
Committee Responsibilities and Authority
The Committee will have the following responsibilities and
authority:
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1. |
To review and approve (consistent with authority delegated by
the Board) policies, practices and procedures of the Company
relating to the compensation of officers and other managerial
employees and the establishment and administration of the
Companys employee benefit plans. |
D-1
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2. |
To annually report to the board on the Companys
compensation policies, practices and procedures and to gain
Board approval on any compensation matter that exceeds the
Committees authority as delegated by the Board. |
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3. |
To review and approve corporate goals and objectives relevant to
CEO compensation. |
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4. |
To evaluate the CEOs performance consistent with the
approved goals and objectives; and either as committee or
together with other independent directors (as directed by the
Board) determine and approve the CEOs compensation level
based on this evaluation. |
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5. |
To review, at least annually, the performance of the senior
executive officers of the Company. |
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6. |
To advise and consult with the Companys senior executive
officers regarding managerial personnel and development matters. |
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7. |
To review and to make recommendations to the Board at least
annually with respect to the compensation (including
compensation under the incentive-compensation plans and
equity-based plans that are subject to Board approval) of the
senior executive officers of the Company and its subsidiaries. |
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8. |
To interpret, administer and make awards to employees under the
Companys stock incentive plans and any other employee
benefit plans and to exercise other authority granted to the
Committee by such plans, and to review and approve
managements recommendations as to stock and compensation
awards. |
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9. |
To review and make recommendations to the Board as to any
contractual or other special employment arrangements for
officers and other management employees of the Company or any of
its subsidiaries. |
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10. |
To produce a Compensation Committee report on executive officer
compensation as required by the Securities and Exchange
Commission (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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11. |
To perform such other duties as the Board may assign to the
Committee. |
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12. |
The Committee will periodically review this Charter and make
recommendations to the Board regarding changes the Committee
deems appropriate. |
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13. |
The Committee may conduct investigations, studies and surveys
and may review compensation practices in relevant industries to
make certain that the Company remains competitive and is able to
recruit and retain highly qualified personnel. |
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14. |
The Committee may retain, at the expense of the Company,
independent counsel or other consultants necessary to assist in
fulfillment of its responsibilities and the exercise of its
authority under this Charter. |
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15. |
The Committee will establish an annual calendar for the orderly
management of its responsibility. |
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16. |
The Committee, at the direction of the full board, will evaluate
the competitiveness of Directors compensation and make
recommendations to the full board as appropriate. |
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17. |
To evaluate, on an annual basis, the performance of the
Compensation Committee. |
D-2
ANNEX E
CHARTER OF THE CORPORATE GOVERNANCE/ NOMINATING COMMITTEE
OF THE
BOARD OF DIRECTORS
OF
VALEANT PHARMACEUTICALS INTERNATIONAL
(a Delaware corporation)
Purposes
The Corporate Governance/ Nominating Committee of the Board of
Directors of Valeant Pharmaceuticals International
(a) develops and recommends corporate governance principles
and guidelines applicable to the Board and the Companys
employees, (b) identifies individuals qualified to become
Board members, consistent with criteria approved by the Board
(c) recommends candidates to fill Board vacancies and
newly-created director positions, (d) recommends whether
incumbent directors should be nominated for re-election to the
Board upon the expiration of their terms and (e) oversees
the evaluation of the Board and monitors the Compensation
Committees evaluation of management.
Composition
Size. The size of the Committee shall be determined by
the Board, subject to any requirements or limitations in the
Companys certificate of incorporation or by-laws. The
Board believes that the Committee should always have at least
three members.
Qualifications. Each Committee member will be
independent under the rules of the New York Stock
Exchange. Desirable qualifications for Committee members include
experience in corporate governance, business management,
personnel or human resources management, and organizational
behavior.
Selection. The Board selects Committee members. Each
Committee member will serve at the pleasure of the Board for
such term as the Board may decide or until such Committee member
is no longer a Board member. The Committee will report to the
Board of Directors.
Duties and Responsibilities
The Committee has the following duties and responsibilities:
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1. Develop
Corporate Governance Guidelines. The Committee shall develop
and recommend to the Board corporate governance guidelines
applicable to the Corporation. At least annually, the Committee
shall review those guidelines and recommend changes, if
appropriate. |
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2. Assist
in Succession Planning. At least annually, the Committee
shall report to the Board on succession planning, which shall
include appropriate contingencies in case the Chairman of the
Board, the CEO, or the Chairman and CEO retires or is
incapacitated. The Committee shall assist the Board in
evaluating potential successors to these key leadership
positions. |
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3. Review
Possible Conflicts of Interest. The Committee shall consider
possible conflicts of interest of Board members and management
and make recommendations to prevent, minimize, or eliminate such
conflicts of interest. Consistent with NYSE listing requirements
and the Companys code of business conduct and ethics, the
Board will cause the Company to promptly disclose any waiver of
the Companys conflict of interest policy for a director or
executive officer. The Committee shall include in the
Companys governance guidelines information relating to the
complaint helpline access procedures. |
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4. Director Independence.
The Committee shall review and make recommendations to the Board
regarding the determination of independent status of each
Director on an annual basis. |
E-1
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5. Board Assessment. The
Committee shall oversee the evaluation of the Board, Board
leadership and Board committees. |
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6. Recommendations as to the
Board. The Committee shall make recommendations regarding
the appropriate size of the Board and the effectiveness of the
Board in fulfilling its obligations to the Company and its
stockholders. |
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7. Board Reports. At least
annually, the Committee shall report its activities to the Board
and in such manner and at such times as the Committee or the
Board deems appropriate. This report shall include the
Committees assessment of the Boards performance and
procedures. To assist the Committee in this assessment, the
Board shall periodically conduct a formal Board self-evaluation. |
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8. Identify New Director
Candidates. The Committee shall identify individuals
believed to be qualified to become Board members and recommend
candidates to the Board to fill new or vacant positions. In
recommending candidates, the Committee shall consider such
factors as it deems appropriate consistent with the factors in
the Companys corporate governance guidelines. These
factors may include judgment, integrity, skill, diversity,
experience with businesses and other organizations of comparable
size, the interplay of the candidates experience with the
experience of other Board members, and the extent to which the
candidate would be a desirable addition to the Board and any
committees of the Board. The Committee shall also review the
qualifications of, and make recommendations to the Board
regarding, director nominations submitted to the Company in
accordance with the Companys by-laws or otherwise. |
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9. Evaluate Incumbent
Directors. The Committee shall evaluate whether an incumbent
director should be nominated for re-election to the Board. The
Committee will use the same factors established for new director
candidates to make its evaluation and will also take into
account the incumbent directors performance as a Board
member. |
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10. Other Delegated Duties or Responsibilities. The
Committee shall perform any other duties or responsibilities
delegated to the Committee by the Board from time to time. |
Meetings
The Committee shall meet as frequently as necessary to carry out
its responsibilities under this Charter. The Committee Chair
shall, in consultation with the other members of the Committee
and appropriate officers of the Company, establish the agenda
for each Committee meeting. Each Committee member may submit
items to be included on the agenda. Committee members may also
raise subjects that are not on the agenda at any meeting. The
Committee Chair or a majority of the Committee members may call
a meeting of the Committee at any time. A majority of the number
of Committee members selected by the Board shall constitute a
quorum for conducting business at a meeting of the Committee.
The act of a majority of Committee members present at a
Committee meeting at which a quorum is in attendance shall be
the act of the Committee, unless a greater number is required by
law, the Companys certificate of incorporation or its
by-laws. The Committee Chair shall supervise the conduct of the
meetings and shall have other responsibilities, which the
Committee may designate from time to time. The Committee may
request any officer or employee of the Company, or any
representative of the Companys advisors, to attend a
meeting or to meet with any members or representative of the
Committee.
Resources and Authority
The Committee shall have appropriate resources and authority to
discharge its responsibilities, including appropriate funding in
such amount as the Committee deems necessary, to compensate any
consultants and any independent advisors retained by the
Committee. The Committee shall have the sole authority to engage
search firms to assist in the identification of director
candidates and the sole authority to set the fees and other
retention terms of such search firms. The Committee may also
retain independent counsel and other independent advisors to
assist it in carrying out its responsibilities. In its sole
discretion, the Committee will have the authority to delegate
any of its responsibilities to subcommittees as appropriate.
E-2
Annual Review
At least annually, the Committee shall (a) review this
Charter with the Board and recommend any changes to the Board
and (b) evaluate its performance against the requirements
of this Charter and review this evaluation with the Board. The
Evaluation shall include the goals and objectives of the
Committee for the upcoming year. The Committee shall conduct its
review and evaluation in such manner as it deems appropriate.
This Charter will be included on the Companys website and
will be made available in print upon request sent to the
Companys Chief Governance Officer & Corporate
Secretary.
E-3
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 24, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
VALEANT PHARMACEUTICALS INTERNATIONAL
The undersigned hereby appoints Robert W. OLeary and Christina de Vaca as Proxyholders, each with the
power to appoint his or her substitute, and hereby authorizes them to represent and to vote, as designated
below, all the shares of common stock of Valeant Pharmaceuticals International (the Company) held of
record by the undersigned on April 12, 2005 at the Annual Meeting of Stockholders to be held at 9:00 a.m.,
local time, on May 24, 2005, and any adjournments or postponements thereof.
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 and
FOR the ratification of the appointment of PricewaterhouseCoopers LLP as independent registered
public accounting firm for the Company. 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
24, 2005. 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.
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 2005 Annual Meeting of Stockholders.
(Continued, and to be signed, on the reverse side.)
THERE ARE THREE WAYS TO VOTE YOUR PROXY
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TELEPHONE VOTING
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INTERNET VOTING
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VOTING BY MAIL
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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 23, 2005.
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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 23, 2005.
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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. |
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TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
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X
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Please mark
votes as in
this example.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITS NOMINEES
TO THE BOARD OF DIRECTORS, AND FOR PROPOSAL 2.
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1. Election of three persons to the Board of Directors of the Company.
Nominees: Richard H. Koppes, Robert W. OLeary and Randy H. Thurman
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FOR ALL
NOMINEES LISTED
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WITHHOLD
AUTHORITY FOR
ALL NOMINEES
LISTED |
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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. Ratification of the appointment of PricewaterhouseCoopers LLP
as independent registered public accounting firm for the Company.
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3. 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 2005 Annual
Meeting of Stockholders.
The board of directors recommends that
you vote FOR the election of each of
the nominees in Proposal No. 1 and
FOR the ratification of the
appointment of PricewaterhouseCoopers,
LLP as the Companys independent
registered public accounting firm. 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.
Signature(s)
Signature(s)
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.