UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☑ Filed by a Party other than the Registrant ☐
Check the appropriate box:
Filed by the Registrant ☑ | Filed by a Party other than the Registrant ☐ |
Check the appropriate box: | ||||
☐ | Preliminary Proxy Statement | |||
☐ | ||||
Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2)) | ||||
☑ | ||||
Definitive Proxy Statement | ||||
☐ | ||||
Definitive Additional Materials | ||||
☐ | ||||
Soliciting Material Pursuant to §240.14a-12 | ||||
VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
(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) | |||||
☑ | |||||
No fee required. | |||||
☐ | |||||
Fee computed on table below per Exchange Act Rules14a-6(i)(1) and0-11. | |||||
(1) | |||||
Title of each class of securities to which transaction applies: | |||||
(2) | Aggregate number of securities to which transaction applies: | ||||
(3) |
| ||||
(4) | Proposed maximum aggregate value of transaction: | ||||
(5) | Total fee paid: | ||||
☐ | |||||
Fee paid previously with preliminary materials. | |||||
☐ | |||||
| |||||
(1) | |||||
Amount Previously Paid: | |||||
(2) | Form, Schedule or Registration Statement No.: | ||||
(3) | Filing Party: | ||||
(4) | Date Filed: | ||||
March 23, 201721, 2018
Dear Fellow Shareholders:
On behalf of the Board of Directors of Valeant Pharmaceuticals International, Inc. (the “Company”), I want to take this opportunity to invite you to attend our 20172018 Annual Meeting of Shareholders.Shareholders (the “Meeting”). The meetingMeeting will be held at 9:00 a.m., local time, on Tuesday, May 2, 2017Monday, April 30, 2018 at the Company’s offices located at 2150 Saint Elzear Blvd. West, Laval, Quebec, Canada H7L 4A8. At the meeting, shareholders will vote on the proposals set forth in the Notice of Annual Meeting and the accompanying management proxy circular and proxy statement (the “Proxy Statement”), as well as receive a report on the progress of the Company. For those shareholders who have previously provided instructions to receive paper copies of our proxy materials, a paper copy will be sent to you in addition to the Notice.
We are providing access to our proxy materials, including our Annual Report onForm 10-K for the fiscal year ended December 31, 2016,2017, in a fast and efficient manner via the Internet. On March 23, 2017,21, 2018, we will begin mailing a Notice Regarding Internet Availability of Proxy Materials (the “Notice”) to all shareholders of record as of March 7, 2017,5, 2018, and post our proxy materials on the website referenced in the Notice (www.proxyvote.com). As more fully described in the Notice, all shareholders may choose to access our proxy materials on the website referred to in the Notice or may request to receive a printed set of our proxy materials. In addition, the Notice and website will provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
Your vote at this meetingMeeting is important. Whether or not you plan to attend the meeting,Meeting, we hope you will vote as soon as possible. You will find voting instructions in the Notice, the Proxy Statement and on the Proxy Card. You may vote over the Internet or telephone. Alternatively, if you requested a printed copy of the proxy materials by mail, you may mark, date, sign and mail the Proxy Card in the envelope provided.
We appreciate your continued ownership of Valeant shares and your support.
Sincerely, | |
 | |
Joseph C. Papa | |
Chairman of the Board and Chief Executive Officer |
Sincerely,
Joseph C. PapaTABLE OF CONTENTS
Chairman of the Board and Chief Executive Officer
VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
2150 Saint Elzear Blvd. West
Laval, Quebec H7L 4A8
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 30, 2018
May 2, 2017
To the Shareholders of
Valeant Pharmaceuticals International, Inc.:
NOTICE IS HEREBY GIVEN that the 20172018 Annual Meeting of Shareholders (the “Annual Meeting” or the “Meeting”) of Valeant Pharmaceuticals International, Inc., a British Columbia corporation (the “Company” or “our”), will be held at 2150 Saint Elzear Blvd. West, Laval, Quebec, Canada H7L 4A8, on Tuesday, May 2, 2017,Monday, April 30, 2018, at 9:00 a.m., local time, for the following purposes:
1. To receive the audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2016 and the auditors’ report thereon, a copy of which is enclosed with this Notice of Annual Meeting;
2. To elect 10 directors of the Company (each a “Director” and collectively, the “Directors”) to serve until the close of the 2018 Annual Meeting of Shareholders;
3. To approve, in anon-binding advisory vote, the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis section, executive compensation tables and accompanying narrative discussions contained in the Management Proxy Circular and Proxy Statement that accompanies this Notice of Annual Meeting of Shareholders;
4. To vote, in anon-binding advisory vote, on the frequency of advisory votes on the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis section, executive compensation tables and accompanying narrative discussions contained in the Management Proxy Circular and Proxy Statement that accompanies this Notice of Annual Meeting of Shareholders;
5. To appoint PricewaterhouseCoopers LLP as independent registered public accountant (the “auditors”) for the Company to hold office until the close of the 2018 Annual Meeting of Shareholders and to authorize the Company’s Board of Directors to fix the auditors’ remuneration; and
6. To transact such other business as may properly come before the meeting or any adjournments or postponements thereof.
| 1. | To receive the audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2017 and the auditors’ report thereon, a copy of which is enclosed with this Notice of Annual Meeting; |
| 2. | To elect 10 directors of the Company (each a “Director” and collectively, the “Directors”) to serve until the close of the 2019 Annual Meeting of Shareholders or until their successors are duly elected or appointed, or until such Director’s earlier resignation or removal; |
| 3. | To approve, in a non-binding advisory vote, the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis section, executive compensation tables and accompanying narrative discussions contained in the Management Proxy Circular and Proxy Statement that accompanies this Notice of Annual Meeting of Shareholders; |
| 4. | Approval of an amendment to the Company’s 2014 Omnibus Incentive Plan (the “2014 Plan”) to increase the number of Common Shares authorized under the 2014 Plan; |
| 5. | To appoint PricewaterhouseCoopers LLP as independent registered public accountants (the “auditors”) for the Company to hold office until the close of the 2019 Annual Meeting of Shareholders and to authorize the Company’s Board of Directors to fix the auditors’ remuneration; and |
| 6. | To transact such other business as may properly come before the meeting or any adjournments or postponements thereof. |
The record date for the Meeting is March 7, 2017.5, 2018. Only record shareholders at the close of business on March 7, 20175, 2018 will be entitled to notice of and to vote at the Annual Meeting in person or by proxy.
We are providing access to our proxy materials, including our Annual Report on Form10-K for the fiscal year ended December 31, 2016,2017, to each shareholder of record in a fast and efficient manner via the Internet. On March 23, 2017,21, 2018, we will begin mailing a Notice Regarding Internet Availability of Proxy Materials (the “Notice”), to all shareholders of record as of March 7, 2017,5, 2018, and post our proxy materials on the website referenced in the Notice (www.proxyvote.com). As more fully described in the Notice, all shareholders may choose to access our proxy materials free of charge on the website referred to in the Notice or may request to receive a printed set of our proxy materials free of charge. These materials will remain available on the website through the conclusion of the Annual Meeting. In addition, the Notice and website provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. For those shareholders who have previously provided instructions to receive paper copies of our proxy materials, a paper copy will be sent to you in addition to the Notice. The management proxy circular and proxy statement (the “Proxy Statement”) that accompanies this Notice of Annual Meeting of Shareholders contains additional information regarding the proposals to be considered at the Annual Meeting, and shareholders are encouraged to read it in its entirety.
Shareholders are invited to attend the Annual Meeting.Record shareholderswho are unable to attend the Annual Meeting in person are requested to vote via the Internet, by going towww.proxyvote.com and following the instructions on the website, or vote by calling toll free1-800-690-6903 on a touch tone telephone and following the instructions provided by “Vote Voice.” You will need to refer to the Proxy Card and to your12-digit control number
provided on the Proxy Card. Alternatively, you may vote by mail by completing, dating and signing the enclosed form of proxy (the “Proxy Card”) and sending it in the enclosed envelope to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717, United States or to the Company at 2150 Saint Elzear Blvd. West Laval, Quebec H7L 4A8 or by fax514-744-6272.Non-record shareholders who receive these materials through their broker or other intermediary should follow the instructions provided by their broker or intermediary.
For your vote to be effective, your voting instructions must be received by Broadridge Financial Solutions, Inc. (“Broadridge”) not later than11:59 p.m. (Eastern Daylight Time) on April 28, 2017 26, 2018, or, in the case of any adjournment of the Annual Meeting, not less than 48 hours, excluding Saturdays, Sundays and applicable holidays, prior to the time of the rescheduled meeting. The Company’s Board of Directors may, at its discretion, accept late proxies or waive the time limit for deposit of proxies, but is under no obligation to accept or reject any late proxy.If you have voted by proxy using the Proxy Card, via fax or the Internet or by telephone, any subsequent vote by proxy through any of these methods will cancel any other proxy you may have previously submitted in connection with the Annual Meeting, and only the latest dated proxy received prior to the deadline will be counted.
By Order of the Board of Directors,
Christina M. Ackermann
Executive Vice President and General Counsel
By Order of the Board of Directors, | |
 | |
Christina M. Ackermann Executive Vice President and General Counsel |
Dated: March 23, 201721, 2018
TABLE OF CONTENTS
VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
2150 Saint Elzear Blvd. West
Laval, Quebec H7L 4A8
MANAGEMENT PROXY CIRCULAR AND PROXY STATEMENT
20172018 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 2, 2017APRIL 30, 2018
This Management Proxy Circular and Proxy Statement (“Proxy Statement”) contains information about the 20172018 Annual Meeting of Shareholders of Valeant Pharmaceuticals International, Inc., a British Columbia corporation (the
(the “Company” or “Valeant”). The meeting will be held at 2150 Saint Elzear Blvd. West, Laval, Quebec, Canada H7L 4A8, on Tuesday, May 2, 2017,Monday, April 30, 2018, at 9:00 a.m., local time, and any adjournments or postponements thereof (the “Annual Meeting” or the “Meeting”), for the purposes set forth in this Proxy Statement and in the accompanying Notice of Annual Meeting of Shareholders. In this document, the words “Valeant,” “we,” “our,” “ours” and “us” refer only to Valeant Pharmaceuticals International, Inc. and not to any other person or entity. References to “US$” or “$” are to United States dollars. Unless otherwise indicated, the statistical and financial data contained in this Proxy Statement are as of February 28, 2017.March 5, 2018.
We are providing you with this Proxy Statement and related materials in connection with the solicitation of proxies by our management. See “Proxy Solicitation” below for additional information.
We are providing access to our proxy materials, including our Annual Report on Form10-K for the fiscal year ended December 31, 2016,2017, in a fast and efficient manner via the Internet. On March 23, 2017,21, 2018, we will begin mailing a Notice Regarding Internet Availability of Proxy Materials (the “Notice”) to all shareholders of record as of March 7, 2017,5, 2018, and post our proxy materials on the website referenced in the Notice (www.proxyvote.com). As more fully described in the Notice, all shareholders may choose to access our proxy materials on the website referred to in the Notice or may request to receive a printed set of our proxy materials. In addition, the Notice and website will provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. For those shareholders who have previously provided instructions to receive paper copies of our proxy materials, a paper copy will be sent to you in addition to the Notice.
All properly executed written proxies, and all properly completed proxies submitted by mail, facsimile or telephone or via the Internet, which are delivered pursuant to, and which appoint Mr. Papa and Ms. Ackermann as proxyholders in accordance with, this solicitation will be voted at the Meeting in accordance with the directions given in the proxy, unless the proxy is revoked prior to completion of voting at the Meeting.
ELECTRONIC DELIVERY OF VALEANT SHAREHOLDER COMMUNICATIONS
We are pleased to offer to our shareholders the benefits and convenience of electronic delivery of Annual Meeting materials, including:
Email delivery of the Proxy Statement, Annual Report and related materials;
We encourage you to conserve natural resources and to reduce printing and mailing costs by signing up for electronic delivery of Valeant shareholder communications.
If you are a registered shareholder or a beneficial owner of common shares, no par value, of the Company (“
(“Common Shares”), or if a broker or other nominee holds your Valeant Common Shares, and you would like to sign up for electronic delivery, please visitwww.proxyvote.com and enter the information requested to enroll. Your electronic delivery enrollment will be effective until you cancel it. If you have questions about electronic delivery, please call Valeant Investor Relations at514-744-6792 or send an email toir@valeant.com.
1
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 2, 2017APRIL 30, 2018
Our Annual Report on Form10-K for the fiscal year ended December 31, 20162017 (the “Annual Report”) is available on the Internet at our website at www.valeant.com, through the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com or through the U.S. Securities and Exchange Commission’s electronic data system called EDGAR at www.sec.gov.To request a printed copy of our Annual Report, which we will provide to you without charge, either write to Valeant Investor Relations at Valeant Pharmaceuticals International, Inc., 2150 Saint Elzear Blvd. West, Laval, Quebec H7L 4A8, Canada, or send an email to Valeant Investor Relations at ir@valeant.com.
This Proxy Statement and the Annual Report are available at: www.proxyvote.com.
This Proxy Statement contains information regarding, among other things:
The date, time and location of the Meeting;
Whether or not you plan to attend the Annual Meeting, please promptly provide your voting instructions.Your promptness in voting will assist in the expeditious and orderly processing of the proxies and in ensuring that a quorum is present. If you vote your proxy, you may nevertheless attend the Annual Meeting and vote your Common Shares in person if you wish. Please note, however, that if your Common Shares are held of record by a broker or other nominee and you wish to vote in person at the Meeting, you must follow the instructions provided to you by your broker or such other nominee. If you want to revoke your instructions at a later time prior to the vote for any reason, you may do so in the manner described in this Proxy Statement.
What decisions will the shareholders be making at the Meeting?
You will be asked to vote on each of the following proposals:
the election of 10 Directors to serve until the close of the 20182019 Annual Meeting of Shareholders or until their successors are duly elected or appointed, or until such Director’s earlier resignation or removal (“Proposal No. 1”);
(as defined below) as disclosed in the Compensation Discussion and Analysis (“CD&A”) section, executive compensation tables and accompanying narrative discussions contained in this Proxy Statement (“Proposal No. 2”);
in anon-binding advisory vote, a recommendation on
The Board recommends that you voteFOR: (i) the election of the 10 Director nominees proposed by the Board in this Proxy Statement; (ii) the approval, in anon-binding advisory vote, of the compensation of the Named Executive Officers as described in the CD&A section, executive compensation tables and accompanying narrative discussion contained in this Proxy Statement; (iii) EVERY YEAR with respect to how frequently anon-binding advisory vote on the compensationapproval of the Company’s Named Executive Officers should be heldamendment to the 2014 Plan to increase the number of Common Shares authorized under the 2014 Plan and (iv) the appointment of PwC as our auditors and the authorization of the Board to fix the auditors’ remuneration.
In addition, you may be asked to vote in respect of any other matters that may properly be brought before the Meeting. As of the date of this Proxy Statement, the Board is not aware of any such other matters.
2
A simple majority of votes cast at the Meeting, whether in person, by proxy or otherwise, in favor of any of Proposal No. 1 through Proposal No. 4 will constitute approval of any such proposal submitted to a vote, subject, with respect to Proposal No. 1, to the Company’s majority vote policy described in “Proposal No. 1 Election of Directors” under “Background” below.
What impact does a Withhold or Abstain vote have?
Proposal No. 1:With respect to each nominee, you may either vote “For” the election of such nominee or “Withhold” your vote with respect to the election of such nominee. If you vote “For” the election of a nominee, your Common Shares will be voted accordingly. If you select “Withhold” with respect to the election of a nominee, your vote will not be counted as a vote cast for the purposes of electing such nominee but will be considered in the application of the majority vote policy described in “Proposal No. 1 Election of Directors” under “Background” below.
What is the effect if I do not cast my vote?
If a record shareholder does not cast its vote by proxy or in any other permitted fashion, no votes will be cast on its behalf on any of the items of business at the Annual Meeting. If anon-record shareholder does not instruct its intermediary on how to vote on any of the items of business at the Annual Meeting and the intermediary does not have discretionary authority to vote thenon-record shareholder’s Common Shares on the matter, or elects not to vote in the absence of instructions from thenon-record shareholder, no votes will be cast on behalf of suchnon-record shareholder with respect to such item (a “brokernon-vote”). If you are a beneficial owner whose Common Shares are held of record by a broker authorized to trade on the New York Stock Exchange (“NYSE”), NYSE rules permit your broker to exercise discretionary voting authority to vote your Common Shares on the appointment of PricewaterhouseCoopers LLP as our independent registered public
accountants (the “auditors”), even if the broker does not receive voting instructions from you. However, NYSE rules do not permit your broker to exercise discretionary authority to vote on the election of Directors, to vote on thenon-binding advisory approval of executive compensation or to vote on thenon-binding advisory approval of proposal to amend the frequency of thenon-binding advisory approval of executive compensation2014 Plan without instructions from you, in which case a brokernon-vote will occur and your vote will not be counted as a vote cast on these matters. If you have further questions on this issue, please contact your intermediary bank or broker or Valeant Investor Relations at ir@valeant.com.
What constitutes a quorum for the Annual Meeting?
Two persons, who are, or represent by proxy, shareholders holding, in the aggregate, at least 25% of the outstanding Common Shares entitled to vote at the Meeting will constitute a quorum for the transaction of business at the Annual Meeting. Votes withheld, abstentions and brokernon-votes will be counted for purposes of determining the presence of a quorum.
Who is entitled to vote?
Each shareholder is entitled to one vote for each Common Share registered in his or her name as of the close of business on March 7, 2017,5, 2018, the record date for the purpose of determining holders of Common Shares entitled to receive notice of and to vote at the Meeting.
3
As of March 7, 2017, 347,850,2275, 2018, 348,840,468 Common Shares were issued and outstanding and entitled to be voted at the Meeting.
How do I vote?
The voting process is different depending on whether you are a record (registered) ornon-record shareholder:
You are a record shareholder if your name appears in our share register.
Non-record shareholders
If you are anon-record shareholder, your intermediary will send you a voting instruction form or proxy form with this Proxy Statement. This form will instruct the intermediary how to vote your Common Shares at the Meeting on your behalf. You should carefully follow the instructions provided by the intermediary (including with respect to applicable timelines for providing voting instructions, which may be different from those described in this Proxy Statement) and contact the intermediary promptly if you need help. The Company will pay for delivery of proxy materials to beneficial owners, including objecting beneficial owners.
If you do not intend to attend the Meeting and vote in person, mark your voting instructions on the voting instruction form or proxy form, sign it, and return it as instructed by your intermediary. Your intermediary may have also provided you with the option of voting by telephone or fax or through the Internet.
If you wish to vote in person at the Meeting, follow the instructions provided by your intermediary. Your intermediary may have also provided you with the option of appointing yourself or someone else to attend and vote on your behalf at the Meeting through the Internet. When you arrive at the Meeting, please register with the Inspector of Elections.
Your intermediary must receive your voting instructions in sufficient time for your intermediary to act on them prior to the deadline for the deposit of proxies of 11:59 p.m. (Eastern Daylight Time) Friday,Thursday, April 28, 2017,26, 2018, or, in the case of any adjournment of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and applicable holidays) prior to the rescheduled Meeting.
Record shareholders
If you are a record shareholder, a Proxy Card is enclosed with this Proxy Statement to enable you to vote, or to appoint a proxyholder to vote on your behalf, at the Meeting.
Whether or not you plan to attend the Meeting, you may vote your Common Shares by proxy by any one of the following methods:
By mail: Mark, sign and date your Proxy Card and send it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717, United States. Broadridge must receive your Proxy Card not later than 11:59 p.m. (Eastern Daylight Time) on April 28, 201726, 2018 in order for your vote to be counted. If the Meeting is adjourned or postponed, Broadridge must receive your Proxy Card at least 48 hours, excluding Saturdays, Sundays and applicable holidays, before the rescheduled Meeting.
By telephone: Call toll free1-800-690-6903. You will be prompted to provide your 12 digit control number printed below yourpre-printed name and address on the Proxy Card. The telephone voting service is available until 11:59 p.m. (Eastern Daylight Time) on April 28, 2017.26, 2018. You may not appoint a person as proxyholder other than the Board nominated proxies named in the Proxy Card when voting by telephone.
Via the Internet: Go to www.proxyvote.com and follow the instructions on the website prior to 11:59 p.m. (Eastern Daylight Time) on April 28, 2017.26, 2018.
We provide Internet proxy voting to allow you to vote your Common Shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.
4
If you receive more than one Notice, your Common Shares are registered in more than one name or are registered in different accounts. Please follow the voting instructions oneach Notice to ensure that all of your Common Shares are voted.
How do I appoint a proxyholder?
Your proxyholder is the person you appoint to cast your votes on your behalf.You can choose anyone you want to be your proxyholder; it does not have to be either of the persons we have designated in the Proxy Card. Just write in the name of the person you would like to appoint in the blank space provided in the Proxy Card.Please ensure that the person you have appointed will be attending the Meeting and is aware that he or she will be voting your Common Shares. Proxyholders should speak to the Inspector of Elections upon arriving at the Meeting. Please note that the option to appoint your own proxyholder is not available if you vote by telephone or online.
If you sign the Proxy Card without naming your own proxyholder, or, if you vote online or by telephone, you appoint Mr. Papa and Ms. Ackermann as your proxyholders, either of whom will be authorized to vote and otherwise act for you at the Meeting, including any continuation after adjournment of the Meeting.
How will my Common Shares be voted if I give my proxy?
On the Proxy Card, you can indicate how you want your proxyholder to vote your Common Shares, or you can let your proxyholder decide for you by signing and returning the Proxy Card without indicating a voting
preference in one or more proposals. If you have specified on the Proxy Card how you want to vote on a particular proposal (by marking, as applicable, FOR, WITHHOLD, AGAINST or ABSTAIN), then your proxyholder must vote your Common Shares accordingly.
If you have not specified how to vote on a particular proposal, then your proxyholder can vote your Common Shares as he or she sees fit. Unless you specify voting instructions, Mr. Papa and Ms. Ackermann, as your proxyholders, will vote your Common Shares as follows:
FOR the election of the 10 Director nominees proposed by the Board in this Proxy Statement to serve until the close of the 20182019 Annual Meeting of Shareholders;
If I change my mind, can I revoke my proxy once I have given it?
If you are anon-record shareholder, you can revoke your prior voting instructions by providing new instructions on a voting instruction form or proxy form with a later date, or at a later time in the case of voting by telephone or through the Internet. Otherwise, contact your intermediary if you want to revoke your proxy, change your voting instructions or if you change your mind and want to vote in person. Any new voting instructions given to intermediaries in connection with the revocation with proxies must be received in sufficient time to allow intermediaries to act on such instructions prior to the deadline for the deposit of proxies of 11:59 p.m. (Eastern Daylight Time) Friday,Thursday, April 28, 2017,26, 2018, or at least 48 hours (excluding Saturdays, Sundays and applicable holidays) prior to the time of the Meeting if it is rescheduled. If you choose to provide voting instructions multiple times, only the latest one which is not revoked and is received prior to such deadline will be counted.
If you are a record shareholder, you may revoke any proxy that you have given until the time of the Meeting by voting again by telephone or over the Internet as instructed above, by signing and dating a new Proxy Card and submitting it as instructed above, by giving written notice of such revocation to the Corporate Secretary of the Company at our address, by revoking it in person at the Annual Meeting or by voting by ballot at the Annual Meeting. If you choose to submit a proxy multiple times whether by telephone, over the Internet or by mail, or a combination thereof, only your latest vote, which is not revoked and is received prior to 11:59 p.m. (Eastern Daylight Time) on Friday,
5
Thursday, April 28, 201726, 2018 (or 48 hours, excluding Saturdays, Sundays and applicable holidays, before the Meeting if it is rescheduled) will be counted. A record shareholder participating in person, in a vote by ballot at the Meeting, will automatically revoke any proxy previously given by that shareholder regarding business considered by that vote. However, mere attendance at the Annual Meeting by a record shareholder who has voted by proxy does not revoke such proxy.
What if amendments are made to these proposals or if other matters are brought before the Meeting?
The Proxy Card also gives discretionary authority to proxyholders to vote as the proxyholders see fit with respect to amendments or variations to proposals identified in the Notice of Meeting or other matters that may come before the Meeting whether or not the amendment, variation or other matter that comes before the Meeting is or is not routine and whether or not the amendment, variation or other matter that comes before the Meeting is contested.
As of the date of this Proxy Statement, the Board is not aware of any such amendments, variations or other matters to come before the Meeting. However, if any such changes that are not currently known to the Board should properly come before the Meeting, the Common Shares represented by your proxyholders will be voted in accordance with the best judgment of the proxyholders.
Who is soliciting my proxy?
Management of the Company is soliciting your proxy for use at the Meeting.All associated costs of solicitation will be borne by the Company. It is expected that the solicitation will be primarily by mail, but proxies may also be solicited personally, by advertisement, by telephone, Internet, telegraph, courier service, telecopies or other electronic means by Directors, officers or employees of the Company without special compensation or by the Company’s proxy solicitor, D.F. King Co., Inc. (“D.F. King”) for a fee of $10,000 plus reimbursement of reasonableout-of-pocket expenses. The Company will bear the entire cost of solicitation, including the preparation, assembly, Internet hosting, maintaining a dedicated call line, and printing and mailing the Proxy Statement and form of Proxy Card. The Company will pay those entities holding Common Shares in the names of their beneficial owners, such as brokers, nominees, fiduciaries and other custodians, for their reasonable fees and expenses in forwarding solicitation materials to their beneficial owners and for obtaining their instructions. We anticipate that the Notice and the accompanying Proxy Card will be distributed to shareholders on or about March 23, 2017.21, 2018.
How can I contact the independent Directors and/or the Chairman of the Board?
You may contact the independent directors and/or the Chairman of the Board with the assistance of the Company’s Investor Relations Department. Shareholders or other interested persons can call or send a letter, email or fax to:
Valeant Pharmaceuticals International, Inc.
Investor Relations
2150 Saint Elzear Blvd. West
Laval, Quebec H7L 4A8
Canada
Phone:514-744-6792
Fax:514-744-6272
Email: ir@valeant.com
Whom should I contact if I have questions concerning the Proxy Statement or the Proxy Card?
If you have questions concerning the information contained in this Proxy Statement or require assistance in completing the Proxy Card, you may contact Valeant Investor Relations as provided above.
6
How can I contact the Company’s transfer agent?
You may contact the Company’s transfer agent by mail or by telephone (within Canada and the United States):
CST
AST Trust Company
(Canada)
P.O. Box 700
Station B
Montreal, QC H3B 3K3
Canada
Website: www.canstockta.com
Email: inquiries@canstockta.com
Tel:inquiries@astfinancial.com
Fax: 888-249-6189
Phone (for all security transfer inquiries):1-800-387-0825 or416-682-3860
Website: www.astfinancial.com/ca-en
Fax:888-249-6189
7
ELECTION OF DIRECTORS
The number of Director nominees standing for election at the Meeting is 10. Under the Company’s Articles, Directors are elected annually. Directors elected at the Meeting will hold office until the close of the 20182019 Annual Meeting of Shareholders of the Company or until their successors are duly elected or appointed.appointed, or until such Director’s earlier resignation or removal. In an uncontested election, any Director nominee who receives a greater number of votes “withheld” from his or her election than votes “for” such election is required to tender his or her resignation promptly following the vote, which resignation must state that it will become effective upon acceptance by the Board. The Nominating and Corporate Governance Committee shall then consider the offered resignation and make a recommendation to the Board as to whether it should accept such resignation. The Nominating and Corporate Governance Committee shall be expected to accept such resignation except in satiations where extenuating circumstances would warrant the applicable director continuing to serve on the Board. Thereafter, and within 90 days of the applicable vote, the Board must decide whether to accept such resignation, and it must promptly disclose its decision via press release. Full details of this policy are set forth in our Corporate Governance Guidelines, available on our website at www.valeant.com (under the tab “About” and under the subtab “Corporate Governance”). Our website is not part of this Proxy Statement; references to our website address in this Proxy Statement are intended to be inactive textual references only.
Each of the 10 Director nominees has established his or her eligibility and willingness to serve on the Board. Set forth below are the names of the Director nominees together with details about their backgrounds and experience. Also indicated is the number of the Company’s securities beneficially owned, controlled or directed, directly or indirectly, by each of the Director nominees as of February 28, 2017,March 5, 2018, as well as the aggregate value based on the $15.40 closing price per share of our Common Shares as reported on the NYSE on February 28, 2017 of $14.38.March 5, 2018. You will find for each Director nominee who was on the Board at any time in 20162017 a record of attendance at meetings of the Board and the standing committees of the Board on which such Director nominee served from January 1, 20162017 to December 31, 2016.2017.
Nine of the 10 Director nominees are independent within the meaning of all applicable securities regulatory and stock exchange requirements in Canada and the U.S. In addition, in accordance with the applicable stock exchange requirements and Board committee charters, all members of the Audit and Risk Committee, the Talent and Compensation Committee and the Nominating and Corporate Governance Committee are independent directors.
Unless otherwise instructed, the designated proxyholders intend to vote FOR the election of the 10 Director nominees proposed by the Board in this Proxy Statement. If, for any reason, at the time of the Meeting any of these Director nominees are unable or unwilling to serve, unless otherwise specified in the signed Proxy Card, it is intended that the designated proxyholders will vote in their discretion for a substitute nominee or nominees.
The Nominating and Corporate Governance Committee is responsible for identifying individuals qualified to become Directors and recommending such individuals to the Board for nomination for election by the Company’s shareholders.
In making recommendations to the Board for new nominees for election or appointment, the Nominating and Corporate Governance Committee considers the selection criteria approved by the Board from time to time, and such knowledge, experience, skills, expertise and diversity that the Board considers to be necessary for the Board, as a whole, to possess and for each Director to possess. In November 2015, the Board retained Odgers Berndtson, LLC, a third-party search firm, to assist with the recruitment ofnon-executive Directors. In 2016, the Company paid Odgers Berndtson, LLC $1,351,379 for the recruitment ofnon-executive Directors and Mr. Papa.
The Nominating and Corporate Governance Committee endeavors to recommend to the Board individuals possessing certain qualities such that the resulting Board will be comprised of a diverse membership. The
Company does not have a Director retirement policy; however, the Nominating and Corporate Governance Committee considers the results of its Director assessment process in determining the nominees to be put forward on a regular basis. The Company has not set term limits for independent directors because it does not believe term limits are necessary to provide for adequate Board renewal. The Nominating and Corporate Governance Committee and the
8
Board, in conducting Director evaluations and nominations, considers the composition of the Board and whether there is a need to include nominees with different skills, experiences and perspectives on the Board. This mechanism has resulted in a reasonable level of Board renewal, such that our current Board is comprised of individuals who have served on our Board or the board of a predecessor of the Company from less than one year to nine years.
The Nominating and Corporate Governance Committee views diversity in a broad context and considers a variety of factors. Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has adopted a formal written diversity policy. The objective of the diversity policy is to require the consideration of a wide range of attributes, competencies, characteristics, experiences and backgrounds, including consideration of the number of women on the Board, when considering the composition of the Board in the Director identification and nomination andre-nomination(and re-nomination) process. The key provisions of the diversity policy emphasize the Company’s view about the benefits of diverse backgrounds and the need to consider diversity in evaluating the needs of the Board. The Nominating and Corporate Governance Committee will oversee and annually evaluate the implementation and effectiveness, both as measured annually and cumulatively, of the diversity policy in conjunction with its Board evaluation and nomination process. The Nominating and Corporate Governance Committee assesses the effectiveness of the diversity policy by reference to, among other things, the extent to which the current Board and the nominees for election to the Board reflect the stated objectives of the Board as set out in the diversity policy. The Company has not established a specific target number or date by which to achieve a specific number of women on the Board, as we consider a multitude of factors in determining the best nominee at the time and consider the Company’s objectives and challenges at such time. If all of our Director nominees are elected by shareholders at this Annual Meeting, then two Directors, representing 20% of our Directors, will be women. For a discussion of the Company’s policy regarding the level of women in executive officer positions, see “Succession Planning” below.
In considering an individual’s experience, the following additional criteria are also considered:
Healthcare and Healthcare Industry Expertise: The Board values Directors with experience in healthcare and the healthcare industry, including the pharmaceutical, consumer and life science industries, who can draw on their functional expertise and industry relationships to assist the Board and management in executing the Company’s strategy.
International Business Experience: To complement the Company’s multinational and cross-border operations, the Board seeks to have Directors with a global business perspective who can assist the Board and management in successfully navigating the business, political, legal and regulatory environments in the countries in which the Company conducts, or seeks to conduct, its business.
Financial Literacy: The Board believes that it is important for its Directors to possess significant financial reporting, compliance and accounting expertise. Among other functions, the Board and the Audit and Risk Committee have oversight responsibility with respect to the quality and integrity of the Company’s financial statements, the internal and external audit functions, and internal control over financial reporting and disclosure controls and procedures. It is therefore important that Directors are financially knowledgeable.
Corporate Governance Experience: The Board is responsible for the stewardship of the Company and supervising its management, business and affairs, in addition to being responsible for adopting and monitoring the Company’s corporate governance guidelines and policies. In order to carry out these responsibilities, it is important that the Board be comprised of individuals who understand corporate governance issues, the various constituencies interested in such issues, and have a proven track record of sound business judgment, integrity and high ethical standards. Many of the Company’s Director nominees have experience serving on public company boards in multiple jurisdictions, including the United States and Canada.
Executive Leadership: The Board believes that it is important for its Directors to possess strong management experience at senior corporate levels. It is important that the Board be comprised of individuals
who have held senior management positions with companies or business entities who have experience with mergers, acquisitions and strategic business transactions and who have a strong background in implementing, managing and overseeing strategic planning and business development initiatives. A number of the Company’s Director nominees possess extensive leadership experience and have held a number of senior management and leadership positions with global organizations.
9
Submitting Director Recommendations to the Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee will also consider recommendations for Director nominees submitted by the Company’s shareholders. Shareholders who desire to have the Nominating and Corporate Governance Committee consider their recommendations for nominees for Director should submit their submission in writing to the Nominating and Corporate Governance Committee, attention: Chairperson. Recommendations made by shareholders in such manner will undergo the same evaluation as other Board recommended nominees. For more detailed information on this evaluation process, please refer to the charter of the Nominating and Corporate Governance Committee (the “Nominating and Corporate Governance Committee Charter”) which is available on the Company’s website at www.valeant.com (under the tab “About” and under the subtab “Corporate Governance”). For additional information regarding the standards for nominees to the Board, please refer to our Corporate Governance Guidelines.
In order for a shareholder’s Director nominee to be included in the management proxy circular and proxy statement as a nominee for an Annual Meeting of Shareholders, such shareholder’s nomination must satisfy the criteria and procedures prescribed under theBritish Columbia Business Corporations Act(“BCBCA”) and in the Company’s Articles. For additional information regarding the deadlines and procedures for submitting such nominations for the 20182019 Annual Meeting of Shareholders, please see the discussion below under “Shareholder Proposals and Director Nominations for the 20182019 Annual Meeting of Shareholders” below.
NOMINEES FOR ELECTION TO THE BOARD
Each of the proposed Director nominees is an incumbent Director. Mr. DeSchutter and Ms. Kavanagh werePaulson was not elected at last year’s annual meeting but werewas appointed to the Board in January 2017 and July 2016, respectively. Messrs. Ackman and Fraidin were elected at last year’s annual meeting and have announced that they are not standing for reelection at the 2017 Annual Meeting. Additionally, Mr. Ingram was elected at the 2016 Annual Meeting and is not standing for reelection at the 2017 Annual Meeting.June 2017. Each Director nominee elected at the 20172018 Annual Meeting will hold office until the close of the 20182019 Annual Meeting of Shareholders or until his or her successor is duly elected or appointed, or until such Director’s earlier resignation or removal.
In light of Dr. Eshelman’s recent additional responsibilities, the Company has determined to not nominate him to stand for re-election at the Annual Meeting. Dr. Eshelman’s service will therefore end on the date of the Annual Meeting. We would like to thank Messrs. Ingram, AckmanDr. Eshelman for his service on our Board and Fraidinexpress our appreciation for their service as Directors, and appreciate the support and guidance that they havehe has provided to us during a challenging time. Serving on the Board of a company undergoing a transformation requires a significant commitment.his tenure.
The voting results from last year’s election of Directors for each candidate who was elected are as follows:
Name | For | Withheld | Broker Non-Votes | ||||||
Richard U. De Schutter | 123,623,109 | 5,319,736 | 98,872,954 | ||||||
Dr. Fredric N. Eshelman | 126,125,069 | 2,817,776 | 98,872,954 | ||||||
D. Robert Hale | 123,127,211 | 5,815,634 | 98,872,954 | ||||||
Dr. Argeris (Jerry) N. Karabelas | 123,529,948 | 5,412,897 | 98,872,954 | ||||||
Sarah B. Kavanagh | 126,292,442 | 2,650,403 | 98,872,954 | ||||||
Joseph C. Papa | 123,983,101 | 4,959,744 | 98,872,954 | ||||||
Robert N. Power | 125,649,938 | 3,292,907 | 98,872,954 | ||||||
Russel C. Robertson | 126,590,227 | 2,352,618 | 98,872,954 | ||||||
Thomas W. Ross, Sr. | 126,166,299 | 2,776,546 | 98,872,954 | ||||||
Amy B. Wechsler, M.D. | 123,473,243 | 5,469,602 | 98,872,954 | ||||||
Name | For | Percentage of Votes Cast | Withheld | Broker Non-Votes | ||||||||||||
William A. Ackman | 198,528,445 | 98.6 | 2,803,967 | 61,983,675 | ||||||||||||
Dr. Frederic N. Eshelman | 197,044,996 | 98.1 | 3,787,416 | 61,983,675 | ||||||||||||
Stephen Fraidin | 198,643,367 | 98.9 | 2,189,045 | 61,983,675 | ||||||||||||
D. Robert Hale | 196,991,641 | 98.1 | 3,840,771 | 61,983,675 | ||||||||||||
Robert A. Ingram | 185,459,606 | 92.4 | 15,372,806 | 61,983,675 | ||||||||||||
Dr. Argeris (Jerry) N. Karabelas | 198,470,956 | 98.8 | 2,361,456 | 61,983,675 | ||||||||||||
Joseph C. Papa | 195,388,625 | 97.3 | 5,443,787 | 61,983,675 | ||||||||||||
Robert N. Power | 187,469,060 | 93.3 | 13,369,352 | 61,983,675 | ||||||||||||
Russel C. Robertson | 198,700,104 | 98.9 | 2,132,308 | 61,983,675 | ||||||||||||
Thomas W. Ross, Sr. | 198,249,663 | 98.7 | 2,582,749 | 61,983,675 | ||||||||||||
Amy B. Wechsler, M.D. | 198,488,329 | 98.8 | 2,344,083 | 61,983,675 | ||||||||||||
10
The following narrative provides details about each of the Director nominees’ background and experience and summarizes the specific attributes, competencies and characteristics that led to the Nominating and Corporate Governance Committee’s and the Board’s determination to nominate such individual as a Director for election by the shareholders at the Meeting. In addition, the narrative lists the number of meetings of the Board or applicable committee each Director nominee, who was a Director of the Company in 2016,2017, attended in 20162017 and lists the directorships of public companies held by the nominees during the past five years other than the Company. The narrative also sets out the number of securities of the Company each Director nominee beneficially owned, controlled or directed, directly or indirectly, as of February 28, 20172018 (unless otherwise indicated), as well as the aggregate value based on the $15.40 per share closing price of our stockCommon Shares on March 5, 2018, as reported on the NYSE on February 28, 2017 of $14.38.NYSE. The Company’s Board recently adopted a change to the Company’s Director’s share ownership requirement in 2017, which was designed to align with the Company’s expanded peer group. Under the Company’s new Director share ownership guidelines, eachnon-employee Director is expected to hold or control Common Shares, vested, restricted or deferred share units or a combination thereof, having a market value at least equal to five (5) times the annual Board cash retainer not later than the fifth anniversary of his or her election or appointment to the Board or, for individuals who were Directors on May 30, 2012, not later than May 30, 2017. The annual cash retainer of the Board is currently at $100,000 per year (or a current aggregate amount of $500,000 at the fifth anniversary of Director’s election or appointment to the Board). Please see “Director Compensation” below. The number of stock options, as set out below, indicates stock options previously awarded to eligible participants under our stock option plans (the “Options”).Non-management Currently, non-management Directors do not receive stock options. From 2005 through May 2011,non-management Directors received deferred share units (“DSUs”). OnStarting on May 17, 2011,non-management Directors began receiving restricted share units (“RSUs”) rather than DSUs.. Information for each Director nominee as to securities beneficially owned, controlled or directed, directly or indirectly, is not within our knowledge and therefore has been provided by each Director nominee.
11
Mr. DeSchutter De Schutter has been servingserved on the Board since January 2017. Prior to his retirement, Mr. DeSchutterDe Schutter served as the Chairman and Chief Executive Officer (“CEO”) of DuPont Pharmaceuticals Company from July 2000 until its acquisition by Bristol-Myers Squibb in October 2001. Mr. DeSchutterDe Schutter was also a director and Chief Administrative Officer of Pharmacia Corporation, which was created through the merger of Monsanto Company and Pharmacia & Upjohn in 2000. Prior to the merger, Mr. DeSchutterDe Schutter was a director, Vice Chairman and Chief Administrative Officer for Monsanto. From 1995 to 1999, he served as Chairman and CEO of G.D. Searle & Co., Monsanto’s wholly owned pharmaceutical subsidiary. Mr. DeSchutterDe Schutter currently serves as a director of AuVen Therapeutics and Applied Silver, Inc. He was previously Chairman of Navicure, Inc. (2002from 2002 to 2016);2016, of Incyte Corporation (2003from 2003 to 2015);2015, of Sprout Pharmaceuticals, Inc. (“Sprout”) (2011from 2011 to 2015);2015, of Durata Therapeutics Inc. (2012from 2012 to 2014); and Lead Independent Director (2011 to 2014) and2014. Mr. De Schutter was also a director (2001 to 2014) of Smith & Nephew plc.plc from 2001 to 2014, during which time he also served as the Lead Independent Director from 2011 to 2014. Mr. DeSchutterDe Schutter earned a Bachelor of Science degree (1963)in 1963, and a Master of Science Degree (1965) in Chemical Engineering om 1965 from the University of Arizona.
Director Qualifications:
The Board has determined that Mr. DeSchutter’sDe Schutter’s many years of experience in senior management and board positions of publicly-traded companies, as well as his extensive insight and knowledge of the pharmaceutical industry and healthcare related issues qualify him to serve as a member of the Board and the committeecommittees on which he sits.
Mr. Richard U. DeSchutter
De Schutter
Arizona, USA
Age 7677
Independent
14,00063,042 Common Shares1 Shares Beneficially Owned — $201,320
11,190$1,124,846
33,020 RSUs (comprised of 07,614 vested RSUs — $0
$117,256 and 11,19025,406 unvested RSUs — $160,912)
$391,252)
No Options
No DSUs
Total Equity Value at Risk2: $201,320,$1,242,102, representing 40%248% of the Company’s current aggregate amount of $500,000 required under the share ownership guidelines fornon-management Directors and 201%1,242% of the Director’s annual retainer. Mr. DeSchutter has until January 2022 to achieve the expected minimum equity ownership under the share ownership guidelines.
2016De Schutter 2017 Meeting Attendance:
Board — N/A. Mr. DeSchutter was appointed to the Board on January 2, 2017.8/8;
Nominating and Corporate Governance Committee —
3/3;
Finance and Transactions Committee — 4/4;
Talent and Compensation Committee — 4/4.
| 1 |
|
| 2 | The Total Equity Value at Risk calculation for each Director includes only beneficially owned Common Shares and owned and vested RSUs |
Dr. Eshelmanhas been serving on the Board since March 2016 and has more than 35 years of strategic development, executive, operational and financial leadership experience in the pharmaceutical and healthcare industries. He is the founder and principal of Eshelman Ventures, LLC, an investment company focused on the healthcare industry. From July 2009 to July 2014, Dr. Eshelman served as the Chairman of Furiex Pharmaceuticals, Inc., a drug development company that collaborated with pharmaceutical and biotechnology companies to increase the value of their drug candidates by applying an accelerated approach to drug development. He was the founder and former CEO and Executive Chairman of Pharmaceutical Product Development, Inc., a global contract pharmaceutical research organization providing drug discovery, development and lifecycle management services from July 2009 to December 2011. Dr. Eshelman currently serves as Chairman of The Medicines Company.
Director Qualifications:
The Board has determined that Dr. Eshelman’s experience as a CEO of a publicly-traded company, where he demonstrated leadership capability and extensive knowledge of the pharmaceutical industry and complex financial and operational matters facing large organizations and his breadth of experience in corporate governance qualify him to serve as a member of the Board and the committees on which he sits.
Dr. Fredric N. Eshelman
North Carolina, USA
Age 68
Independent
1,070 Shares Beneficially Owned — $15,387
16,726 RSUs (comprised of 0 vested RSUs — $0 and 16,726 unvested RSUs — $240,520)
No Options
No DSUs
Total Equity Value at Risk: $15,387, representing 3% of the Company’s current aggregate amount of $500,000 required under the share ownership guidelines fornon-management Directors and 15% of the Director’s annual retainer. Dr. Eshelman has until March 2021 to achieve the expected minimum equity ownership under the share ownership guidelines.
2016 Meeting Attendance:
Board — 23/24;
Conduct and Compliance Committee — 3/3;
Finance and Transactions Committee — 4/4;
Talent and Compensation Committee — 3/3.12
Mr. Halehas been servingserved on the Board since August 2015. He is a Partner of ValueAct Capital Management, L.P. (“ValueAct Capital”), a governance-oriented investment fund which invests in a concentrated portfolio of public companies and works collaboratively with management and the board of directors on matters such as strategy, capital structure, M&A and talent management. During his tenure at ValueAct Capital as a Partner, and formerly as a Vice President and Associate, Mr. Hale has worked on investments in the pharmaceutical, medical device, information technology and business services industries. Prior to joining ValueAct Capital in January 2011, Mr. Hale was a Principal with The Parthenon Group, a strategy consultancy firm, working with corporate and private equity clients in industries such as investment management, media, education and retail in both the Boston and Mumbai offices of Parthenon’s strategic consulting practice. He also worked in an investment role at Parthenon’s long-short public equity vehicle, Strategic Value Capital. Mr. Hale is a former director of MSCI, Inc.
Director Qualifications:
The Board has determined that Mr. Hale’sin-depth knowledge of complex financial and global capital market issues, his proven leadership experience in investment and governance positions and his extensive knowledge of financial and operational matters qualify him to serve as a member of the Board and the committees on which he sits.
Mr. D. Robert Hale
California, USA
Age 3233
Independent
17,997,224318,010,027 Common Shares Beneficially Owned —$258,800,081 (for277,354,416
(for details of Mr. Hale’s beneficial ownership, please see “Ownership of Management” on page 33)
16,726 RSUs
25,406RSUs (comprised of 0 vested RSUs — $0 and 16,72625,406 unvested RSUs — $240,520)
$391,252)
No Options
No DSUs
Total Equity Value at Risk: for this purpose, attributing the foregoing Common Shares beneficially owned to Mr. Hale, $258,800,081,$277,354,416, representing 51,726%55,471% of the Company’s current aggregate amount of $500,000 required under the share ownership guidelines fornon-management Directors and 258,800%277,354% of the Director’s annual retainer.
20162017 Meeting Attendance:
Board — 31/31;
8/8;
Audit and Risk Committee — 9/9;
4/4;
Finance and Transactions Committee — 4/4;
6/6;
Talent and Compensation Committee — 13/13.4/4.
|
13
Dr. Karabelashas been servingserved on the Board since June 2016. Since December 2001, Dr. Karabelas has been a Partner at Care Capital, LLC (“Care Capital”), a life sciences venture firm with $500M under management. Prior to his work at Care Capital, from July 2000 to September 2001, Dr. Karabelas was the founder and Chairman at Novartis BioVenture Fund. Dr. Karabelas served as Head of Healthcare and CEO of Worldwide Pharmaceuticals for Novartis Pharma AG from 1998 to 2000, with responsibilities for Novartis Pharma, Ciba Vision, Generics and strategic and operational leadership of research and development. Prior to joining Novartis, Dr. Karabelas was Executive Vice President of SmithKline Beecham responsible for U.S. and European operations, regulatory and strategic marketing. Dr. Karabelas has served on numerous boards of pharmaceutical and therapeutics companies, including Renovo, plc, Vanda Pharmaceuticals, Inc., NitroMed, Inc., Inotek Pharmaceuticals Corporation and SkyePharma, plc. Since May 2015 has served as a board member of REGENEXBIO Inc. He hasalso previously served as a director of Inotek Pharmaceuticals Corporation since(which merged with Rocket Pharmaceuticals, Inc. in 2017) from July 2012 and is currently Chairman, however, his term as director expires inthrough June 2016, and he is not standing for reelection.served as Chairman from February 2004 through January 2012. Dr. Karabelas also served as a board member of Human Genome Sciences from 2003 to 2013. He is currently Chairman of Polyphor, LTD and since 2015, ishas been a board member of Braeburn Pharmaceuticals, Inc. since 2015.
Director Qualifications:
The Board has determined that Dr. Karabelas’ many years of experience in senior management positions, his strong knowledge of strategic and regulatory issues, his insight into international operations and his international perspective on the pharmaceutical industry and healthcare related issues qualify him to serve as a member of the Board.
Dr. Argeris (Jerry) N. Karabelas
New Hampshire, USA
Age 6465
Independent
4,000 Common Shares Beneficially Owned — $57,520
16,726$61,600
42,132 RSUs (comprised of 016,726 vested RSUs — $0
$257,580 and 16,72625,406 unvested RSUs — $240,520)
$391,252)
No Options
No DSUs
Total Equity Value at Risk: $57,520,$319,180, representing 12%64% of the Company’s current aggregate amount of $500,000 required under the share ownership guidelines fornon-management Directors and 58%320% of the Director’s annual retainer. Dr. Karabelas has until June 2021 to achieve the expected minimum equity ownership under the share ownership guidelines.
20162017 Meeting Attendance:
Board — 6/6;
8/8;
Finance and Transactions Committee — 4/4;
6/6;
Talent and Compensation Committee — 3/3.4/4.
14
Ms. Kavanaghhas been servingserved on the Board since July 2016. From June 2011 through May 2016, she served as a Commissioner, and since 2014, as Chair of the audit committee, at the Ontario Securities Commission. She is currently a director of Hudbay Minerals Inc. (chair of audit committee) and a Trustee of WPT Industrial REIT (chair of compensation and governance committee). In addition to her public company directorships, she is a director at the American Stock Transfer & Trust Company LLC (chair of audit committee) and the Canadian Stock Transfer Company, a director of Sustainable Development Technology Canada (chair of audit and investment committee), and a director of Canadian Tire Bank. Between 1999 and 2010, Ms. Kavanagh served in various senior investment banking roles at Scotia Capital Inc., including Vice-Chair andCo-Head of Diversified Industries Group, Head of Equity Capital Markets, Head of Investment Banking. Prior to Scotia Capital, she held several senior financial positions with operating companies. She started her career as an investment banker with a bulge bracket firm in New York. Ms. Kavanagh graduated from Harvard Business School with a Masters of Business Administration and received a Bachelor of Arts degree in Economics from Williams College. She completed the Directors Education Program at the Institute of Corporate Directors in May 2011.
Director Qualifications:
The Board has determined that Ms. Kavanagh’s extensive experience of complex financial and capital market issues at various banking institutions, and herin-depth knowledge of financial and operational matters qualify her to serve as a member of the Board and the committeecommittees on which she sits.
Ms. Sarah B. Kavanagh
Toronto, Canada
Age 6061
Independent
0 Common Shares Beneficially Owned
14,458
39,864 RSUs (comprised of 014,458 vested RSUs — $0
$222,653 and 14,45825,406 unvested RSUs — $207,906)
$391,252)
No Options
No DSUs
Total Equity Value at Risk: $0,$222,653, representing 0%45% of the Company’s current aggregate amount of $500,000 required under the share ownership guidelines fornon-management Directors and 0%223% of the Director’s annual retainer. Ms. Kavanagh has until July 2021 to achieve the expected minimum equity ownership under the share ownership guidelines.
20162017 Meeting Attendance:
Board — 5/5;
8/8;
Audit and Risk Committee — 7/8;
10/10;
Nominating and Corporate Governance Committee — 1/1.6/6.
15
Mr. Papahas been our Chairman of the Board and CEO since May 2016. Mr. Papa has more than 35 years of experience in the pharmaceutical, healthcare and specialty pharmaceutical industries, including 20 years of branded prescription drug experience. He served as the CEO of Perrigo Company plc (“Perrigo”) since 2006 and was appointed as its Chairman in 2007. He resigned from all positions at Perrigo in April 2016. Prior to joining Perrigo, Mr. Papa served from December 2004 to October 2006 as Chairman and CEO of the Pharmaceutical and Technologies Services segment of Cardinal Health, Inc. From 2001 to 2004, he served as President and Chief Operating Officer of Watson Pharmaceuticals, Inc. (“Watson”). Prior to joining Watson, Mr. Papa has also held management positions at DuPont Pharmaceuticals, Pharmacia/Searle and Novartis AG. Mr. Papa has been a director of Smith & Nephew, a developer of advanced medical devices, since August 2008.
Director Qualifications:
The Board has determined that Mr. Papa’s extensive experience as a chief executive officer of a public company, where he demonstrated leadership capability and extensive knowledge of complex financial and operational issues facing large organizations, and his understanding of operations and financial strategy in challenging environments qualify him to serve as a member of the Board. Additionally, Mr. Papa’s knowledge of the pharmaceutical industry and business, combined with his drive for innovation and excellence, position him well to serve as the Chairman of the Board.
Mr. Joseph C. Papa
New Jersey, USA
Age 6162
Not Independent
202,000232,000 Common Shares Beneficially Owned(1) — $2,904,760
$3,572,800
373,367 RSUs (comprised of 0 vested RSUs — $0 and
373,367 unvested RSUs — $5,369,017)
$5,749,852)
682,652 Options
No DSUs
Total Equity Value at Risk: $2,904,760,$3,572,800, based on the value of the Common Shares beneficially owned by Mr. Papa or $2,904,760 including all vested RSUs (but excluding all options)options and unvested RSUs).
Mr. Papa is subject to share ownership guidelines under the terms of his employment agreement with the Company and as further described in the Compensation Discussion and Analysis section beginning on page 35.
2017 Meeting Attendance:
Board — 8/8.
| 1 | Includes 30,000 Common Shares purchased by Mr. Papa on March 13, 2018. |
16
Mr. Paulson has served on the Board of Directors since June 2017. He is the President and Portfolio Manager of Paulson & Co. Inc., representing 58%an investment management company specializing in global mergers, event arbitrage and credit strategies founded in 1994.
Mr. Paulson received his Masters of Business Administration with high distinction, as a Baker Scholar, from Harvard Business School in 1980. He graduated summa cum laude in Finance from New York University's College of Business and Public Administration in 1978. Prior to forming Paulson & Co. Inc. in 1994, he was a partner of Gruss Partners and managing director in mergers and acquisitions at Bear Stearns.
Mr. Paulson serves on the Board of Trustees of New York University, Board of Trustees of the $5 million worthCentral Park Conservancy, the Deans Advisory Board of the Harvard Business School, the Board of Directors of the 92nd Street Y, the Board of the Partnership for New York City, and the Chairman's Circle of the Metropolitan Museum of Art.
Director Qualifications:
The Board has determined that the skills and expertise that Mr. Paulson acquired founding and leading Paulson & Co., including his in-depth knowledge of financial transactions and leadership abilities, qualify him to serve as a member of the Board and the committee on which he sits.
Mr. John A. Paulson
New York, USA
Age 62
Independent
20,839,035 Common Shares he is contractually committed to purchase no later than one year following(for details of Mr. Paulson’s beneficial ownership, please see “Ownership of Management” on page 33)— $320,921,139
39,246 RSUs (comprised of 21,349 vested RSUs — $328,745 and 17,897 unvested RSUs — $275,614)
No Options
Total Equity Value at Risk: $321,249,914, representing 64,250% of the date he joinedCompany’s current aggregate amount of $500,000 required under the Company.share ownership guidelines for non-management Directors and 321,250% of the Director’s annual retainer.
20162017 Meeting Attendance:
Board — 10/10.4/4;
Finance and Transactions Committee— 3/3.
17
Mr. Powerhas been servingserved on the Board since August 2008. Mr. Power was a faculty member at The Wharton School of Business, University of Pennsylvania, where he taught multinational marketing from 2009 to 2011. Mr. Power has over 25 years’ experience working in the pharmaceutical and biotechnology industry through a number of leadership positions with Wyeth beginning in 1985 through 2007, including Director — New Product Development, Managing Director — U.K./Ireland, Vice President — Global Marketing, President — Europe, Middle East, Africa, President — International and Executive Vice President — Global Business Operations. Mr. Power also has completed the Director Professionalism course offered by the National Association of Corporate Directors.
Director Qualifications:
The Board has determined that Mr. Power’s extensive experience in the pharmaceutical industry and international business is a valuable contribution to the Board. In addition, his experience in general management, strategic planning, working with R&D organizations, business development, product marketing, merging and streamlining of organizations and his demonstrated leadership in a multi-billion dollar business qualify Mr. Power as a member of the Board and the committees on which he sits.
Mr. Robert N. Power
Pennsylvania, USA
Age 6061
Independent
6,601 Common Shares Beneficially Owned — $94,922
26,221$101,655
51,627 RSUs (comprised of 9,49526,221 vested
RSUs — $136,538$403,803 and 16,72625,406 unvested
RSUs — $240,520)
$391,252)
No Options
No DSUs
Total Equity Value at Risk: $231,460,$505,459, representing 46%101% of the Company’s current aggregate amount of $500,000 required under the share ownership guidelines fornon-management Directors and 231%505% of the Director’s annual retainer. Mr. Power has until May 2017 to achieve the expected minimum equity ownership under the share ownership guidelines. He satisfied the minimum equity ownership requirement in August 2016, but at the date of this Proxy Statement he does not satisfy the requirement due to the decline in the price of our Common Shares. Mr. Power has an additional 16,726 RSUs that are expected to vest by May 2017, in which case, using the reference price of $14.38 per Common Share, his Total Equity Value at Risk would be $471,980, representing 94% of the required share ownership amount.
20162017 Meeting Attendance:
Board — 31/31;
8/8;
Audit and Risk Committee — 18/18;
10/10;
Nominating and Corporate Governance Committee — 13/13;6/6.
Sustainability and Environmental Subcommittee4 — 1/1;
Talent and Compensation Committee — 10/10.
|
18
Mr. Robertsonhas been servingserved on the Board since June 2016. He served as Executive Vice President and Head, Anti-Money Laundering, at BMO Financial Group (“BMO”), a diversified financial services organization, from July 2013 to August 2016. Prior to that role, he served as Executive Vice President, Business Integration, at BMO Financial Group, and as Vice Chair at BMO Financial Corp. since March 2011. He joined BMO as interim Chief Financial Officer (“CFO”), BMO Financial Group in March 2008 and was appointed CFO, BMO Financial Group in August 2009. Before joining BMO, he spent over 35 years as a Chartered Public Accountant. In this capacity, he held various senior positions with a number of major accounting firms, including holding the positions of Vice Chair, Deloitte & Touche LLP in Toronto, Canada, from 2002 to 2008, and Canadian Managing Partner, Arthur Andersen LLP, from 1994 to 2002. Mr. Robertson holds a Bachelor of Arts degree (Honours) from the Ivey School of Business at the University of Western Ontario. Since June 2012, Mr. Robertson has served on the board of Turquoise Hill Resources. He was on the board of Virtus Investment Partners, Inc. from May 2013 to August 2016.
Director Qualifications:
The Board has determined that Mr. Robertson’s extensive experience of complex financial matters at Deloitte & Touche LLP and Arthur Andersen LLP,in-depth knowledge of financial and accounting matters and leadership capabilities in senior finance positions qualify him to serve as a member of the Board.Board and as Chairman of the Audit and Risk Committee.
Mr. Russel C. Robertson
Toronto, Canada
Age 6970
Independent
0 Common Shares Beneficially Owned
20,738
55,858 RSUs (comprised of 4,01230,452 vested
RSUs — $57,693$468,961 and 16,72625,406 unvested
RSUs —$240,520)
391,252)
No Options
No DSUs
Total Equity Value at Risk: $57,693,$468,961, representing 12%94% of the Company’s current aggregate amount of $500,000 required under the share ownership guidelines fornon-management Directors and 58%469% of the Director’s annual retainer. Mr. Robertson has until June 2021 to achieve the expected minimum equity ownership under the share ownership guidelines.
20162017 Meeting Attendance:
Board — 6/6;
8/8;
Audit and Risk Committee — 9/9;
10/10;
Conduct and Compliance Committee — 1/1;
Nominating and Corporate Governance Committee — 2/2.4/4.
19
Mr. Rosshas been servingserved on the Board since March 2016 and was appointed our Lead Independent Director in June 2016. He has served as the President of Volcker Alliance since July 2016 and is President Emeritus of the University of North Carolina (“UNC”) having served as President from January 2011 to January 2016. He currently serves as the Sanford Distinguished Fellow in Public Policy at the Duke University Sanford School of Public Policy. Prior to becoming President of the UNC system, Mr. Ross served as President of Davidson College, Executive Director of the Z. Smith Reynolds Foundation, director of the North Carolina Administrative Office of the Courts, a Superior Court judge, chief of staff to U.S. Congressman Robin Britt, a member of the Greensboro, NC law firm Smith, Patterson, Follin, Curtis, James & Harkavy and as an Assistant Professor of Public Law and Government at UNC Chapel Hill’s School of Government.
Director Qualifications:
The Board has determined that Mr. Ross’s demonstrated leadership in senior management positions, extensive experience with corporate governance responsibilities and complex knowledge of legal, compliance and operational issues qualify him to serve as a member of the Board and the committees on which he sits.
Mr. Thomas W. Ross, Sr.
North Carolina, USA
Age 6667
Independent
9,000 Common Shares Beneficially Owned — $129,420
17,822$138,600
43,228 RSUs (comprised of 1,09617,822 vested
RSUs — $15,760$274,459 and 16,72625,406 unvested
RSUs — $240,520)
$391,252)
No Options
No DSUs
Total Equity Value at Risk: $145,180,$413,059, representing 29%83% of the Company’s current aggregate amount of $500,000 required under the share ownership guidelines fornon-management Directors and 145%413% of the Director’s annual retainer. Mr. Ross has until March 2021 to achieve the expected minimum equity ownership under the share ownership guidelines.
20162017 Meeting Attendance:
Board — 22/24;
8/8;
Conduct and Compliance Committee — 3/3;
4/4;
Nominating and Corporate Governance Committee — 6/6.
20
Dr. Wechsler has been servingserved on the Board since June 2016. She has been a practicing dermatologist in New York City since 2005. Dr. Wechsler is the author of The Mind-Beauty Connection, published by Simon & Schuster in 2008. She is board certified in both dermatology and psychiatry and is also an Adjunct Clinical Professor in Psychiatry at the Weill Cornell Medical College. As an expert on skin health, Dr. Wechsler serves as an advisor for Chanel Skin Care and is also a certified trainer and well-known KOL Speaker, qualified to teach physicians and other medical professionals in the use of various dermatological products. Dr. Wechsler is an active member of several medical professional organizations, including the American Academy of Dermatology; the American Psychiatric Association; the American Academy of Child and Adolescent Psychiatry; the Independent Doctors of New York; The Physicians Scientific Society; and The Skin Cancer Foundation. Dr. Wechsler completed her residency in psychiatry and a fellowship in child and adolescent psychiatry at New York Presbyterian Hospital’s Payne Whitney Clinic. She also completed a residency in dermatology at SUNY Downstate Medical Center.
Director Qualifications:
The Board has determined that Dr. Wechsler’s many years of experience as a board-certified dermatologist and psychiatrist, her strong knowledge of medical products to assist patients with their medical needs and her insight into the medical field and pharmaceutical industry and healthcare related issues qualify her to serve as a member of the Board.
Amy B. Wechsler, M.D.
New York, USA
Age 4748
Independent
0 Common Shares Beneficially Owned
19,690
47,556 RSUs (comprised of 2,96422,150 vested RSUs — $42,622
$341,110 and 16,72625,406 unvested RSUs — $240,520)
$391,252)
No Options
No DSUs
Total Equity Value at Risk: $42,622,$341,110, representing 9%68% of the Company’s current aggregate amount of $500,000 required under the share ownership guidelines fornon-management Directors and 43%341% of the Director’s annual retainer. Dr. Wechsler has until June 2021 to achieve the expected minimum equity ownership under the share ownership guidelines.
20162017 Meeting Attendance:
Board — 5/6;
7/8;
Conduct and Compliance Committee — 2/3;
4/4;
Talent and Compensation Committee — 2/3.4/4.
None of the Directors or Director nominees were selected for nomination at this year’s Annual Meeting pursuant to any arrangement or understanding. None of the Directors or Director nominees are related by blood, marriage or adoption to one another or to any Named Executive Officer of the Company.
Cease Trade Orders
From March 31, 2016 to April 29, 2016, all of our then current Directors and our then current CEO and CFO were subject to a customary management cease-trade order issued by the Autorité des marchés financiers (the “AMF”), our principal securities regulator in Canada, pending the filing of our audited annual financial statements for the year ended December 31, 2015, the related management’s discussion and analysis, certificates of our then current CEO and CFO and our 2015 Form10-K. From May 17, 2016 to June 8, 2016, all of our then current Directors, our current CEO and then current CFO were subject to a similar order issued by the AMF pending filing of our interim consolidated financial statements for the quarter ended March 31, 2016, the related management’s discussion and analysis and certificates of our CEO and then current CFO. Both these orders prohibited the affected individuals from, directly or indirectly, trading in or acquiring any of our securities during those periods, but did not affect the ability of our other shareholders to trade in our securities.21
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
The Board is committed to sound and effective corporate governance practices with the goal of ensuring the Company’s financial strength and overall business success. Our governance practices are periodically assessed against those practices suggested by recognized governance authorities and are designed to maintain alignment with shareholder interests and key governance best practices.
Director Independence
The Board believes that in order to be effective our Board must be able to operate independently of management. As described in our Corporate Governance Guidelines available on our website at www.valeant.com (under the tab “About” and under the subtab “Corporate Governance”), a sufficient number of Directors must satisfy the applicable tests of independence, such that the Board complies with all independence requirements under applicable corporate and securities laws and stock exchange requirements applicable to the Company. The Corporate Governance Guidelines further provide that the Nominating and Corporate Governance Committee, as well as the Board, reviews the relationships that each Director has with the Company in order to satisfy itself that these independence criteria have been met. On an annual basis, as part of our disclosure procedures, all Directors complete a questionnaire pertaining to, among other things, share ownership, family and business relationships and Director independence standards. The Board must then disclose in the Company’s annual management proxy circular and proxy statement the identity of each of the independent directors and the basis for the Board’s determination for each of the Directors who are not independent.
The Board is currently comprised of 1311 members. The Board has determined that 1210 of our 1311 current Directors (or 92%91%) are “independent directors” within the meaning of applicable regulatory and stock exchange requirements in Canada and the United States, as none of them have a material relationship with the Company that could interfere with their exercise of independent judgment. The 1210 independent directors currently on the board are: Mr. Ross (Lead Independent Director), Mr. Ackman, Mr. DeSchutter,De Schutter, Dr. Eshelman, Mr. Fraidin, Mr. Hale, Mr. Ingram, Dr. Karabelas, Ms. Kavanagh, Mr. Paulson, Mr. Power, Mr. Robertson, Mr. Ross and Dr. Wechsler. If each of the Director nominees is elected at the 20172018 Annual Meeting, the Board will be comprised of 10ten Directors, nine of whom will be independent directors. In rendering its determination regarding Director independence, the Board considered that in 2014, Dr. Wechsler entered into a consulting agreement with the Company to be a member of the aesthetics steering committee which advised management of the Company, for which she was paid approximately $33,000 in the aggregate for 2014 and 2015. On April 25, 2016, Mr. Papa entered into an
employment agreement with the Company as its Chairman of the Board and CEO and for this reason, he will not be an independent director and will not be eligible to serve on the Audit and Risk Committee, the Talent and Compensation Committee, or the Nominating and Corporate Governance Committee.
None of our current Directors or Director nominees has entered into service or similar contracts with us, with the exception of Mr. Papa, who has entered into an employment agreement with us as our Chairman of the Board and CEO.
22
The table below sets forth each current Director’s membership on our standing Board committees.
Audit and Risk Committee | Talent and Compensation Committee | Nominating and Corporate Governance Committee | Conduct and Compliance | Finance and Transactions Committee | ||||||
Richard U. De Schutter | ✔ | ✔ | ||||||||
| ||||||||||
Dr. Fredric N. Eshelman | ✔ | ✔ | ||||||||
| ||||||||||
D. Robert Hale | ✔ | ✔* | ||||||||
| ||||||||||
Dr. Argeris (Jerry) N. Karabelas | ✔* | ✔ | ||||||||
Sarah B. Kavanagh | ✔ | ✔ | ||||||||
Joseph C. | ||||||||||
John A. Paulson | ✔ | |||||||||
Robert N. Power | ✔ | ✔* | ||||||||
Russel C. Robertson | ✔* | ✔ | ||||||||
Thomas W. Ross, Sr. | ✔ | ✔* | ||||||||
Amy B. Wechsler, M.D. | ✔ | ✔ |
Notes:
| * | Indicates Chairperson of the Board committee |
| (1) |
|
Chairman of the Board |
Board Leadership Structure
The Board believes that the most effective Board leadership structure for the Company at the present time is for the CEO to serve as Chairman of the Board in conjunction with the appointment of a Lead Independent Director as described below. Combining the positions of Chairman and CEO provides the Company with decisive and effective leadership. The Board believes that Mr. Papa’sin-depth knowledge of the Company’s operations and his vision for its development make him the best qualified person to serve as both Chairman and CEO. Because the CEO is ultimately responsible for theday-to-day operation of the Company and for executing the Company’s strategy, and because the performance of the Company is an integral part of Board deliberations, the Board believes that Mr. Papa is the Director most qualified to act as Chairman of the Board. The Board also believes that its existing corporate governance practices achieve independent oversight and management accountability.
The Company’s Corporate Governance Guidelines provide that if the Chairman is not independent, then the independent Directors on the Board shall appoint a Lead Independent Director. The Chairman, if independent, or the Lead Independent Director, if the Chairman is not independent, will assume the responsibilities set forth in the Company’s Position Description for the Lead Independent Director, which is posted on the Company’s website. These responsibilities include: (i) fostering processes that allow the Board to function independently of management and encouraging
open and effective communication between the Board and management of the Company; (ii) providing input to the Chairman on behalf of the independent directors with respect to Board agendas; (iii) presiding at all meetings of the Board at which the Chairman is not present, as well as regularly scheduled executive sessions of independent directors; (iv) in the case of a conflict of interest involving a Director, if appropriate, asking the conflicted Director to leave the room during discussion concerning such matter and, if appropriate, asking such Director to recuse him or herself from voting on the relevant matter; (v) communicating with the Chairman and the CEO, as appropriate, regarding meetings of the independent directors and resources and information necessary for the Board to effectively carry out its duties and responsibilities; (vi) serving as liaison between the Chairman and the independent directors; (vii) being available to Directors who have concerns that cannot be addressed through the Chairman; (viii) having the authority to call meetings of the independent directors; and (ix) performing other functions as may reasonably be requested by the Board or the Chairman. The independent Directors on the Board annually appointsappoint a Lead Independent Director, who will assume the responsibilities set forth in the Company’s Position Description for the Lead Independent Director. Our independent directors have appointed Mr. Ross asis the Board’s current Lead Independent Director.
Meetings of Independent Directors
The Corporate Governance Guidelines provide that at any meeting of the Board, the independent Directors of the Board shall meet in executive session and that an opportunity shall be provided during the meeting for any
23
member of the Board to make such a request. Consequently, the independent directors currently meet in executive sessions at a majority of the regularly scheduled Board meetings. From January 1, 20162017 to December 31, 2016,2017, independent directors held an executive session at four of the sixfour regularly scheduled Board meetings and at 11one of the 25four ad hoc Board meetings. At any meeting of the Board, the Board shall meet in executive session and an opportunity shall be provided during the meeting for any member of the Board to make such a request.
Meetings of the Board
The Board meets regularly, at least four times per year. Additional meetings can be called when necessary. The Board meets annually to review our strategic plan. From January 1, 20162017 to December 31, 2016,2017, the Board had sixfour regularly scheduled meetings and 25four ad hoc meetings to review specific matters. All agendas of the meetings are set by the Chairman of the Board in consultation with the Board committee Chairpersons, as necessary.
As required under the Articles of the Company, in order to transact business at any Board meeting, at least fifty percent of the Directors in office must be present. AllDuring all meetings of the Board held between January 1, 20162017 and December 31, 2016 had2017, at least fifty percent or more of our Directors participating.participated.
In 2016,2017, the Board had five standing committees: Audit and Risk Committee, Talent and Compensation Committee, Nominating and Corporate Governance Committee, Conduct and Compliance Committee, (established on April 15, 2016) and Finance and Transactions Committee. In addition, the Board established the Ad Hoc Committee on October 25, 2015 and this committee was dissolved April 5, 2016. In February 2015, the Board established the Sustainability and Environmental Subcommittee (a subcommittee of the Nominating and Corporate Governance Committee) and dissolved such Subcommittee on June 15, 2016. The duties and responsibilities of such Subcommittee were absorbed by the Nominating and Corporate Governance Committee. Additionally, the Board established the Special Independent Committee in 2009, and this committee was dissolved on June 15, 2016. Directors are expected to attend and participate in substantially all meetings of the Board and of all committees on which they serve. The attendance records at Board and meetings of the committees for each Director who was a Director of the Company from January 1, 20162017 to December 31, 20162017 are set forth below. Mr. DeSchutter was appointed as a Director on January 2, 2017 and was not a Director of the Company in 2016.
Director William A. Ackman(3) Dr. Frederic N. Eshelman(4) Ronald H. Farmer(5) Stephen Fraidin(6) Colleen A. Goggins(7) D. Robert Hale Robert A. Ingram Dr. Argeris (Jerry) N. Sarah B. Kavanagh(9) Anders O. Lönner(10) Theo-Melas—Kyriazi(11) G. Mason Morfit(12) Joseph C. Papa(13) J. Michael Pearson(14) Robert N. Power Norma A. Provencio(15) Russel C. Robertson(16) Thomas W. Ross, Sr.(17) Howard B. Schiller(18) Katharine B. Stevenson(19) Amy B. Wechsler, M.D.(20) Board
31 Meetings Audit
and Risk
Committee
24 Meetings Talent and
Compensation
Committee
13 Meetings Nominating
and
Corporate
Governance
Committee
13 Meetings Sustainability
and
Environmental
Subcommittee
1 Meetings(1) Conduct and
Compliance
Committee
3 Meetings(2) Finance and
Transactions
Committee
4 Meetings Overall # % # % # % # % # % # % # % # % 20/20 100 % — — — — — — — — — — 4/4 100 % 24 100 % 24/24 100 % — — 3/3 100 % — — — — — — 4/4 100 % 31 100 % 25/25 100 % — — 10/10 100 % 10/10 100 % — — — — — — 45 100 % 24/24 100 % — — 3/3 100 % — — — — 3/3 100 % — — 30 100 % 23/25 92 % — — — — 10/10 100 % 1 100 % — — — — 34 94 % 31 100 % 9/9 100 % 13 100 % — — — — — — 4/4 100 % 57 100 % 31 100 % — — — — 13 100 % — — — — — — 44 100 %
Karabelas(8) 6/6 100 % — — 3/3 100 % — — — — — — 4/4 100 % 13 100 % 5/5 100 % 7/8 88 % — — 1/1 100 % — — — — — — 13 93 % 4/6 67 % — — 2/4 50 % — — — — — — — — 6 60 % 24/25 96 % 15/15 100 % — — — — — — — — — — 39 98 % 20/25 80 % — — — — — — — — — — — — 20 80 % 10/10 100 % — — — — — — — — — — — — 10 100 % 13/13 100 % — — — — — — — — — — — — 13 100 % 31 100 % 18/18 100 % 10/10 100 % 13 100 % 1 100 % — — — — 73 100 % 25/25 100 % 15/15 100 % — — — — — — — — — — 40 100 % 6/6 100 % 9/9 100 % — — 2/2 100 % — — 1/1 100 % — — 18 100 % 22/24 92 % — — — — 6/6 100 % — — 3/3 100 % — — 31 94 % 10/25 40 % — — — — — — — — — — — — 10 40 % 12/12 100 % 6/6 100 % — — — — — — — — — — 18 100 % 5/6 83 % — — 2/3 67 % — — — — 2/3 67 % — — 9 75 %
Board 8 Meetings | Audit and Risk Committee 10 Meetings | Talent and Compensation Committee 4 Meetings | Nominating and Corporate Governance Committee 6 Meetings | Conduct and Compliance Committee 4 Meetings | Finance and Transactions Committee 6 Meetings | Overall | ||||||||||||||||||||||||||||||||||||
Director | # | % | # | % | # | % | # | % | # | % | # | % | # | % | ||||||||||||||||||||||||||||
Richard U. De Schutter(1) | 8/8 | 100 | % | — | — | 4/4 | 100 | % | 3/3 | 100 | % | — | — | 4/4 | 100 | % | 20/20 | 100 | % | |||||||||||||||||||||||
Dr. Frederic N. Eshelman | 8/8 | 100 | % | — | — | — | — | — | — | 4/4 | 100 | % | 6/6 | 100 | % | 18/18 | 100 | % | ||||||||||||||||||||||||
D. Robert Hale | 8/8 | 100 | % | 4/4 | (2) | 100 | % | 4/4 | 100 | % | — | — | — | — | 6/6 | 100 | % | 22/22 | 100 | % | ||||||||||||||||||||||
Dr. Argeris (Jerry) N. Karabelas | 8/8 | 100 | % | — | — | 4/4 | 100 | % | — | — | — | — | 6/6 | 100 | % | 18/18 | 100 | % | ||||||||||||||||||||||||
Sarah B. Kavanagh | 8/8 | 100 | % | 10/10 | 100 | % | — | — | 6/6 | 100 | % | — | — | — | — | 24/24 | 100 | % | ||||||||||||||||||||||||
Joseph C. Papa | 8/8 | 100 | % | — | — | — | — | — | — | — | — | — | — | 8/8 | 100 | % | ||||||||||||||||||||||||||
John A. Paulson(3) | 4/4 | 100 | % | — | — | — | — | — | — | — | — | 3/3 | 100 | % | 7/7 | 100 | % | |||||||||||||||||||||||||
Robert N. Power | 8/8 | 100 | % | 10/10 | 100 | % | — | — | 6/6 | 100 | % | — | — | — | — | 24/24 | 100 | % | ||||||||||||||||||||||||
Russel C. Robertson | 8/8 | 100 | % | 10/10 | 100 | % | — | — | — | — | 4/4 | 100 | % | — | — | 22/22 | 100 | % | ||||||||||||||||||||||||
Thomas W. Ross, Sr. | 8/8 | 100 | % | — | — | — | — | 6/6 | 100 | % | 4/4 | 100 | % | — | — | 18/18 | 100 | % | ||||||||||||||||||||||||
Amy B. Wechsler, M.D. | 7/8 | 88 | % | — | — | 4/4 | 100 | % | — | — | 4/4 | 100 | % | — | — | 15/16 | 94 | % | ||||||||||||||||||||||||
| (1) |
|
| (2) |
|
| (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charter of the Board
The Board is responsible for the overall stewardship of the Company and its business, including supervising the management of the Company’s business and affairs. The Board discharges this responsibility directly and through delegation of specific responsibilities to committees of the Board and our officers. Under the charter of the Board (the “Board Charter”), the Board has established committees to assist with its responsibilities: the Audit and Risk Committee, the Talent and Compensation Committee, the Nominating and Corporate Governance Committee, the Finance and Transactions Committee and the Conduct and Compliance Committee.
24
Under the Board Charter, the Board is responsible for, among other things, the following corporate governance related matters:
overseeing the Company’s performance and the quality, depth and continuity of management needed to meet the Company’s strategic objectives;
The Board Charter is attached heretoto this Proxy Statement as Exhibit AB and is available on our website at www.valeant.com (under the tab “About” and under the subtab “Corporate Governance”).
Position Descriptions
The Board has developed written position descriptions for the Chairman of the Board, the Lead Independent Director in the event that the Chairman is not independent, the Chairperson of each of the Audit and Risk Committee, the Nominating and Corporate Governance Committee and the Talent and Compensation Committee and the CEO. The position descriptions are posted on our website at www.valeant.com (under the tab “About” and under the subtab “Corporate Governance”). The position descriptions are reviewed annually.
Orientation and Continuing Education
The Nominating and Corporate Governance Committee oversees the Board’s continuing education program which was developed to assist Directors in maintaining or enhancing their skills and abilities as Directors and updating their knowledge and understanding of the Company and the pharmaceutical industry. New Directors are oriented to the roles of the Board and individual Directors and the business and affairs of the Company through discussions with the Company’s management and the incumbent Directors by periodic presentations from senior management on major business, industry and competitive issues. Management and outside advisors provide information and education sessions to the Board and its committees as necessary to keep the Directorsup-to-date with disclosure and corporate governance requirements and best practices, the Company and its business and the environment in which it operates, as well as developments in the responsibilities of Directors. From time to time, Directors may accompany sales representatives to visit doctors’ offices for a better comprehension of the current trends in the pharmaceutical marketplace. The Board may also invite representatives of various business units to Board meetings to discuss business strategy and market analysis, as well as makeon-site visits of the operations of the Company at the various facilities of the Company. Directors may also attend outside conferences and seminars that are relevant to their roles at the Company’s expense, with the approval of the Chairman of the Board. Directors may attend meetings with physicians for updates in the pharmaceutical industry and market. In 2016,2017, some Directors participated in outside seminars and conferences on educational topics that included business models and strategies, accounting oversight, healthcare industry dynamics, tax reform, cybersecurity and issues of general importance to board composition, board compensation and governance, executive compensation, governance of international operations and risk oversight.members.
Ethical Business Conduct
Standards of Business Conduct (including the Code of Ethics for CEO and Senior Financial Executives)
We have a written code of business conduct and ethics entitled the Standards of Business Conduct (the “Standards”) for our Directors, officers and employees that sets out the Board’s expectations for the conduct of such persons in their dealings on behalf of the Company. Employees, officers and Directors are required to maintain an
25
understanding of, and ensure that they comply with, the Standards. Supervisors are responsible for maintaining awareness of the Standards and for reporting any deviations to management. In addition, the Standards require the Company to conduct regular audits to test compliance with the Standards. Subject to Board approval, responsibility for the establishment and periodic update and review of the Standards falls within the mandate of the Audit and Risk Committee and the Conduct and Compliance Committee.
Employees, officers and Directors are required to immediately report violations of the Standards and can report confidentially and anonymously through the Company’s business ethics hotline, in addition to having the option of reporting to their supervisors, the appropriate department head, division President, our Chief Compliance Officer or our General Counsel. The Board has established reporting procedures in order to encourage employees, officers and Directors to raise concerns regarding matters addressed by the Standards on a confidential basis free from discrimination, retaliation or harassment. Employees and officers who violate the Standards may face disciplinary actions, including dismissal.
Code of Ethics
We also have a Code of Ethics for the CEO and Senior Finance Executives (the “Code of Ethics”), which is designed to deter wrongdoing and promote (i) honest and ethical conduct in the practice of financial management, (ii) full, fair, accurate, timely and understandable disclosure, and (iii) compliance with all applicable laws and regulations. Violations of the Code are reported to the Chief Compliance Officer. Failure to observe the terms of the Code of Ethics may result in disciplinary action, including dismissal.
The Standards (including the Code of Ethics) are available on our website at www.valeant.com (under the tab “About” and under the subtab “Corporate Governance”). These documents are also available in print to
shareholders upon request. Shareholders may submit their request to Investor Relations, Valeant Pharmaceuticals International, Inc., 2150 Saint Elzear Blvd. West, Laval, Quebec H7L 4A8, Canada.
We intend to satisfy any disclosure requirements regarding amendments to or waivers of, any provision of the Standards or its appendix that sets forth certain additional information relating to the Code of Ethics by posting such information on the Company’s website at www.valeant.com (under the tab “About” and under the subtab “Corporate Governance”).
Directors’ Share Ownership
To support the alignment of Directors’ interests with our interests and those of our shareholders,non-management Directors are expected, in accordance with our Corporate Governance Guidelines, to hold or control Common Shares, vested restricted or deferred share units or a combination thereof, having a market value at least equal to five (5) times the annual Board cash retainer by not later than the fifth anniversary of such Director’s election or appointment, or for individuals who were Directors on May 30, 2012, not later than May 30, 2017. TheBased on the current annual cash retainer of the Board is currently atof $100,000 per year, (or a current aggregate amountthe minimum value of $500,000 at the fifth anniversaryequity each of Director’s election or appointmentour non-management Directors are required to the Board). Other thanhold is $500,000. Mr. Power, one of our Director nomineeswho was required to satisfy the minimum equity ownership requirement by May 30, 2017, has met thissatisfied the minimum equity ownership requirement withbased on the remainder$15.40 per share closing price for Common Shares on March 5, 2018, as reported on the NYSE. Of the remaining nine non-management Directors (each of whom has been appointed or elected to the Board since January 1, 2016), three have met the Director share ownership requirements described in this paragraph, and the remainder are anticipated to meet this requirement prior to May 30, 2017 orthese requirements by the fifth year after being electedfollowing their election or appointed,appointment, as applicable. Mr. Power satisfiedEach non-management Director’s progress toward the minimum equityDirectors’ share ownership requirementis provided in August 2016, but atfurther detail in their biographies, which appear in the datesection “Nominees for Election to the Board” beginning on page 10 of this Proxy Statement, he does not satisfy the requirement due to the decline in the price of our Common Shares. Mr. Power has an additional 16,726 RSUs that are expected to vest by May 2017, in which case, using the reference price of $14.38 per Common Share, his Total Equity Value at Risk would be $471,980, representing 94% of the required share ownership amount.Statement.
Risk Oversight
Our Board participates in risk management oversight, with a view of supporting the achievement of organizational objectives, including strategic objectives, improving long-term organizational performance and enhancing shareholder value. In addition, the Audit and Risk Committee and the Conduct and Compliance Committee assist the Board in monitoring and overseeing the Company’s Standards and risk management. Various other committees of the Board also have responsibility for monitoring risk management in specific areas. For example, the Talent and Compensation Committee annually reviews and discusses with management the relationship between the Company’s compensation policies and practices and its risk management, including the extent to which those policies
26
and practices create risks for the Company. See “Talent and Compensation Committee — Compensation Risk Determination” below. In addition, the Nominating and Corporate Governance Committee periodically provides oversight with respect to risks associated with our corporate governance policies and practices, including our Corporate Governance Guidelines. The Nominating and Corporate Governance Committee also oversees and reviews evaluations of the Board and each of our Board committees. The Conduct and Compliance Committee was formedprovides oversight for the Company’s global ethics and healthcare compliance program, and oversees the Company’s receipt and handling of business ethics reports received pursuant to among other things, oversee implementation of certain remediation measures proposed by the Ad Hoc Committee.Company’s Business Ethics Reporting Program.
Under the supervision of our Board, our management is responsible for assessing and managing our exposure to various risks. We have a global Enterprise Risk Management (“ERM”) office that reports to our Executive Vice President and General Counsel. The ERM office’s objectives include, but are not limited to, managing known risks through assessments and action plans, identifying emerging risks and reporting on the ERM process and risk findings to the ConductAudit and ComplianceRisk Committee on a quarterly basis.
Board Committees
In 2016,2017, the Board had five standing committees: the Audit and Risk Committee, the Talent and Compensation Committee, the Nominating and Corporate Governance Committee, the Conduct and Compliance Committee (established on April 15, 2016) and the Finance and Transactions Committee. In addition, the Special Independent Committee was established in 2009 to review finalization and implementation of the Corporation Integrity Agreement with the Office of Inspector General of the United States Department of Health and Human Services. The term of the Corporate Integrity Agreement concluded in September 2014 and the Company filed its final Annual Report to the Office of the Inspector General in January 2015. Pursuant to the terms of the Corporate Integrity Agreement, the requirements contained therein have terminated. The Special Independent Committee was dissolved in June 2016. Furthermore, the Ad Hoc Committee was established in October 2015 to review allegations related to the Company business relationship with Philidor and related matters and dissolved in April 2016. In response to the dissolution of the Ad Hoc Committee, the Conduct and Compliance Committee was established in April 2016 to, among other things, oversee implementation of certain remediation measures proposed by the Ad Hoc Committee. In 2015, the Board and the Nominating and Corporate Governance Committee established the Sustainability and Environmental Subcommittee of the Nominating and Corporate Governance Committee to oversee and address issues relating to sustainability and environmental impact, and this subcommittee was dissolved in June 2016. The duties and responsibilities of this Subcommittee were absorbed by the Nominating and Corporate Governance Committee.
No member of any committee is presently an employee of the Company or its subsidiaries. The specific responsibilities of each of the Audit and Risk Committee, the Talent and Compensation Committee and the Nominating and Corporate Governance Committee are identified in each such committee’s charter. A copyCopies of the charters for each such charter isof the foregoing committees are available on our website at www.valeant.com (under the tab “About” and under the subtab “Corporate Governance”), and isare also available in print to shareholders upon request submitted to Investor Relations, Valeant Pharmaceuticals International, Inc., 2150 Saint Elzear Blvd. West, Laval, Quebec H7L 4A8, Canada. The responsibilities of the Ad Hoc Committee, the Conduct and Compliance Committee and the Finance and Transactions Committee, the Special Independent Committee and the Sustainability and Environmental Subcommittee of the Nominating and Corporate Governance Committee were identified by the Board and the Nominating and Corporate Governance Committee, respectively, in establishing such committee and subcommittee.Committee.
The Chairman of the Board and the Chairperson of each of the Audit and Risk Committee, the Talent and Compensation Committee and the Nominating and Corporate Governance Committee are expected to be available to respond to questions from shareholders at the Annual Meeting.
Audit and Risk Committee
The Audit and Risk Committee is currently comprised of fourthree independent directors: Messrs.Mr. Robertson (Chairperson), Hale andMr. Power and Ms. Kavanagh. The responsibilities, powers and operation of the Audit and Risk Committee are set out in the written charter of the Audit and Risk Committee (the “Audit and Risk Committee Charter”). Pursuant to the Audit and Risk Committee Charter, each member of the Audit and Risk Committee is an independent director as defined and required by applicable regulatory and stock exchange rules. The Board has concluded that each member of the Audit and Risk Committee is “financially literate” as defined under National Instrument52-110 — Audit Committeesand as required under NYSE rules, and each isof Mr. Robertson and Ms. Kavanagh qualify as an “audit committee financial expert” under the regulations promulgated by the Securities and Exchange Commission.
The Audit and Risk Committee operates pursuant to the Audit and Risk Committee Charter. Its responsibilities include, among other things, responsibility for reviewing and recommending to the Board our annual financial statements and management’s discussion and analysis of results of operation and financial condition (“MD&A”) and reviewing and approving our interim financial statements and MD&A. As contemplated in the Audit and Risk Committee Charter, the Audit and Risk Committee periodically meets with
our internal auditor and with our external auditors without management being present. The Audit and Risk Committee also recommends to the Board the external auditors to be nominated for approval by the Company’s shareholders, as well as the compensation of the external auditors. The charter also provides that the Audit and Risk Committee must establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing practices.
In accordance with the Audit and Risk Committee Charter, the Audit and Risk Committee also provides assistance to the Board in fulfilling its oversight function with respect to:
the quality and integrity of our financial statements;
27
The Audit and Risk Committee also consults with the Conduct and Compliance Committee was formedwith respect to amonginvestigating compliance matters other things, oversee implementation of certain remediation measures proposed by the Ad Hoc Committee, including working with the Auditthan those relating to financial reporting, accounting, internal accounting controls and Risk Committee with its oversight function in relation to the restatement and remediation matters related thereto.auditing matters.
The Audit and Risk Committee Charter provides that no member of the Audit and Risk Committee may hold ten percent or more of the Company’s capital stock or serve simultaneously on the audit committee of more than two other public companies, unless the Board determines that such simultaneous service would not impair his or her ability to serve effectively on the Audit and Risk Committee.
Talent and Compensation Committee
The Talent and Compensation Committee is currently comprised of fivefour independent directors: Drs.Dr. Karabelas (Chairperson), Mr. De Schutter, Mr. Hale, and Wechsler and Messrs. DeSchutter, Fraidin and Hale.Dr. Wechsler. The responsibilities, powers and operation of the Talent and Compensation Committee are set out in the written charter of the Talent and Compensation Committee (the “Talent and Compensation Committee Charter”). In accordance with the Talent and Compensation Committee Charter, each member of the Talent and Compensation Committee is an independent director as defined and required by applicable regulatory and stock exchange rules.
As described in the Talent and Compensation Committee Charter, the key responsibilities of the Talent and Compensation Committee include:
reviewing and approving the linkage of corporate goals and objectives toin connection with the compensation of our CEO, evaluating the CEO’s performance in light of those goals and objectives, and (either as a committee or together with the other independent directors who satisfy the independence,“non-employee” “non-employee” and “outside director” requirements under the Talent and Compensation Committee Charter) determining and approving the compensation of the CEO based on such evaluation;
Compensation
For details on the philosophy and approach adopted by the Talent and Compensation Committee with respect to compensation of our officers, and Directors, please see “Compensation Discussion and Analysis” and “Director Compensation.”starting on page 35.
The Talent and Compensation Committee has the authority to retain and compensate any consultants and advisors it considers necessary to fulfill its mandate. It shall, annually or on anas-needed basis, specify the work to be performed by, and agree on the associated fees to be paid to the compensation consultants. It shall also review annually the work performed and fees paid. In addition, the Talent and Compensation Committee Charter provides that the Talent and Compensation Committee shall report to the Board, on an annual basis, the nature of any
28
additional work ornon-Board based services conducted by any such compensation consultant and associated fees paid, if approved by the Chairperson of the Talent and Compensation Committee.
Periodically, and at least annually, the Talent and Compensation Committee selects and retains independent consultants to conduct comprehensive reviews and assessments of our policies, procedures and internal controls for setting compensation of the CEO and other members of senior management. The consultant prepares and submits relevant information and analyses to the Talent and Compensation Committee. As discussed below under “Compensation Discussion and Analysis,” in 2016,2017, the Talent and Compensation Committee retained Pay Governance LLC (“Pay Governance”), as its independent consultant to provide advice on compensation matters. Pay Governance’s services included the following: (i) periodically reviewing our executive compensation programs, including base salary, short-term incentives, equity-based incentives, total cash compensation levels and total direct compensation of certain senior positions, against those of a peer group ofsimilar-sized pharmaceutical companies as measured by revenue and/or market capitalization; (ii) advising the Talent and Compensation Committee with regard to the compensation packages of the CEO and other members of senior management; (iii) reviewing the proxy and specifically the Compensation Discussion and Analysis; and (iv) preparing and attending select Talent and Compensation Committee Meetings; and (v) reviewing and commenting on the retention plans that the Company adopted in 2015 and 2016.Meetings. All of the services provided by Pay Governance during the fiscal year 20162017 were provided to the Talent and Compensation Committee. Pay Governance did not provide any additional services to the Company during the fiscal year 2016.2017. The Talent and Compensation Committee has assessed, at the relevant times, the independence of Pay Governance and concluded that its engagement of Pay Governance did not raise any conflict of interest with the Company or any of the Company’s Directors or executive officers.
The Talent and Compensation Committee considers the advice and analysis of the independent compensation consultants, together with other factors the Talent and Compensation Committee considers appropriate (including feedback from shareholders and corporate governance groups, market data, knowledge of the comparator group and personal knowledge and experience of the Talent and Compensation Committee members), in reaching its decisions and making compensation determinations for the CEO and executive officers to the Board.
Compensation Risk Determination
The Talent and Compensation Committee assesses the potential risks relating to our compensation policies and practices for our employees, including those related to our executive compensation programs. Periodically, at least annually, the Talent and Compensation Committee reviews and discusses with management the relationship between the Company’s compensation policies and practices and its risk management, including the extent to which those policies and practices create risks for the Company, to ensure that such policies and practices support not only
economic performance, but also compliance with our risk management objectives, to ensure that they do not encourage excessive or unnecessary risk-taking and are not reasonably likely to have a material adverse effect on the Company. The Talent and Compensation Committee is engaged in reevaluating such compensation policies and practices and its risk management in light of the restatement and the remediation efforts associated therewith.
Succession Planning
The Board regularly undertakes a thorough review of succession planning over the course of the year, led by the efforts of the Talent and Compensation Committee. The Talent and Compensation Committee continuously reviews the Executive Committee and key positions within the Company to ensure the continuity and comprehensiveness of succession planning companywide. Among other factors, the Talent and Compensation Committee considers the level of representation of women in executive officer and managerial positions when making appointments and considering succession planning;planning by considering the overall number of women currently serving in such roles at the Company and by actively considering women candidates for such positions when they become available; however, the Company does not have a specific target number or date by which to achieve a specific number of women, as it considers a multitude of factors in determining the best person for any position. In 2016, there were two women serving as executive officers of the Company or a material subsidiary, representing 29% of all such executive officers on the Company’s corporate executive management team. Additionally, womenWomen currently lead a substantial portion of our businesses and global functions, including our U.S.in the following roles: EVP and General Counsel (who also serves as an executive officer of the Company); SVP, Global Human Resources; SVP, Diversified Products; SVP and General Manager, Ophthalmology Women’s HealthPharmaceuticals and Surgical businesses, ManagedSurgical; SVP, Market Access and Commercial Operations, South Africa and Western Europe businesses and ourex-U.S. Contact Lens business, and serve as our Executive Vice President and General Counsel; Senior Vice President,Operations; SVP, Chief Compliance Officer; Senior Vice President,SVP, Treasurer; Senior Vice PresidentVP, International Vision Care; and General Manager, Neurology, Generics, Obagi; Senior Vice President, Global Human Resources; and Vice President,VP, Regulatory Affairs. Overall, one (representing 20%) of the Company’s executive officers is a woman.
The Board, primarily through the Talent and Compensation Committee, regularly receives exposure to executives, managers and other personnel in the organization by attending and participating in the Company’s business and strategy meetings.
The Board’s participation in these events provides significant exposure to the Company’s leadership team and strategic focus which greatly enhances the Board’s ability to conduct succession planning, as well as to gain insight as it oversees organization risk and strategy.
For details with respect to changes in the executive management team, please see “Compensation Discussion and Analysis — Changes in our Executive Management Team.”
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is currently comprised of fivethree independent directors: Messrs.Mr. Power (Chairperson), DeSchutter, IngramMs. Kavanagh and Ross and Ms. Kavanagh.Mr. Ross. The responsibilities, powers and operation of the Nominating and Corporate Governance Committee are set out in the committee’s written charter (the “Nominating and Corporate Governance Committee Charter”). Pursuant to the Nominating and Corporate Governance Committee Charter, each member of the Nominating and Corporate Governance Committee is an independent director as defined and required by applicable regulatory and stock exchange rules.
29
As described in the Nominating and Corporate Governance Committee Charter, the key responsibilities of the Nominating and Corporate Governance Committee include, among others:
identifying individuals qualified to become Directors and recommending to the Board new nominees for election by shareholders or for appointment by the Board;
The Nominating and Corporate Governance Committee annually develops and recommends processes for assessing the performance and effectiveness of the Board as a whole and the committees of the Board and reports annually to the Board on the results of such assessments. The Board and each committee conducts anconduct annual self-assessmentself-assessments of itstheir performance and effectiveness, including a review of itstheir compliance with its Charter,their respective charters, in accordance with the process established by the Nominating and Corporate Governance Committee and adopted by the Board. The Board intends to conduct sucha peer review of the Directors on a periodic basis to supplement the annual reviews of the Board and each committee. The Nominating and Corporate Governance Committee also makes recommendations to the Board regarding Director compensation. For information regarding the compensation of Directors, please see “Director Compensation” below.
In February 2015, the Nominating and Corporate Governance Committee established a Sustainability and Environmental Subcommittee to review and assist in the oversight of the Company’s existing health, safety and environmental policies and practices and in recognition of the impact these policies and practices have on the Company’s constituents and shareholders. In establishing the Subcommittee, the Nominating and Corporate Governance Committee identified the key responsibilities of the Subcommittee, including, among others, to:
develop, and periodically review, a sustainability strategy and plan that supports the Company’s business and environmental impact objectives;
liaison with the members of management responsible for areas most directly affecting sustainability and environmental impact, on the assessment of the Company’s practices with respect to sustainability and environmental impact;
communicate the Company’s policies and philosophy with respect to sustainability and environmental impact; and
keep the Board apprised of matters related to sustainability and environmental impact, and make recommendations to the Board with respect thereto.
In June 2016, the Sustainability and Environmental Subcommittee was dissolved, and its duties and responsibilities were absorbed by the Nominating and Corporate Governance Committee.
With the Company’s sustainability and environmental efforts,Newsweek’s Green Ranking of the Company substantially improved in 2016. By market capitalization, the Company is ranked 78 out of the top 500 largest publicly-traded U.S. companies and 135 out of the top 500 largest publicly-traded companies globally in 2016.
Finance and Transactions Committee
The Finance and Transactions Committee is currently comprised of fourfive independent directors: Messrs. AckmanMr. Hale (Chairperson), Mr. De Schutter, Dr. Eshelman, Dr. Karabelas and Hale and Drs. Eshelman and Karabelas.Mr. Paulson. It was established to assist the Board in providing fiduciary oversight and strategic advice with respect to the Company’s significant transactional activities, advising the Board regarding the Company’s significant financing activities and monitoring the overall financial condition of the Company and the impact of our significant financing activities.
Conduct and Compliance Committee
The Conduct and Compliance Committee which was established on April 15, 2016, is currently comprised of fivefour independent directors: Messrs.Mr. Ross (Chairperson), Fraidin andDr. Eshelman, Mr. Robertson, and Drs. EshelmanDr. Wechsler. The Conduct and Wechsler. It was established to, among other things, oversee implementation of certain remediation measures proposed by the Ad Hoc Committee.
Special Independent Committee
In June 2009, the Board established a Special Independent Committee to review finalization and implementation of the Corporate Integrity Agreement with the OIG, which expired in September 2014. The Special Independent Committee has also undertaken to review reports and oversee the implementation of recommendations generated from reports submitted by an independent consultant retained by the Board pursuant to a consent of final judgment. The consent no longer requires such reports after September 2011. Its tasks include overseeing the implementation of recommendations by the OIG and the Ontario Securities Commission. The term of the Corporate Integrity Agreement concluded in September 2014 and the Company has subsequently filed its final Annual Report to the Office of the Inspector General in January 2015. Pursuant to the terms of the Corporate Integrity Agreement, the requirements contained therein terminated in 2015. The Special Independent Committee was dissolved in June 2016.
Ad Hoc Committee
In October 2015, the Ad HocCompliance Committee was established to review allegations related toprovide oversight for the Company’s business relationship with Philidor and related matters. On April 5, 2016, the Ad Hoc Committee was dissolved andnon-financial compliance matters, including the Company’s Board determined that the 12 then current independent directors, including the membersoverall compliance programs, policies and procedures, matters of the Auditsignificant legal or regulatory compliance, and Risk Committee and the newly created Conduct and Compliance Committee, would, among other things, oversee implementation of certain remediation measures proposed by the Ad Hoc Committee.material reports or inquiries from government or regulatory agencies.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Talent and Compensation Committee is comprised of Drs.Dr. Karabelas (Chairperson), Mr. De Schutter, Mr. Hale and Dr. Wechsler, and Messrs. DeSchutter, Fraidin and Hale, each of whom is (i) anon-employee Director for purposes of Rule16b-3 of the Exchange Act, as amended, each of whom is(ii) an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), to the extent applicable, and each of whom is(iii) an independent director. None of these Directorsthe members of the Talent and Compensation Committee is a current or former officer of the Company. There were no compensation committee interlocks with other companies in 20162017 within the meaning of Item 407(e)(4)(iii) of RegulationS-K. See “Certain Transactions — Certain Related-Person Transactions” below for a description of related-person transactions.
30
The executive officers of the Company are as follows:
Name | Age | Title | ||
|
|
| ||
Joseph C. Papa | 62 | Chief Executive Officer | ||
Paul S. Herendeen | 62 | Executive Vice President and Chief Financial Officer | ||
Christina M. Ackermann | 53 | Executive Vice President and General Counsel | ||
Thomas J. Appio | 56 | Executive Vice President, Company Group Chairman, International | ||
William D. Humphries | 51 | Executive Vice President, Company Group Chairman, Dermatology |
Below is a description of each executive officer who is not also a Director nominee of the Company.
PAUL S. HERENDEEN has been our Executive Vice President and Chief Financial Officer since August 2016. Prior to joining Valeant, he served as Executive Vice President and CFO of Zoetis Inc. for two years. From 2005 to 2013 and from 1998 to 2001, Mr. Herendeen served as CFO at Warner Chilcott, a specialty pharmaceuticals company. He rejoined Warner Chilcott after four years as EVP and CFO of MedPointe, a privately held healthcare company, where he served as CFO from 2001 until 2005. Prior to that, Mr. Herendeen spent nine years as a principal investor at both Dominion Income Management and Cornerstone Partners, where he worked on investments as well as mergers and acquisitions for the firms and their portfolio companies. He spent the early part of his career in banking and public accounting, having held various positions with the investment banking group of Oppenheimer & Company, the capital markets group of Continental Bank Corporation and as a senior auditor with Arthur Andersen & Company. Mr. Herendeen earned a Master of Business Administration (MBA) from the University of Virginia’s Darden School of Business, and holds a bachelor’s degree in Business Administration from Boston College.
CHRISTINA M. ACKERMANN has been our Executive Vice President and General Counsel since August 2016. Prior to joining Valeant, Ms. Ackermann was part of the Novartis group of companies for the past 14 years, most recently serving as Senior Vice President, General Counsel for Alcon, where she was responsible for the Legal, Intellectual Property and Compliance functions. Prior to this, she served as Global Head, Legal and General Counsel at Sandoz, the generics division of Novartis, from 2007 to 2012. She joined Novartis Pharma in 2002 as Head, Legal Technical Operations and Ophthalmics and assumed the role of Head Legal General Medicine in July 2005. Before Novartis, Ms. Ackermann served in Associate General Counsel roles with Bristol Myers Squibb and DuPont Pharmaceuticals, as well as in private practice, where she focused on securities and mergers & acquisitions. Ms. Ackermann has a Post Graduate Diploma in EC Competition Law from the University of London, U.K. and a Bachelor of Laws from Queen’s University, Kingston, Canada.
THOMAS J. APPIO has been our Executive Vice President, Company Group Chairman, International since August 2016. Mr. Appio joined Valeant from Bausch & Lomb in 2013, and under his leadership Valeant has experienced accelerated growth in revenue and profitability in the region, particularly in China. During his almost seven years with Bausch & Lomb, Mr. Appio served as Vice President, North Asia/Japan and as Managing Director, Greater China and Japan. PreviousPrior to joining Bausch & Lomb, Mr. Appio served 23 years with Schering-Plough in a wide range of leadership and operations responsibilities. Mr. Appio has spent nearly 1819 years working in the Asia Pacific region. Mr. Appio holds a Bachelor of Science in Accounting from Arizona State University, W.P. Carey School of Business.
WILLIAM D. HUMPHRIES has been our Executive Vice President, Company Group Chairman, Dermatology since January 2017. He was previously CEO of Merz North America from March 2012 until December 2016, where he oversaw strategic direction and collaboration among three North American companies: Merz Pharmaceuticals, LLC, Merz Aesthetics, Inc. and Merz Pharma Canada, Ltd. Prior to joining Merz, he served as the President of Stiefel, a leader in global dermatology and skin health, where he spearheaded two major acquisitions, and led the global integration of Stiefel into GlaxoSmithKline. Previously, Mr. Humphries
held multiple senior executive roles within Allergan, Inc., concluding as Vice President of the U.S. Skincare business. Mr. Humphries has been a director of Clearside Biomedical, Inc., a late-stage clinical biopharmaceutical company, since January 2012, and has also served as a director of Aclaris Therapeutics, Inc., a dermatologist-led biopharmaceutical company, since September 2016. He holds a Bachelor of Arts from Bucknell University and an MBA from Pepperdine University.
None of the executive officers of the Company were selected pursuant to any arrangement or understanding, other than their respective employment agreements with the Company. 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.
31
OWNERSHIP OF THE COMPANY’S SECURITIES
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial ownership of our Common Shares and the percentage of Common Shares owned beneficially by holders of more than 5% of our outstanding Common Shares as of March 16, 2017.5, 2018.
Identity of Owner or Group | Number of Shares and Nature of Beneficial Ownership | Percentage of Class(1) | Number of Shares and Nature of Beneficial Ownership (#) | Percentage of Class (%)(1) | ||||||||||
Paulson & Co. Inc. | 19,384,500 | (2) | 5.57 | 20,860,384 | (2) | 5.97 | ||||||||
1251 Avenue of the Americas, New York, NY 10020 | ||||||||||||||
VA Partners I, LLC | 17,997,224 | (3) | 5.17 | 18,011,537 | (3) | 5.16 | ||||||||
One Letterman Drive, Building D, Fourth Floor, San Francisco, CA 94129 | ||||||||||||||
This table is based upon information supplied by the principal shareholders and Schedules 13D and 13G filed with the U.S. Securities and Exchange Commission (the “SEC”) and “early warning reports” and similar regulatory filings filed on SEDAR. Unless otherwise indicated in the footnotes to this table, we believe that the shareholders named in the table have sole voting and investment power with respect to the Common Shares indicated as beneficially owned.
| (1) | Based on |
| (2) | According to a Schedule |
| (3) | According to |
32
The following table sets forth, as of February 28, 2017March 5, 2018 (unless otherwise noted below), certain information regarding the beneficial ownership of our Common Shares and the percentage of Common Shares beneficially owned by (i) each Director and each Director nominee, and (i) the persons serving as CEO of the Company during 2016, (ii) the persons serving as CFO of the Company during 2016, (iii) the other three most highly paid executive officers of the Company who were serving as executive officers at December 31, 2016, and (iv) a highly paideach executive officer ofnamed in the Company who served during 2016 but was not serving as an executive officer at December 31, 2016 but who would have been included in our most highly paid executive officers had he been serving as executive officerSummary Compensation Table on December 31, 2016page 50 (together, the “Named Executive Officers”Officers,” or “NEOs”), and (iii) all current Directors and Director nominees and current executive officers of the Company as a group. None of the shares held by directors and executive officers included in the table are pledged as security.
Identity of Owner or Group | Number of Shares and Nature of Beneficial Ownership(1)(2)(3) | Percentage of Class(4) | ||||||
Named Executive Officers, Directors and Director Nominees | ||||||||
Christina M. Ackermann | 0 | * | ||||||
William A. Ackman(5) | 0 | * | ||||||
Robert R.Chai-Onn | 354,902 | * | ||||||
Richard U. DeSchutter(6) | 14,000 | * | ||||||
Dr. Fredric N. Eshelman | 1,070 | * | ||||||
Stephen Fraidin | 0 | * | ||||||
D. Robert Hale(7) | 17,997,224 | 5.17 | % | |||||
Paul S. Herendeen(8) | 24,000 | * | ||||||
Robert A. Ingram | 73,200 | * | ||||||
Dr. Argeris (Jerry) N. Karabelas. | 4,000 | * | ||||||
Sarah B. Kavanagh | 0 | * | ||||||
Dr. Ari S. Kellen | 82,041 | * | ||||||
Joseph C. Papa | 202,000 | * | ||||||
J. Michael Pearson(9) | 1,197,986 | * | ||||||
Robert N. Power | 16,096 | * | ||||||
Russel C. Robertson. | 4,012 | * | ||||||
Robert L. Rosiello. | 40,958 | * | ||||||
Thomas W. Ross, Sr. | 10,096 | * | ||||||
Howard B. Schiller | 336,751 | * | ||||||
Amy B. Wechsler, M.D. | 2,964 | * | ||||||
Anne C. Whitaker | 22,131 | * | ||||||
Directors and executive officers of the Company as a group (23 persons) | 20,410,083 | 5.87 | % | |||||
Identity of Owner or Group | Number of Shares and Nature of Beneficial Ownership(1)(2)(3) | Percentage of Class(4) | ||||
Named Executive Officers, Directors and Director Nominees | ||||||
Christina M. Ackermann | 43,092 | * | ||||
Thomas J. Appio | 69,645 | * | ||||
Richard U. De Schutter(5) | 80,656 | * | ||||
Dr. Fredric N. Eshelman | 12,892 | * | ||||
D. Robert Hale(6) | 18,011,537 | 5.16 | % | |||
Paul S. Herendeen(7) | 390,158 | * | ||||
William D. Humphries | 78,834 | * | ||||
Dr. Argeris (Jerry) N. Karabelas | 20,726 | * | ||||
Sarah B. Kavanagh | 14,458 | * | ||||
Joseph C. Papa(8) | 573,326 | * | ||||
John A. Paulson(9) | 20,860,384 | 5.98 | % | |||
Robert N. Power | 32,822 | * | ||||
Russel C. Robertson | 30,452 | * | ||||
Thomas W. Ross, Sr. | 26,822 | * | ||||
Amy B. Wechsler, M.D. | 22,150 | * | ||||
Directors and executive officers of the Company as a group (15 persons) | 40,267,954 | 11.54 | % | |||
| * | Less than 1% of the outstanding Common Shares. |
| (1) | This table is based on information supplied by current executive officers and Directors. We believe that Common 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 we have no information as to whether any Common Shares shown in this table are subject to community property laws. |
| (2) | The amounts reported include |
| (3) | Included in the Common Shares set forth above are the following |
|
| (4) | Applicable percentage ownership is based on |
| (5) |
|
|
33
(6) | According to |
| (7) | Excludes 15,000 Common Shares purchased by Mr. Herendeen on March 13, 2018. |
| (8) |
|
| (9) |
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s executive officers and Directors, and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC and the NYSE. Such executive officers, Directors and shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon its review of the copies of such forms it received, or written representations from certain reporting persons for whom no such forms were required, the Company believes that during fiscal year 2016, the following of its2017, all executive officers, Directors and 10% beneficial owners failed toof the Company timely filefiled all forms required by Section 16(a): except for the following: Mr. HalePaulson filed one late Form 4 duerelating to an inadvertent administrative error; Ms. Kavanagh filed a late Form 3 and one late Form 4 due to issues obtaining filing access; Mr. Ingram filed two late Form 4s, one due to issues obtaining filing access and one due to inadvertent administrative errors by the Company; and Messrs. Robertson, Ross and Schiller, Dr. Wechsler and Ms. Whitaker each filed one late Form 4, all due to inadvertent administrative errors by the Company. In addition, Mr. Osama A. Eldessouky, who was appointed as the Company’s Chief Accounting Officer effective June 15, 2016, filed a late Form 3 in 2017 and one late Form 4 in 2017, each for 2016 transactions, due to inadvertent administrative errors by the Company.single transaction.
34
EXECUTIVE COMPENSATION AND RELATED MATTERS
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
At Valeant, we continue to have aThis Compensation Discussion and Analysis (“CD&A”) section describes our compensation philosophy that intends to link executive pay with long term performance. This last year was a transition year as we made progress toward stabilizing our business, resolving legacy issuesapproach and undertaking a new strategy. While we are disappointed with our financial results and share price performance, we have accomplished important steps to position the company for a turnaround, including adding several key new leaders, restructuring the management team and business segments, remediating a material weakness in financial reporting, beginning to pay down debt and adopting a new mission and strategy. With respect to executive compensation, in 2016 the Company primarily focused on stabilizing and transitioning the management of the Company through retention programs and new hire awards, and on designing a new long-term incentive (“LTI”) program to align with our new strategy, which we have launched in 2017.
For 2016, the Company determined that the financial goals that were established at the beginning of the year were not sufficiently achieved to result in a payout of our Named Executive Officers’ annual cash incentive opportunities. However, the Talent and Compensation Committee recognized the significance and quality of the contributions made by Messrs. Papa and Herendeen and Ms. Ackermann. Accordingly, the Talent and Compensation Committee determined to award Mr. Papa with a cash bonus of 50% of his annual target incentive opportunity. The Board is very supportive of Mr. Papa’s efforts to date and is confident in his abilities and those of his team to lead us through our transformation. While in 2016 we made many exceptional retention and new hire compensation awards and this may extend into 2017, going forward we intend for executive pay to come into line with our new LTI framework.
Our Business Strategy
As a company, we believe that there is significant opportunity in the eye health and branded prescription pharmaceutical segments. Our existing portfolio, commercial footprint and pipeline of product development projects position us to compete and be successful in these markets. As a result, we believe these businesses provide us with the greatest opportunity to build value for our shareholders. In order to focus our efforts, in 2016 we performed a review of our portfolio of assets to identify those areas where we believe we have, and can maintain, a competitive advantage. We identify these areas as “core”, as we believe these assets generally have a greater value to our company than to other owners, as we believe we are best positioned to grow and develop them. By narrowing our focus, we have the opportunity to reduce complexity in our business and maximize the value of our core segments. We describe our core areas by business and by geography. Within our Branded Rx segment, our core businesses include gastrointestinal and dermatology. We also view our global eye health business, within our Bausch + Lomb/International segment, as core.
Another critical element of our strategy is our lower risk, output-focused research and development model. This model allows us to advance certain development programs to drive future commercial growth, while minimizing our research and development expenses. This is achieved primarily by:
focusing on innovation through our internal research and development, selected acquisitions andin-licensing;
focusing on productivity through measures such as leveraging industry overcapacity and outsourcing commodity services;
focusing on critical skills and capabilities needed to bring new technologies to the market;
pursuing life-cycle management programs for currently marketed products to increase such products’ value during their commercial lives; and
acquiring dossiers and registrations for branded generic products in emerging markets which require limited manufacturingstart-up and development activities.
Our long-term strategy has also historically included deploying cash via business development, debt repayment and repurchases and share buybacks. Since 2010, we have completed numerous transactions to expand our portfolio offering and geographic footprint, including, among others, the acquisitions of Salix Pharmaceuticals, Ltd. and Bausch & Lomb Holdings Incorporated. Although these transactions were successful in generating growth and bolstering our product portfolio, in 2016 we transitioned away from a focus on acquisitions, and took steps to stabilize our business and began placing greater emphasis on a select number of internal research and development projects, as evidenced by our continued increase in investment in development, which in 2017 is expected to reflect a number greater than 4.5% of sales. While we anticipate business development through acquisitions may be a component of our long-term strategy, we expect acquisitions to be much lower for the foreseeable future as compared to prior periods as we focus on reducing our outstanding debt levels.
We believe our increased focus on the development of new products will allow us to maximize our short term growth and profitability and allow us to stabilize the Company while bolstering our future growth.
Toward these ends, in January 2017, we entered into a definitive agreement to sell all of the outstanding equity interests in our subsidiary, Dendreon Pharmaceuticals, Inc., for $819.9 million in cash. Also in January 2017, we entered into a definitive agreement to sell our CeraVe®, AcneFree™ and AMBI® skincare brands for $1.3 billion in cash.
Changes in Our Executive Management Team
As part of our turnaround strategy and in response to shareholders, we completely reconstituted our organizational structure in 2016 and recruited several key members of our senior management team, including our CEO, CFO, General Counsel and several other critical team members.
New Chairman and CEO
In May 2016, following the Board’s thorough search process, Joseph C. Papa joined us to become our Chairman and CEO. With more than 35 years of experience in the pharmaceutical, healthcare services and specialty pharmaceutical industries, including 20 years of branded prescription drug experience, Mr. Papa joined us from Perrigo, a leading global healthcare supplier that develops, manufactures and distributesover-the-counter (OTC) and prescription (Rx) pharmaceuticals, where he served as the CEO since 2006 and was appointed Chairman in 2007.
The table below outlines the market competitive pay package provided to Mr. Papa that was required in order to attract a proven, long-tenured sitting CEO with pharmaceutical experience. For details of Mr. Papa’s employment agreement, please see “Chairman and Chief Executive Officer’s Employment Agreement.”
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
The buyout awards represent forfeited unvested equity compensation at Mr. Papa’s prior employer. This practice is market practice when recruiting an active CEO. Also, 50% of the buyout RSUs may be accelerated to the second anniversary if goals are achieved relating to (i) succession planning, (ii) government relations, (iii) employee relations, (iv) customer relations and (v) shareholder relations. Finally, no 2017 LTI awards were granted to Mr. Papa.
The value of Mr. Papa’s LTI awards as of December 31, 2016 is significantly below the $52 million target value. The Company’s price would need to increase to $60 in order for the value to surpass the $52 million target value:
Other Executives
In August 2016, Paul S. Herendeen joined us to become our Executive Vice President and CFO. With more than 30 years of broad financial experience and leadership, Mr. Herendeen joined us from Zoetis Inc. (“Zoetis”), a global developer and manufacturer of animal health medicines and vaccines, where he had served as Executive Vice President and CFO. Prior to that, from 2005 to 2013 and from 1998 to 2001, he served in that capacity at Warner Chilcott plc, a specialty pharmaceutical company.
In August 2016, Christina M. Ackermann joined us to become our Executive Vice President and General Counsel. Prior to that, Ms. Ackermann was part of the Novartis group of companies for 14 years, most recently serving as Senior Vice President, General Counsel for Alcon, where she was responsible for the Legal, Intellectual Property and Compliance functions.
As a result, 2016 was a year of transition for our Executive Committee:
In December 2015, J. Michael Pearson, our then Chairman and CEO, went on medical leave. The Board created an Office of the CEO, which was responsible for the management of the Company on an interim basis and was comprised of then Executive Vice President, General Counsel and Chief Legal Officer, Head of Corporate and Business Development, Robert R.Chai-Onn; then Executive Vice President and Company Group Chairman, Dr. Ari S. Kellen; and then Executive Vice President and CFO, Robert L. Rosiello, each of whom remained in their positions in addition to taking on the additional responsibility of the Office of the CEO.
In January 2016, the Board appointed Howard B. Schiller, who served as our CFO from 2011 to 2015 and had been serving on our Board since 2012, to serve as the Interim CEO during Mr. Pearson’s medical leave. At that time, the Board terminated the Office of the CEO, and Messrs.Chai-Onn and Rosiello and Dr. Kellen otherwise remained in their positions.
In February 2016, Mr. Pearson returned from his medical leave and resumed as our CEO. Mr. Schiller transitioned out of his interim duties and continued as a member of our Board. In addition, the Board appointed Robert A. Ingram as theNon-Executive Chairman of the Board.
In March 2016, we announced that the Board had initiated a search to identify a candidate to succeed Mr. Pearson as our CEO. As noted above, the Board identified Mr. Papa, a veteran in the pharmaceutical, healthcare services and specialty pharmaceutical industries, to succeed Mr. Pearson, and Mr. Papa joined us in May 2016. In connection with Mr. Pearson’s departure, we entered into a separation and consulting agreement. We terminated his consulting services in January 2017.
In August 2016, when Mr. Herendeen assumed his duties as our Executive Vice President and CFO, Mr. Rosiello became our Executive Vice President, Corporate Development and Strategy.
In October 2016, in connection with Ms. Ackermann’s assumption of her duties as our Executive Vice President and General Counsel in August 2016,Mr. Chai-Onn’s employment with us ended.
In December 2016, we announced that Dr. Kellen and Mr. Rosiello would be leaving us effective December 31, 2016 and that Anne C. Whitaker, then Executive Vice President and Company Group Chairman, would also be leaving us effective January 13, 2017.
Taking into account these various changes in our Executive Committee, our Named Executive Officers (“NEOs”) for 2016 were:2017. Our NEOs for 2017 are:
Howard B. Schiller — former Interim Chief Executive Officer
Robert L. Rosiello — formerAppio, Executive Vice President, and Chief Financial Officer and formerCompany Group Chairman, International
Dr. Ari S. Kellen — former Executive Vice President and Company Group Chairman, Dermatology
2017 Business Results
Anne C. Whitaker — former Executive Vice President2017 was a year of strong progress as we delivered organic growth, while significantly reducing our debt and Company Group Chairmaninvesting in our Bausch + Lomb, Salix and Ortho Dermatologics businesses, as we move towards the final phase of our strategic plan – the transformation of Valeant. We achieved the following financial results for 2017:
Please see Appendix 1 for a reconciliation of our non-GAAP financial measures to GAAP financial measures and related disclosures.
Robert R. Chai-Onn — former Executive Vice President, General Counsel and Chief Legal Officer, Head of Corporate and Business Development
Our Compensation Philosophy
OurValeant’s compensation philosophy is designed to alignattract, retain, and motivate executives, including our NEOs, who are committed to the ongoing transformation of our company. Our compensation program is intended to link executive compensation to long-term business performance, while providing compensation opportunities that are competitive as compared to our peers and align the interests of our executives with long-term performance. Specifically, we maintain an executive compensation philosophy and program that is focused on long-termpay-for-performance, while balancingthose of our shareholders. Our programs also balance appropriate risk taking and incorporatingincorporate shareholder feedback. For example,
A significant portion of total compensation is linked to satisfying our financial targets and strategic initiatives, in addition to achieving positive total returns to shareholders.
In determining the appropriate mix of base salary and incentive pay (including annual cash incentives and long-term equity) for our NEOs, the Talent and Compensation Committee seeks to balance:
In allocating between short-term and long-term compensation, the Talent and Compensation Committee seeks to establish a balance between rewarding past performance and future contributions. In that respect, the Talent and Compensation Committee designs our share ownership guidelines,annual incentive program to reward executives who achieve pre-determined financial metrics and strategic priorities, and it grants equity awards under our newlong-term incentive program to provide an opportunity for additional compensation based on delivering on our long-term performance and shareholder value creation.
The compensation opportunity provided to our NEOs is primarily performance-based. In 2017, LTI portfolio approachover 60% of our CEO’s and our amended claw back policy serve us wellother NEO’s compensation opportunity, on average, was performance-based pay, subject to the
35
achievement of annual and long-term performance goals, including the growth of our stock price over time. Messrs. Papa and Herendeen did not receive equity awards in 2017 under our Long-Term Incentive (“LTI”) Program. With their transition in 2018 to the annual LTI Program, as discussed in more detail below, we seek to mitigate risk andexpect the percentage of their compensation opportunity that is performance-based will further increase going forward.
Shareholder-Friendly Compensation Practices
We maintain the following shareholder-friendly compensation practices which further align the interests of our executives with thatthose of our shareholders.shareholders and balance appropriate risk taking.
For 2016, an important measure of performance was company total shareholder return (“TSR”).What We Do
For 2017, in view of our evolving business strategy, the Talent and Compensation Committee has adopted newupdated these guidelines for 2018 to better align with our peers and market practice. Pursuant to our Share Ownership Guidelines, our CEO is required to hold 6 times base salary, and our other NEOs are required to hold 3 times base salary.
executive LTI program for its senior-most executives (other than its new CEO and CFO who each received multi-year grants at hire), that is more consistent with pharmaceutical industry practices (for example, annual LTI grants and balanced LTI portfolio): 75% of our 2017 PSUs will be based on return on tangible capital (“ROTC”) and 25% on absolute TSR goals. We believe ROTC and LTI TSR are key performance objectives in our new strategy.
Finally, in light of the Company’s recent performance and in order to align the Company’s Director pay with the expanded peer levels, several changes to our Director compensation program were recently approved, including a decrease in the annual equity grant from $375,000 to $250,000 (effective after the 2017 Annual Meeting) and an increase in the annual Board cash retainer from $75,000 to $100,000, which resulted in a $100,000 reduction per Director.
share units.
Amended Claw Back Policy
In February 2017, the Company amended its claw back policy (which previously permitted the Board to claw back certain incentive compensation from executives in the event of certain material financial restatements as a result of such executive’s knowing or intentional fraudulent or illegal misconduct) to provide that the – The Board may exercise its discretion to require any employee who receives equity-based compensation to reimburse bonus, incentive or equity-based compensation awarded to such employees beginning in 2017 in the event of:
Aof (1) a material restatement or adjustment to our financial statements as a result of such employee’s knowing or intentional fraudulent or illegal misconduct; or
Such employee’s(2) detrimental conduct thatby the employee which has caused material financial, operational, or reputational harm to us, including (i) actsus.
What We Don’t Do
Following a material restatement36
We may not indemnify any covered employee, directly or indirectly, for any losses incurred in connection with the recovery of any compensation under the policy, including through the payment of insurance premiums,gross-up payments or supplemental payments. The policy will continue to apply to covered employees even after they cease to be employed by us.
The claw back policy is available on the Company’s website at www.valeant.com (under the tab “About” and under the subtab “Corporate Governance”).
Other Shareholder-Friendly Compensation Practices
During 2016, in addition to our claw back policy, which we recently amended as describe above, we maintained the following shareholder-friendly compensation practices:
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
20162017 Shareholder Engagement
At our 20162017 Annual Meeting of Shareholders, we held a non-binding advisory vote with respect to the compensation of our Named Executive OfficersNEOs (commonly referred to as a“say-on-pay” “say-on-pay” vote). While we have
always sought feedback on our compensation program from our shareholders, since the 2016 Annual Meeting of Shareholders, and given the disappointing low approval rating of our executive compensation program at that meeting,of 68%, we have engaged in evenconsiderably more active dialogue and engagement with our shareholders in order to solicit feedback on our new compensation philosophy. Members of our Talent and Compensation Committee directly engaged with 11 investors in April 2017 representing approximately 30% of our outstanding shares at that time. Broader outreach was sought, but certain investors were not available to meet.
The outcome of the 20162017 say-on-pay vote and our shareholder engagement were both factors we considered as we made changescontinue to refine the Company’s executive compensation going forward to align with our new strategy.strategy and programs. The Talent and Compensation Committee is committed to ongoing engagement with our shareholders and the major proxy advisory firms and intends to continue these outreach efforts.efforts in order to increase shareholder support going forward.
Key Shareholder Feedback
Findings | ||
|
| |
Support for long-term performance orientation, | Long-term orientation continues | |
Support for LTI “portfolio approach” | LTI balanced portfolio approach | |
Suggestion that capital metrics such as leverage ratio and/or ROIC should be included in annual | 2017 and 2018 PSU design uses ROTC, | |
CEO long-term incentive program should be aligned with the | In 2018, CEO LTI grants will be similar to executive team and | |
Concerns over the CEO PSUs’ high share price goals; namely, concerns regarding whether they appropriately balanced incentivizing performance versus risk management, and provided enough retention incentive | Shareholder feedback was considered when deciding to cancel CEO new hire PSU grant and provide new balanced LTI portfolio grant | |
Discretionary bonus provided to CEO and certain NEOs in | Bonus payouts in early 2018 (for 2017 performance) were |
Response to Shareholder Feedback
Shareholder feedback was considered when designing the annual compensation programs for our NEOs. As disclosed in last year’s proxy statement, the Talent and Compensation Committee introduced a new long-term incentive program for its senior-most executives to better align the awards with Valeant’s business strategy and plan
37
to transform the company. This approach is more consistent with pharmaceutical industry practices, including awarding annual LTI grants (versus front-loaded multi-year grants) and providing a balanced portfolio of Performance Share Units (PSUs), Restricted Share Units (RSUs), and Stock Options. The Committee has decided to continue this balanced portfolio approach for 2018 as well, consistent with shareholder feedback regarding the need for alignment between shareholder interests and NEO long-term compensation.
In light of these changes, the Talent and Compensation Committee reviewed the front-loaded multi-year grants received by our Chief Executive Officer, Joseph C. Papa, and our Executive Vice President and Chief Financial Officer, Paul S. Herendeen upon joining the Company in 2016. As a result of this review, as disclosed in our Form 8-K filing on March 12, 2018, the Board of Directors decided that Mr. Papa and Mr. Herendeen will be eligible to receive the same balanced portfolio of LTI grants on an annual basis as is awarded to other senior executives, and the 933,416 PSUs Mr. Papa received upon hire in 2016 were cancelled. This approach better aligns Mr. Papa and Mr. Herendeen’s long-term compensation with the business strategy and financial plan that Valeant has developed to turn around the company. It also reflects the feedback of our shareholders as noted in the table above, specifically by harmonizing the CEO and CFO LTI with the rest of the senior executive team through a “portfolio approach” and by providing more retentive value to senior leaders who are critical to the successful execution of our turnaround plan.
Compensation Process
Role of the Talent and Compensation Committee
Our Board’s Talent and Compensation Committee, which is comprised entirely of independent directors, is responsible for establishing, implementing, monitoring, and monitoringevaluating our executive compensation philosophy and objectives.objectives and oversees the compensation program for senior executives. The Talent and Compensation Committee reviews and approves, or recommends or approvesto the Board for approval, all components of executive pay, recommends orand reports its decisions to the Board, and oversees the administration of the compensation program for senior executives.Board. The Board, with the assistance of the Talent and Compensation Committee, reviews or approves matters related to executive compensation on anas-needed basis. The Board, through the TalentCommittee’s responsibilities and Compensation Committee, actively participatesauthority are described fully in the establishmentCommittee’s charter, which is available on our website at www.valeant.com (under the tab “About” and under the subtab “Corporate Governance — Board Committee Charters”).
Role of target and stretch goals for our short-term incentive pay opportunities and, as appropriate, reviews our compensation proposals.Management
Our CEO prepares a recommendationmakes recommendations to the Talent and Compensation Committee for base salary, annual incentive awards and equity grants for each Named Executive Officer, otherNEO (other than himself,the CEO), whose compensation is determined solely by the Talent and Compensation Committee, ornon-employee Directors recommended to the Board for approval. Our CEO and Senior Vice President of Human Resources also provide recommendations to the Committee on other elements of our compensation program for senior executives, including, for example, the design and metrics under our annual and long-term incentive programs.
Our CEO and Senior Vice President of Human Resources also lead a process each year to establish the collective strategic priorities of the Board. The Talentsenior executive team, and Compensation Committee then, determines the compensation forwith each Named Executive Officer in additionexecutive, agree on individual performance goals that tie to the CEOachievement of these strategic priorities. These strategic priorities are shared with the Committee and updates the Board as to all of its compensation decisions, and obtains additional approval from the Board as appropriate.their input is considered before finalizing these priorities.
Peer Group
We hire executives largely from within the pharmaceutical industry. While the Talent and Compensation Committee considers peer group compensation data based on a peer group from the pharmaceutical industry, this information serves as a reference or input but does not dictate our decisions. We do not triangulate our compensation to arrive at a target percentileRole of the overall peer group.
For 2016, the Talent andIndependent Compensation Committee referred to the following group of peer companies and did not conduct any formal executive compensation benchmarking:
Allergan plc (previously Actavis Inc.)
Amgen Inc.
Biogen Inc.
Bristol-Myers Squibb Company
Celgene Corporation
Danaher Corporation
Eli Lilly and Company
Gilead Sciences, Inc.Consultant
In November 2016, the Talent and Compensation Committee reviewed the recommendation of its independent compensation consultant, Pay Governance, to increase the size of our peer group and to use companies that are more similarly sized to us. For 2017, the Talent and Compensation Committee has added the following seven companies, in consultation with Pay Governance:
AbbVie Inc.
Alexion Pharmaceuticals, Inc.
Endo International plc
Mallinckrodt plc
Mylan N.V.
Perrigo Company plc
Zoetis Inc.
In addition, the Company removed Danaher Corporation and Gilead Sciences, Inc., as both companies were no longer similarly sized in terms of revenue and therefore did not fully meet the peer group requirements.
Independent Compensation Consultant
In accordance with the Talent and Compensation Committee’s charter, the Talent and Compensation Committee has sole authority to retain compensation consultants and to approve such consultants’ fees and retention terms. In 2016, the Talent and Compensation Committeeagain engaged the services of Pay Governance as its independent consultantsconsultant to provide advice on executive compensation matters. Pay Governance reported directly to the Talent and Compensation Committee, which instructed the consultants to give it objective advice and without influence by management, and to provide such advice for the benefit of the Board and our shareholders. Pay Governance did not provide additionalany other services to us, other than the services related to compensation toCompany or its management. The Committee has evaluated Pay Governance’s independence by considering the requirements adopted by the NYSE and the SEC, and has determined that no conflict of interest exists.
Peer Group
Each year, the Talent and Compensation Committee reviews its peer group to determine if any changes should be made in order to ensure our peers reflect the businesses in which we compete for talent, and include relevant comparators, such as industry, business focus, and revenue.
38
Based on these criteria, for 2018, the Talent and Compensation Committee reviewed the recommendation of its independent compensation consultant, Pay Governance, which resulted in the removal of AbbVie Inc. and the Boardaddition of Jazz Pharmaceuticals plc and other Board committees.
ComponentsUnited Therapeutics Corporation, to better balance the peer group with companies of Our Executive Compensationsimilar size, as follows:
Alexion Pharmaceuticals, Inc. | Endo International plc |
Allergan plc | Jazz Pharmaceuticals plc |
Amgen Inc. | Mallinckrodt plc |
Biogen Inc. | Mylan N.V. |
Bristol-Myers Squibb Company | Perrigo Company plc |
Celgene Corporation | United Therapeutics Corporation |
Eli Lilly and Company | Zoetis Inc. |
A significant portion of total compensation is linkedSince we hire executives largely from within the pharmaceutical industry, we use data from this peer group to satisfying our financial targets and strategic initiatives, inbenchmark pay levels as well as pay practices. In addition to achieving positive total returnsproxy data for the above companies, the Talent and Compensation Committee also utilizes the Willis Towers Watson’s Pharmaceuticals and Health Sciences Survey to shareholders. Thissupplement this data both in terms of pay methodologylevels as well as pay practices.
The Committee references the median of the market data as a guide when making decisions. Market data is designedone element that the Committee uses to help us to attract, retain and motivate top talent.
make pay decisions. Multiple factors are considered in determining total compensation opportunity, including our compensation philosophy, the executive’s role and responsibility, the executive’s past performance, internal equity, and expected contributioncontributions and experience in the role, and the pay practicesrole.
Components of our peers both within and outside the pharmaceutical industry. Executive Compensation
The components of totalexecutive compensation for Named Executive Officers include:our NEOs, as described in more detail below, include (i) base salary; (ii) incentive pay (including annual cash incentive and long-term equity incentives); (iii) retirement and welfare benefits; and (iv) executive benefits and perquisites.
In determining the appropriate mix of base salary and incentive pay (including annual cash incentives and long-term equity) for our Named Executive Officers, the Talent and Compensation Committee sought to balance:
Our desire to attract and retain our executives with the stability of competitive salary compensation;
Our desire to promote pay-for-performance compensation, as we believe that incentive pay appropriately rewards executives for their contribution to our overall performance; and
Our desire to align compensation with corporate performance and shareholder value through the use of performance-based equity compensation awards.
The value of our short-term incentives, in the form of an annual cash incentive, is dependent on the achievement ofpre-determined corporate, divisional/functional and individual performance objectives, while the value of our equity based incentives, in the form of PSU, RSU and option awards, is derived from the value of Common Shares. In allocating between short-term and long-term compensation, the Talent and Compensation Committee seeks to establish a balance between rewarding past performance and future potential, both of which it views as critical for our executives to exhibit. In that respect, the Talent and Compensation Committee designs cash bonuses to reward executives who achieve certain corporate, divisional/functional and individual objectives, and it bases grants of equity awards on the demonstration of exceptional effort, critical skills, key talents and achievements of shareholder value creation.
Base Salary
We typically set our base salaries at competitive levels necessary to attract and retain a top performing management team.senior executives, including our NEOs. Base salary addresses performance of core duties for each executive role, providingsalaries provide an amount of fixed compensation.compensation to each senior executive for the performance of their core duties.
Salary levelsBase salaries are periodically reviewed as part of our performance review process, as well as upon a promotion or other change in job responsibilities. To the extent base salaries are adjusted, the amount of any such adjustmentsadjustment would reflect a review of competitive market data, and consideration ofnon-industry data for comparative purposes, consideration of relative levels of pay internally, consideration of the individual performance of the executive, and any other circumstances that the Talent and Compensation Committee determines are relevant.
The NEOs Base Salaries are as follows:
NEO | 2016 Salary | 2017 Salary | % Increase | ||||
Joseph C. Papa | $ | 1,500,000 | $ | 1,500,000 | No Change | ||
Paul S. Herendeen | $ | 1,000,000 | $ | 1,000,000 | No Change | ||
Christina M. Ackermann | $ | 600,000 | $ | 600,000 | No Change | ||
Thomas J. Appio | $ | 650,000 | $ | 650,000 | No Change | ||
William D. Humphries | N/A | $ | 750,000 | New Hire | |||
Effective March 31, 2018, based on a review of market data, relative levels of pay internally, and individual performance, the Talent and Compensation Committee increased Ms. Ackermann’s salary to $660,000, which is a 10% increase, and increased Mr. Appio’s salary to $750,000, which is a 15% increase. No changes were made to the other NEOs salaries.
Our 2017 annual incentive program (the “2017 AIP”) provides an opportunity for our senior executives, including our NEOs, to earn an annual incentive, paid in cash, based on the achievement of certain financial targets and strategic priorities.
39
2017 Annual Incentive Program Opportunity
The NEOs annual incentive targets are as follows:
NEO | Incentive Target |
Joseph C. Papa | 150% |
Paul S. Herendeen | 120% |
Christina M. Ackermann | 80% |
Thomas J. Appio | 80% |
William D. Humphries | 80% |
2017 Annual Incentive Program Design
For our senior executives, including our NEOs, the annual incentive program is based on performance against pre-established financial targets and strategic priorities approved by the Board. Performance against financial targets makes up 75% of the total payout, while performance against strategic priorities makes up 25% of the total payout.
As disclosed in our 2017 proxy statement, the Talent and Compensation Committee adopted Adjusted EBITDA and Revenue as the financial metrics rewarded under the Annual Incentive Program, starting in 2017, which are two of the key financial metrics our shareholders use to assess our performance. We believe these metrics focus our NEOs on delivering both organic growth as well as the Company’s bottom line for our shareholders. The Company’s strategic priorities are intended to focus the organization on the key initiatives that will drive shareholder value over time.
For Messrs. Papa and Herendeen and Ms. Ackermann, who, were each hired by us in 2016, received base salaries of $1,500,000, $1,000,000 and $600,000, respectively.
Under his 2015 employment agreement, Mr. Pearson did not receive an annual base salary. In April 2016 after Mr. Pearson’s return from medical leave and the announcement as a search for his replacement, the Talent and Compensation Committee approved an annual base salary for Mr. Pearson of $2,000,000, retroactively effective as of January 1, 2016 (reinstating the annual base salary in effect for Mr. Pearson prior to the employment agreement he entered into with us in January 2015) to retain him until a successor could be identified. Mr. Schiller received a monthly base salary of $400,000 when he became our Interim CEO in the first two months of 2016. Mr. Rosiello and Ms. Whitaker, who were both hired by us in 2015, received base salaries of $1,000,000 and $600,000, respectively. Dr. Kellen’s and Ms. Whitaker’s base salaries were adjusted to $1,000,000 and $750,000, respectively, effective as of April 1, 2016. At the time of his departure,Mr. Chai-Onn’s base salary was $750,000.
Short-Term Incentive Pay
We use short-term incentive pay, through our annual cash incentive program, to reward employees for the attainment of target financial and strategic outcomes for each specific year.
In connection with their employment, Messrs. Papa and Herendeen and Ms. Ackermann received annual incentive targets of 150%, 120% and 80%, respectively, of his or her base salary.
Under his 2015 employment agreement, Mr. Pearson’s annual incentive target for 2015 was set at $6,000,000, at least $2,000,000 of which was basedroles, are focused on the achievement of individual objectives related to his role as Chairman and CEO. In April 2016, the Talent and Compensation Committee approved an annual target incentive opportunity for Mr. Pearson in respectoverall performance of the 2016 fiscal year of 200% ofcompany, performance against the reinstated annual base salary,Company’s Adjusted EBITDA and Revenue targets makes up 75% of which was to be based on the achievementtheir total payout. Adjusted EBITDA makes up 75% of certain corporate performance metricsthis financial portion of their payout, and Revenue makes up 25% of which was to be based on Mr. Pearson’s assistance with the transition to our new CEO. The Talent and Compensation Committee believed these targets were consistent with our pay-for-performance compensation philosophy, and in recognitionthis financial portion of the importance of a smooth transition of the CEO role. In connection with his separation from the Company, Mr. Pearson’s cash severance included a prorated annual incentive based on actual performance as determined by the foregoing factors.
2016 Annual Incentive Program
Our 2016 annual cash incentive cash program (the “2016 AIP”) in effect for Named Executive Officers was based on the Talent and Compensation Committee’s assessment of the achievement of certain financial targets andtheir payout. Company-wide strategic initiatives:
For our Named Executive Officers, the financial targets are based on attaining budget or stretch targets for adjusted earnings per sharenon-GAAP (“Adjusted EPSnon-GAAP”) and adjusted revenuenon-GAAP (“Adjusted Revenuenon-GAAP”). Please see Appendices 1 and 2 for a reconciliation of ournon-GAAP financial measures to GAAP financial measures and related disclosures.
The strategic initiatives are approved by the Board at the start of the year and are intended to align the organization to achieve the most pressing objectives.
For our Named Executive Officers, performance related to the financial targets accounts for 75% of the potential payout of the 2016 AIP payout and performance related to the strategic initiatives accounts forpriorities comprise the remaining 25% of their payout.
For Messrs. Humphries and Appio, who, in their roles, are focused on both the potential payoutoverall performance of the 2016 AIPcompany as well as the performance of the specific businesses they lead, performance against the Company’s Adjusted EBITDA and Revenue targets is 25% of their total payout, with Adjusted EBITDA accounting for 75% of this financial portion of their payout and Revenue 25%. Performance against the financial targets (EBITA and Revenue) for the businesses they lead are 50% of their total payout. Finally, Company-wide strategic priorities that include specific underlying priorities for the businesses that they lead comprise the remaining 25% of their payout.
The threshold, target, and stretch performance and corresponding payout for all metrics were as follows, with award payouts capped at 200% of incentive target:
Performance versus Plan | Payout | |
Below Threshold | <90% | 0% |
Threshold | 90% | 10% |
Target | 100% | 100% |
Stretch | 110% | 200% |
Above Stretch | >110% | 200% |
The Talent and Compensation Committee determines whether the AIP performance goalsfinancial metrics and strategic priorities have been achieved. In addition, it retains the discretionability to reduce or eliminate AIP payouts for individual executives, including the NEOs, even if performance targetsfinancial metrics and strategic priorities are met, as well as the discretion to increase AIP payouts.payouts based on individual performance. In exercising discretion,making these decisions, the Talent and Compensation Committee may consider factors such as the performance of the individual Named Executive Officerexecutive against their individual objectives in support of strategic priorities or factors, such as level of performance,additional financial goals or cost targetsmetrics applicable to the business or functional area for which the Named Executive OfficerNEO is responsible,responsible.
40
2017 Financial Objectives
In the division to which the Named Executive Officer belongs or the Company as a whole.
2016 Financial Objectives
At the outsetbeginning of 2016,2017, the Talent and Compensation Committee decided uponand Board of Directors set the following financial objectives that would comprise our 2016 AIP as follows:metrics:
Financial Metric | Weighting | Threshold | Target | Stretch | Actual | Achieved (Rounded to the nearest whole percentage) | Payout | ||||||||||||
Adjusted EBITDA | 75 | % | $ | 3.146B | $ | 3.495B | $ | 3.845B | $ | 3.638B | 104% | 140 | % | ||||||
Revenue(1) | 25 | % | $ | 7.753B | $ | 8.614B | $ | 9.475B | $ | 8.597B | 100% | 100 | % | ||||||
Total | 103% | 130 | % | ||||||||||||||||
| (1) | Revenue for these purposes is the same as GAAP Revenue, except that the exchange rates are those used for the Annual Incentive Plan. |
Objective | Weighting | Achievement | ||||||
Adjusted EPSnon-GAAP $8.80 base target $10.50 stretch target | 75% | $5.47 | ||||||
Adjusted Revenuenon-GAAP $11.1 billion base target $11.35 billion stretch target | 25% | $9.67 billion | ||||||
The 2016 AIP requires the attainment of at least 90% of the base target for payouts to be made. Based on the foregoing results, the Talent and Compensation Committee determinedcertified that the 2016 AIP corporatetotal payout based on the Company’s Adjusted EBITDA and Revenue was 130%. As described above, this payout percentage makes up 75% of the total payout for Messrs. Papa and Herendeen and Ms. Ackermann and 25% of the total payout for Messrs. Appio and Humphries.
For our NEOs, the financial objectives had beentargets are based on attaining budget (to receive a payout at target) or stretch targets (to receive a payout above target) for adjusted revenue and adjusted EBITDA non-GAAP.
For Messrs. Appio and Humphries, as described above, 50% of their total payout is based on the EBITA and Revenue results versus pre-established financial metrics for the lines of business they lead. Mr. Appio leads our international business, and Mr. Humphries runs our dermatology and dentistry businesses. Because the various lines of business which Messrs. Appio and Humphries lead are below the segment level, we do not disclose these EBITA and Revenue targets specifically for competitive reasons. The EBITA and Revenue targets we set for their lines of business are used solely to assess their performance and determine this component of their bonus payout. Based on historical performance, the likelihood of these targets being achieved was within a range of +/- 10% of budget; achieving less than 90% would be considered below threshold and achieving more than 110% would be considered above stretch. In addition, these targets are a component of the overall Company EBITDA and Revenue metrics disclosed above, and are set at the 0% level for bothsame time, and through the same rigorous process. Based on a review of the Adjusted EPSnon-GAAPcombined financial results (EBITA and corporate Adjusted Revenuenon-GAAP objectives.
2016 Strategic Initiatives
The table below outlines our payouts for the corporate strategic initiatives, which make up 25% of total target incentive under the 2016 AIP for our Named Executive Officers. For eachRevenue) of these lines of business versus these pre-established metrics, these executives can achieve up to 100% of target for base goals and up to 200% for stretch goals.
Thethe Talent and Compensation Committee determined that the achievementpayout for this component of the total bonus was 138% for Mr. Appio and was 58% for Mr. Humphries.
2017 Strategic Priorities
In the beginning of 2017, the Talent and Compensation Committee and Board of Directors set the following strategic initiative componentspriorities, which make up the remaining 25% of the 2016 AIP for our Named Executive Officers to be as follows:NEOs’ payout:
Strategic Priority | Weighting | Achievement | Payout |
Engage, retain, develop and recruit talent | 20% | 108% | 180% |
Manage capital structure (covenants, maturities) to provide runway to improve fundamentals of the business | 20% | 109% | 190% |
Achieve 5 filings, 2 phase III and 5 approvals, 50 new launches and 4 life cycle management products | 20% | 103% | 130% |
Achieve operational excellence through process improvement and globalized functions (HR, R&D, QA, Finance, Legal/Compliance, GMS) and resource allocation | 20% | 100% | 100% |
Develop 3-5 year strategic plan by Q3 2017 | 20% | 100% | 100% |
Total | 104% | 140% |
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
41
The Talent and Compensation Committee determined that the overall level of achievement of our 20162017 corporate strategic initiativespriorities was 76%104%. Achievement for each initiative was reviewed by the Talent and Compensation Committee and credit was determined based on actual outcomes.the following:
For 2017 Annual Incentive Program Payouts Based on this performance against pre-established financial targets and strategic priorities as approved by the Board, the following payouts were approved for our NEOs: The Talent and Compensation Committee did not make any further adjustments to the payouts as calculated above based on performance against these pre-established financial targets and strategic priorities approved by the Board. Long-Term Incentive Program As disclosed in our 2017 proxy statement, the Talent and Compensation Committee OverallAIP Achievement Levelsamending our credit agreement to increase our flexibility, and eliminating all long-term debt maturities until 2020 2016, the Talent and Compensation Committee determined that 2016 AIP goals were not sufficiently achieved to result in a payout of our Named Executive Officers’ annual cash incentive opportunities. However, the Talent and Compensation Committee also recognized the significance and quality of the contributions made by Messrs. Papa and Herendeen and Ms. Ackermann. In addition,Ackermann this achievement resulted in a payout of 140% for these Company-wide strategic priorities and for Messrs. Appio and Humphries, their payouts for strategic priorities were 110% and 120%, respectively, based on their achievement of their specific underlying priorities for the lines of business that they lead that were designed to support and promote the corporate strategic priorities set above.
% of Target(1)(1) Bonus Payout as % of Target is shown at the nearest whole percent. acknowledged that they were not at the Company during the budget setting process for 2016. Accordingly, and based on their performance since their respective commencement dates, the Talent and Compensation Committee determined to award them cash bonuses in the amounts of $1,125,000, $400,000 and $300,000, respectively. Mr. Papa’s accomplishments in 2016 include the following:Builtintroduced a new leadership teamLong-Term Incentive program in 2017 (the “2017 LTIP”) for our senior executives, including our NEOs, to better align the addition of several talented external hires: CFO, General Counsel, Senior Vice President — Business Strategy, Executive Vice President — Dermatology, Chief Quality Officer;Re-recruited/re-engaged the Company’s workforce: improved our sales force retention from 89% in first quarter 2016 to 94% in fourth quarter 2016 despite asset sale rumors;Remediated previously identified material weaknesses: tone at the top andnon-standard revenue recognition issues;Significantly improved our customer relations, especiallyawards with Walgreens, KOL and Managed Care;Established new governance process fortop-line calls, monthly financial review, quarterly business reviews, senior leadership team and Executive Committee meetings; andImproved relationships with our shareholders and debt-holders.2017 Annual Incentive ProgramFor our 2017 AIP, the Talent and Compensation Committee determined that, in view of ourValeant’s business strategy adjusted EBITDA and revenue wouldplan to transform the company, as well as to align with pharmaceutical industry practices pertaining to these grants. The program provides an opportunity for our senior executives to be the best financial objectives to measure our performance.
Equity-Based Incentive Compensation
The Talent and Compensation Committee has implementedgranted apay-for-performance compensation structure whereby a combination balanced portfolio of PSUs, RSUs, and/or options have been grantedand Stock Options.
2017 Grants to our active Named Executive Officers. Equity grant award levels are determined based on competitive market data, and the individual’s role, past performance and experience.NEOs
For PSU2017, only Ms. Ackermann and Mr. Appio received 2017 LTIP awards, granted in 2016, the Talent and Compensation Committee sought to ensure that a significant portion of total compensation would be directly related to the achievement of specified TSR thresholds. For PSU awards granted in 2017, the Talent and Compensation Committee determined that a key measure of our long-term growth was ROTC. In January 2017, members of our Executive Committeewhich were granted 40% in PSUs, where 75% of vesting will be determined by three annual performance periods that will measure ROTC and 25% of vesting will be determined by one three-year performance period that will measure TSR.
In addition,30% in 2016, the Talent and Compensation Committee granted (i) time-vesting RSUs and (ii) stock options. The equity awards granted to our Chairman and CEO30% in 2016 are front-loaded and are intended to reward superior performance over a multi-year period if the TSR targets are met or exceeded. The equity awards granted to our Executive Vice President and CFO are also front-loaded. No additional LTI awards were granted to Messrs. Papa and Herendeen in 2017.
The equity awards granted in early 2017 consisted of a combination of PSUs (40% of the award), RSUs (30% of the award) and stock options (30% of the award), all of which are subject to vesting over three years. As part of this grant cycle,Stock Options. Ms. Ackermann received an equity award with aan approximate grant date fair value of $1,200,000.$1,266,000 Mr. Appio received an equity award with an approximate grant date fair value of $633,000. Since Messrs. Papa and Herendeen received multi-year grants upon hire in 2016, no additional long-term incentive awards were granted in 2017. As previously disclosed in our Form 8-K filing on March 12, 2018, Messrs. Papa and Herendeen received LTIP awards in 2018 in order to better align their long-term compensation with the remaining senior executive team, as well as to provide strong retentive value to them and to incorporate the interests and feedback of our shareholders. Mr. Humphries will be eligible for an annual grant in 2019 as he received a two-year grant at the time he was hired in 2017.
42
Retention Awards, Consulting ArrangementsPerformance Share Units provide senior executives with the right to receive shares of our stock at a future date, assuming performance against pre-determined metrics are achieved, specifically our Total Shareholder Return (“TSR”), on both an absolute and Other Special Situationsrelative basis, and our Return on Tangible Capital (“ROTC”).
From timeFor 2017, ROTC comprised 75% of the total PSU award and TSR comprised 25% of the total PSU award, with the number of PSUs that may be achieved capped at 200%. The value ultimately received is based on our performance against these metrics, which are two key measures of our long-term performance, as well as the growth of our stock price over time. 2017 PSUs vest in January 2020, subject to time,continued employment and minimum performance criteria are achieved.
Return On Tangible Capital Metrics
ROTC will be measured over three-years, from 2017 through 2019, with ROTC performance measured each year. For 2017, ROTC comprises 75% of the total PSU award, with 25% of the PSUs achieved based on 2017 ROTC performance, 25% based on 2018 ROTC performance, and 25% based on 2019 ROTC performance.
The following ROTC goals were set at the beginning of 2017, and apply to the grants made to Ms. Ackermann, and Messrs. Appio and Humphries in 2017. ROTC goals for 2018 were set at the beginning of 2018, and will be disclosed in the 2019 proxy statement. ROTC goals for 2019 will be set at the beginning of 2019.
ROTC | PSUs Achieved |
Less than122% | 0% |
122% | 25% |
136% | 100% |
150% | 200% |
Greater than 150% | 200% |
ROTC is calculated as Adjusted NOPAT (Net Operating Profit After Taxes) divided by Tangible Capital.
The Talent and Compensation Committee may identify the need to grant retention and other special awards, to address specific needshas determined that our ROTC in 2017 was 186%. As a result, 200% of the CompanyPSUs were achieved for 2017. The number of PSUs ultimately delivered in 2020 for this portion of the award is dependent on ROTC performance for both 2018 and 2019.
Total Shareholder Return Metrics
Total Shareholder Return, which will be measured on both an absolute and relative basis as they arise. In addition,of the vesting date in connection with2020, comprises 25% of the departuretotal 2017 PSU award. The following absolute stock price targets were set at the beginning of certain executives, we may enter into a consulting arrangement, so that we can draw upon their expertise2017 and haveapply to the benefitgrants made to Ms. Ackermann and Mr. Appio in 2017.
Stock Price in 2020 | PSUs Achieved |
Less than $19.53 | 0% |
$19.53 | 25% |
$29.30 | 100% |
$58.60 | 200% |
Greater than $58.60 | 200% |
43
Based on his hire date, Mr. Humphries’ stock price targets described in his grant agreement are:
Stock Price in 2020 | PSUs Achieved |
Less than $19.51 | 0% |
$19.51 | 25% |
$29.27 | 100% |
$58.53 | 200% |
Greater than $58.53 | 200% |
Total Shareholder Return is calculated as the stock price appreciation from the beginning to the end of a smoother transition. In 2016, we entered into the following arrangements:
In May 2016, we entered into retention letter agreements with eachperformance period, plus dividends and distributions made or declared (assuming such dividends or distributions are reinvested in the Common Shares of Mr. Rosiello, Dr. Kellen and Ms. Whitaker, our then Executive Vice President and Company Group Chairman, as well as Mr. Chai-Onn, our then Executive Vice President, General Counsel and Chief Legal Officer, Head of Corporate and Business Development, in order to provide transitional stability to our Executive Committeethe company) during the CEO transition. Each executive:performance period.
Was eligible to receive special retention cash bonuses equal to $1 million, payableOur stock price on the vesting date in three installments during 2016;
Received a special equity2020 will determine the number of PSUs achieved for this portion of the award. Further, if our TSR over the measurement period is below the 50th percentile ranking of the TSR for NYSE ARCA PHARMACEUTICAL INDEX at the end of the performance period, the TSR portion of the award will in the form of restricted stock units that vested over 18 months following the date of grant; andno event exceed 100%.
2017 Restricted Stock Units
Became entitled to receive enhanced severance benefits, if the executive’s employment was terminated by us without “cause” or by the executive for “good reason.”
When Mr. Chai-Onn, Mr. Rosiello, Dr. Kellen and Ms. Whitaker left the Company, they received payments and benefits consistent with their existing employment arrangements, including their retention letter agreements, in exchange for a release in our favor that included restrictive covenants, including a covenant prohibiting competition and the solicitation of our employees through the first anniversary of his or her respective termination date.
In Mr. Pearson’s separation agreement memorializing his departure in May 2016, he agreed toRSUs provide ussenior executives with consulting services through December 31, 2017, subject toone-month renewal periods if mutually agreed upon by Mr. Pearson and us. We agreed to pay Mr. Pearson $83,333 for each month(pro-rated for
|
In their separation agreements memorializing their departures in December 2016, Mr. Rosiello and Dr. Kellen agreed to provide us with consulting services through December 31, 2017, subject toone-month renewal periods if mutually agreed upon by each of them and us. We agreed to pay each of Mr. Rosiello and Dr. Kellen $20,000 for each month(pro-rated for partial months) during the consulting period that services are performed. We reserved the right to terminatereceive shares of our stock at a future date. The value ultimately received is based on the consulting periodgrowth of our stock price over time. RSUs vest one-third per year, assuming continued employment.
2017 Stock Options
Stock options provide senior executives the opportunity to purchase shares of our stock at any time priora price equal to the second anniversary of their termination date. Asmarket price at the time of the filinggrant. The value ultimately received is based on the growth of the Proxy Statement, we have not terminated the consulting agreements with Mr. Rosiello or Dr. Kellen.
In December 2016, the Board determined that we are not inour stock price over time. Stock options vest one-third per year, and remain exercisable for a position to make any further payments to Mr. Pearson, including in connection with his then-outstanding equity awards with respect to 3,053,014 shares.ten-year term, assuming continued employment.
Retirement and Welfare Benefits
The retirement and welfare benefit programs are a necessary element of the total compensation package to ensure a competitive position in attracting and maintaining a committed workforce. Participation in these programs is not tied to performance.
Our specific contribution levels to these programs are adjusted annually to maintain a competitive position while considering costs.
Retirement Savings Plan — All employees in the United States, including our Named Executive Officers,NEOs, are eligible to participate in atax-qualified retirement savings plan under Section 401(k) of the Code.Internal Revenue Code (“Code”). Starting in 2012, all eligible employees are able to contribute to the Retirement Savings Plan, on abefore-tax basis, the lesser of (i) up to 50%75% of their annual salary or (ii)eligible compensation, subject to the limit prescribed by the Code. We matchIn 2017, we matched 50% of the first 6% of pay that is contributed to the Retirement Savings Plan. All employee contributions to the Retirement Savings Plan are fully vested upon contribution; matching contributions vest equallyratably over three years.
(including medical, dental, vision, life insurance and disability plans) upon the same terms and conditions as other employees.
Executive Benefits and Perquisites
We provide our Named Executive OfficersNEOs with limited perquisites and other personal benefits that the Talent and Compensation Committee believes are reasonable and consistent with our overall compensation program to better attract and retain superior employees for key positions. The Talent and Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to our Named Executive Officers.NEOs. The Talent and Compensation Committee intends to maintain only those perquisites and other benefits that it determines to be necessary components of total compensation and that are not inconsistent with shareholder interests. The Talent and Compensation Committee
44
permits the Chairman and CEO to use our aircraft for his travel, both business and personal. Certain travel by his immediate family is also permitted. We do not gross him up forgross-up the income tax incurred by him. The Talent and Compensation Committee believes that making our aircraft available to our Chairman and CEO allows him to serve shareholder interests by efficiently and securely conducting business during and when traveling.
Attributed costs of the personal benefits described above for our Named Executive OfficersNEOs for the fiscal year ended December 31, 2016,2017 are included in the column entitled “All Other Compensation” of the Summary Compensation Table.
Chairman and Chief Executive Officer’sMr. Papa’s Employment Agreement
In April 2016, we entered into an employment agreement with Mr. Papa. The initial term of Mr. Papa’s agreement commenced on May 2, 2016 and continues until the fifth anniversary of the commencement date. Beginning at the expiration of the initial term, the term will automatically renew for successive one year periods unless either party gives notice ofnon-renewal.
Cash Compensation
Pursuant to his agreement, Mr. Papa currently receives a base salary of $1,500,000, and a target annual incentive opportunity equal to 150% of his base salary, andwith a maximum annual incentive opportunity equal to 200% of his annual target incentive. For 2016, 75% percent of Mr. Papa’s annual incentive opportunity will be based on the achievement of corporate financial metrics and 25% will be based on the achievement of strategic metrics determined by the Talent and Compensation Committee after consultation with Mr. Papa.
Shortly following his commencement date, Mr. Papa received a cash payment from us equal to $8,000,000 to compensate him for equity-based compensation he forfeited in connection with the termination of his employment with Perrigo, theafter-tax amount of which must be repaid by Mr. Papa to us if he is terminated by us for “cause” or voluntarily terminates his employment with us without “good reason” during the first year of his employment with us.
Equity Compensation
In connection with entering into his employment agreement, Mr. Papa received (i) 933,416 PSUs (with the potential to earn between zero and 1,866,832 PSUs depending on performance, as described below), (ii) 373,367 RSUs and (iii)(ii) an option to acquire Common Shares with a grant-date fair value equal to $10,000,000 at an exercise price equal to the fair market value of our common stockCommon Shares on the date of grant. Additionally, pursuant to his employment agreement, Mr. Papa was required to purchase $5,000,000 worth of Common Shares by no later than the first anniversary of his commencement date. Mr. Papa has satisfied this obligation.
PSUs. The PSUs will vest As previously disclosed in our Form 8-K filing on March 12, 2018, the fourth anniversary of the commencement date based on the achievement of the following share prices, applying linear interpolation for performance between the applicable thresholds (and provided that933,416 PSUs Mr. Papa is employed by us through the vesting date): (a) if the share price on the vesting date is below $60, none of the PSUs will vest; (b) if the share price on the vesting date equals or exceeds $60, 25% of the PSUs will vest; (c) if the share price on the vesting date equals or exceeds $90, 50% of the PSUs will vest; (d) if the share price on the vesting date equals or exceeds $120, 75% of the PSUs will vest; (e) if the share price on the vesting date equals or exceeds $150, 100% of the PSUs will vest; (f) if the share price on the vesting date equals or exceeds $180, 125% of the PSUs will vest; (g) if the share price on the vesting date equals or exceeds $210, 150% of the PSUs will vest; (h) if the share price on the vesting date equals or exceeds $240, 175% of the PSUs will vest; and (i) if the share price on the vesting date equals or exceeds $270, 200% of the PSUs will vest. Notwithstanding the above, no more than 100% of the PSUs will vest if the Company’s total shareholder return for the period between the commencement date and the vesting date is below the 50th percentile ranking of the total shareholder return of the companies that constitute the NYSE ARCA PHARMACEUTICAL INDEX (^DRG).received upon hire have been cancelled.
RSUs. The 373,367 RSUs will vest on the fourth anniversary of his commencement date subject to Mr. Papa’s continued employment through the vesting date, provided, however, that the vesting of 50% of the RSUs may be accelerated to the second anniversary of the commencement date if certain individual goals relating to (i) succession planning, (ii) government relations, (iii) employee relations, (iv) customer relations and (v) shareholder relations are achieved. The Talent and Compensation Committee is tracking progress on these goals as specifically outlined below:
below and the Board of Directors has determined that these pre-determined goals have been achieved:
| 1. | build a new executive team and implement a corporate succession planning process; |
| 2. | improve our government relations through key shareholder relationships / meetings; |
| 3. | improve our employee relations and employee retention, especially sales force retention; |
| 4. | improve our key customer relations; and |
| 5. | improve relationships with our shareholders and debtholders. |
As provided for under the RSU award, 50% (186,684) of these RSUs will vest on the second anniversary of his commencement date, which is May 2, 2018.
Options. The options will vest as to 25% of the total award on each of the first four anniversaries following the commencement date, subject to Mr. Papa’s continued employment with the Company through the applicable vesting date.
Future equity grants for Mr. Papa will be at the sole discretion of the Board or the Talent and Compensation Committee.
These equity grants and the requirement to purchase shares are consistent with our long-standing view that newly hired executive officers should be required to purchase and hold a significant amount of our shares as a condition of hiring while ensuring strong shareholder alignment.
Termination of Employment
The consequences of Mr. Papa’s termination of employment, whether or not in connection with a “change in control” of us,control,” are described below in “Potential Payments Upon Termination ofor Change in Control,” starting on page 64.55.
Holding Requirements
Pursuant to his employment agreement, Mr. Papa is restricted from selling, assigning, transferring or otherwise disposing of Common Shares acquired pursuant to equity awards granted to him in accordance with the employment
45
agreement (net of any shares sold or withheld by us in payment of the exercise price or tax withholding obligations) until the fourth anniversary of his commencement date (or, if later, in the case of all of Mr. Papa’s options, and PSUs, the first anniversary of the exercise date or vesting date and, in the case of 50% of Mr. Papa’s options, and PSUs, the second anniversary of the exercise date or vesting date). In addition, Mr. Papa is restricted from selling, assigning, transferring or otherwise disposing of Common Shares he purchases pursuant to the employment agreement until the fourth anniversary of the purchase date. Notwithstanding the foregoing, all sales restrictions will lapse upon a “change of control” (excluding any change of control following which Mr. Papa serves as the chief executive officer of the ultimate parent company), Mr. Papa’s death, disability and involuntary termination of employment without “cause” or for “good reason,” or, in the case of the purchased shares, Mr. Papa’s voluntary termination of employment.
Restrictive Covenants
Mr. Papa will beis subject to customary restrictive covenants, includingnon-competition andnon-solicitation covenants during his employment and for two years following termination of employment for any reason.
Mr. Herendeen’s Employment Agreement
In August 2016, we entered into an employment agreement with Mr. Herendeen. The initial term of Mr. Herendeen’s agreement commenced on August 22, 2016 and continues until the third anniversary of the commencement date. Beginning at the expiration of the initial term, the term will automatically renew for successive one year periods unless either party gives notice of non-renewal.
Pursuant to his agreement, Mr. Herendeen receives a base salary of $1,000,000, and a target annual incentive opportunity equal to 120% of his base salary, with a maximum annual incentive opportunity equal to 200% of his annual target incentive. Ongoing equity grants are at the sole discretion of the Talent and Compensation Committee.
The consequences of Mr. Herendeen’s termination of employment, whether or not in connection with a “change in control,” are described below in “Potential Payments Upon Termination or Change in Control,” starting on page 55.
Mr. Herendeen is subject to customary restrictive covenants, including non-competition and non-solicitation covenants during his employment and for one year following termination of employment for any reason.
Ms. Ackermann’s Employment Agreement
In July 2016, we entered into an employment agreement with Ms. Ackermann. Ms. Ackermann’s agreement commenced on August 8, 2016.
Pursuant to her agreement, Ms. Ackermann receives a base salary of $600,000, and a target annual incentive opportunity equal to 80% of her base salary, with a maximum annual incentive opportunity equal to 200% of her annual target incentive. Ongoing equity grants are at the sole discretion of the Talent and Compensation Committee.
Ms. Ackermann relocated to the New Jersey area when she joined the Company. As a result, she was provided with relocation assistance under Valeant’s relocation policy. The benefits under this policy include (i) home sale assistance, (ii) home purchase assistance, (iii) tax preparation assistance, and (iv) net loss on sale payment, at such time as Ms. Ackermann completes the sale of her house. Benefits incurred in 2017 are reported in the “All Other Compensation” column of the “Summary Compensation Table,” including reimbursement related to the taxes on imputed income for these relocation benefits, starting on page 50.
The consequences of Ms. Ackermann’s termination of employment, whether or not in connection with a “change in control,” are described below in “Potential Payments Upon Termination or Change in Control,” starting on page 55.
Ms. Ackermann is subject to customary restrictive covenants, including non-competition and non-solicitation covenants during her employment and for one year following termination of employment for any reason.
Mr. Appio’s Employment Agreement
In March 2017, we entered into an employment agreement with Mr. Appio. The initial term of Mr. Appio’s agreement commenced on August 17, 2016 and continues until August 17, 2019. Beginning at the expiration of the initial term, the term will automatically renew for successive one year periods unless either party gives notice of non-renewal.
46
Pursuant to his agreement, Mr. Appio receives a base salary of $650,000, and a target annual incentive opportunity equal to 80% of his base salary, with a maximum annual incentive opportunity equal to 200% of his annual target incentive. Mr. Appio also received a retention equity award in the form of Restricted Stock Units, with an approximate grant date fair value of $680,000, on March 28, 2017 which vested on August 17, 2017 and the remaining 2/3rds will vest equally on August 17, 2018 and August 17, 2019, respectively. Ongoing equity grants are at the sole discretion of the Talent and Compensation Committee.
Mr. Appio is on an expatriate assignment from New Jersey to China. As a result, Mr. Appio receives (i) Company-paid housing in China, (ii) tax equalization, with Mr. Appio responsible for actual taxes due in the United States and the Company responsible for any taxes due in non-United States jurisdictions in which Mr. Appio earns taxable income, and (iii) tax preparation services. These benefits are reported in the “All Other Compensation” column of the “Summary Compensation Table,” including reimbursement related to the taxes on imputed income for these expatriate assignment benefits, starting on page 50.
The consequences of Mr. Appio’s termination of employment, whether or not in connection with a “change in control,” are described below in “Potential Payments Upon Termination or Change in Control,” starting on page 55.
Mr. Appio is subject to customary restrictive covenants, including non-competition and non-solicitation covenants during his employment and for one year following termination of employment for any reason.
Mr. Humphries’ Employment Agreement
In December 2016, we entered into an employment agreement with Mr. Humphries. The initial term of Mr. Humphries’ agreement commenced on January 1, 2017 and continues until the third anniversary of the commencement date. Beginning at the expiration of the initial term, the term will automatically renew for successive one year periods unless either party gives notice of non-renewal.
Pursuant to his agreement, Mr. Humphries receives a base salary of $750,000, and a target annual incentive opportunity equal to 80% of his base salary, with a maximum annual incentive opportunity equal to 200% of his annual target incentive. Mr. Humphries received a new hire grant, with a grant date fair value of $3,000,000, comprised 40% in Performance Share Units, 30% in Restricted Stock Units, and 30% in Stock Options. It is not intended that Mr. Humphries will receive additional equity grants in 2018, and ongoing equity grants after 2018 are at the sole discretion of the Talent and Compensation Committee.
To compensate for compensation forfeited by leaving his prior employer, Mr. Humphries received (i) a cash payment of $3,000,000, of which Mr. Humphries must repay a pro-rata portion in the event he leaves the Company within 2 years of his hire date, and (ii) a Restricted Stock Unit grant, with a grant date fair value of $1,000,000, on January 2, 2017, which vests in three equal installments on the first, second and third anniversaries of the grant date.
The consequences of Mr. Humphries termination of employment, whether or not in connection with a “change in control,” are described below in “Potential Payments Upon Termination or Change in Control,” starting on page 55.
Mr. Humphries is subject to customary restrictive covenants, including non-competition and non-solicitation covenants during his employment and for one year following termination of employment for any reason.
Other Compensation Governance Practices
Share Ownership Guidelines
The Talent and Compensation Committee believes that purchasing and holding a large amount of Common Shares with one’s own money should create an incentive to manage the Company prudently. For some of our Named Executive Officers, there are minimum required purchase amounts. For example, whenWhen our CEO was hired in 2016, he was required to purchase at least $5,000,000 worth of Common Shares by no later than the first anniversary of his commencement date.date, which he did on June 10, 2016.
The Talent and Compensation Committee also established minimum share ownership requirements. Each Named Executive Officerrequirements for our NEOs, which were updated in 2018 to better align with our peers and market practice. Our CEO is required to hold 6 times base salary, and our other NEOs are required to hold 3 times base salary. Common shares and unvested Restricted Share Units are included in the calculation of share ownership. NEOs have five years to achieve these guidelines, and must retain 50% of their net shares vesting until this requirement is met. Mr. Papa has satisfied this requirement based on the Common Shares representing the combined amount of two times of their base salary plus their target annual cash incentive — an amount generally in excess of the share ownership requirements ofhe currently owns, and our peer group companies. In addition, our CEO also has restrictions requiring himother NEOs are on track to hold shares as described above.achieve these guidelines within five years.
47
Anti-Pledging, Anti-Hedging and Claw Back PolicyClawback Policies
In 2014, we adopted anti-hedging, anti-pledging and recoupment (“claw back”clawback”) policies. The anti-hedging policy generally prohibits officers, Directors and employees from engaging in new hedging or monetization transactions with Company stock. This prohibition prevents officers, Directors and employees from owning securities without the full risks and rewards of ownership and preserves the common interests and objectives of the Company and its officers, Directors and employees. The anti-pledging policy generally prohibits officers, Directors and employees from holding our securities in a margin account where the securities are subject to margin sales or pledging our securities as loan collateral.
As described above, our Board amended our claw back policy inIn February 2017, the Company amended its clawback policy to make it more robust.
Employment Agreements
To fosterprovide that the retentionBoard may exercise its discretion to require any employee who receives equity-based compensation to reimburse bonus, incentive or equity-based compensation awarded to such employees beginning in 2017 in the event of:
Following a material restatement or adjustment of our keyfinancial statements, the compensation subject to clawback is the amount in excess of what would have been awarded based on the corrected performance measures, calculated on a pre-tax basis. If the financial reporting measure applicable to the incentive or equity-based compensation is a stock price or total shareholder return measure, the Board has broad authority to estimate the effect of the financial restatement on our share price in calculating recoverable compensation. In the case of detrimental conduct, the Board has the ability to recover all incentive compensation.
We may not indemnify any covered employee, directly or indirectly, for any losses incurred in connection with the recovery of any compensation under the policy, including through the payment of insurance premiums, gross-up payments or supplemental payments. The policy will continue to apply to covered employees even after they cease to be employed by us.
Compensation Risk Determination
The Talent and Compensation Committee assesses the potential risks relating to our compensation policies and practices for our employees, including those related to our executive compensation programs. Periodically, at least annually, the Talent and Compensation Committee reviews and discusses with management team, we have entered into an employment agreementthe relationship between the Company’s compensation policies and practices and its risk management, including the extent to which those policies and practices create risks for the Company, to ensure that such policies and practices support not only economic performance, but also compliance with our active Named Executive Officers. The agreement for our CEO is described above under “Chief Executive Officer’s Employment Agreement” startingrisk management objectives, to ensure that they do not encourage excessive or unnecessary risk-taking and are not reasonably likely to have a material adverse effect on page 54. We have also entered into agreements with Mr. Herendeen and Ms. Ackermann. These agreements set forth the terms and conditions of each executive’s employment, including their base salary, short-term and long-term incentive opportunity, consequences of a termination of employment and the restrictive and other covenants to which they will be subject, including our claw back policy.Company.
Tax and Accounting Implications
Tax DeductibilityConsiderations of Our Executive Compensation
Section 162(m) of the Code generally limits the tax deductibility of annual compensation paid by public companies for certain executive officers to $1 million. Prior to the enactment of the Tax Cuts and Jobs Act of 2017 (the “TCJA”), Section 162(m) provided an exemption from this limitation for “qualified performance-based compensation.” The TCJA repealed the “qualified performance-based compensation” exemption, effective for taxable years beginning after December 31, 2017, but provides transition relief for certain contractual arrangements in place as of November 2, 2017 and not modified thereafter.
As part of its role, the Talent and Compensation Committee reviews and considersconsidered the tax deductibility of executive compensation under Section 162(m) of the Code, which provides that we may not deduct compensation in excess of $1,000,000 that is paid to certain individuals, unless that compensation is performance based and meets other requirements.Code. We generally develop our compensation plans with the intent of maximizing the tax deductibility of our executive compensation program for federal income tax purposes.purposes, including
48
developing compensation plans that intended for such payouts to meet the definition of qualified performance-based compensation under Section 162(m) of the Code that was in effect prior to the enactment of the TCJA. However, in certain situations, the Talent and Compensation Committee may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for its executive officers.
Accounting for Our Stock-Based Compensation
We account for stock-based payments, including grants under each of our equity compensation plans in accordance with the requirements of FASB ASC Topic 718.
49
The Report of the Talent and Compensation Committee of the Board 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, as amended or under the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
The Talent and Compensation Committee of our Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K with management and, based on such review and discussions, the Talent and Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Talent and Compensation Committee Dr. Argeris (Jerry) N. Karabelas, Chairperson Richard U. De Schutter D. Robert Hale Amy B. Wechsler, M.D. |
Talent and Compensation Committee
Dr. Argeris (Jerry) N. Karabelas, Chairperson
Richard U. DeSchutter
Stephen Fraidin
D. Robert Hale
Amy B. Wechsler, M.D.
The following table sets forth the annual and long-term compensation awarded to or paid to the Named Executive OfficersNEOs for services rendered to the Company in all capacities during the year ended December 31, 2016.2017.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($)(3) | Total ($) | ||||||||||||||||||||||||
Current Officers | ||||||||||||||||||||||||||||||||
Joseph C. Papa(4) | 2016 | 980,769 | 9,125,000 | (5) | 41,994,406 | 10,000,007 | — | 617,665 | 62,717,846 | |||||||||||||||||||||||
Chief Executive Officer | ||||||||||||||||||||||||||||||||
Paul S. Herendeen(6) | 2016 | 346,154 | 10,400,000 | (7) | 4,690,500 | 15,937,869 | — | — | 31,374,523 | |||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | ||||||||||||||||||||||||||||||||
Christina M. Ackermann(8) | 2016 | 230,769 | 1,800,000 | (9) | 2,109,143 | 599,987 | — | 13,306 | (10) | 4,753,204 | ||||||||||||||||||||||
Executive Vice President and General Counsel | ||||||||||||||||||||||||||||||||
Former Officers | ||||||||||||||||||||||||||||||||
J. Michael Pearson(11) | 2016 | 669,231 | (12) | — | — | — | — | 11,304,448 | 11,973,679 | |||||||||||||||||||||||
Chief Executive Officer | 2015 | — | — | 140,304,682 | — | 500,000 | 772,760 | 141,577,442 | ||||||||||||||||||||||||
| 2014 | 2,007,693 | — | — | — | 8,000,000 | 368,235 | 10,375,928 | |||||||||||||||||||||||||
Howard B. Schiller(13) | 2016 | 813,491 | — | — | — | — | 217,571 | 1,031,063 | ||||||||||||||||||||||||
Interim Chief Executive Officer | 2015 | 563,963 | — | — | — | — | 42,842 | 606,805 | ||||||||||||||||||||||||
| 2014 | 953,846 | — | 23,730,659 | — | 2,400,000 | 23,067 | 27,107,572 | |||||||||||||||||||||||||
Robert L. Rosiello(14) | 2016 | 1,000,000 | 1,000,000 | (15) | 2,118,427 | — | — | 153,504 | 4,271,931 | |||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2015 | 546,154 | 6,000,000 | 53,126,290 | — | 712,184 | 13,770 | 60,398,398 | ||||||||||||||||||||||||
Dr. Ari S. Kellen(16) | 2016 | 932,692 | 1,000,000 | (17) | 2,875,027 | — | — | 89,915 | 4,897,634 | |||||||||||||||||||||||
Executive Vice President, Company Group Chairman | 2015 | 741,316 | 3,000,000 | — | — | 955,688 | 30,688 | 4,727,692 | ||||||||||||||||||||||||
| 2014 | 752,885 | 5,000,000 | 43,085,254 | — | 1,800,000 | 2,521 | 50,640,660 | |||||||||||||||||||||||||
Anne C. Whitaker(18) | 2016 | 709,615 | 1,000,000 | (19) | 945,720 | — | — | 50,183 | 2,705,518 | |||||||||||||||||||||||
Executive Vice President, Company Group Chairman | 2015 | 376,154 | 900,000 | 15,058,798 | — | 325,370 | 13,764 | 16,674,086 | ||||||||||||||||||||||||
Robert R. Chai-Onn(20) | 2016 | 591,346 | 1,000,000 | (21) | 1,513,176 | — | — | 3,354,938 | 6,459,460 | |||||||||||||||||||||||
Executive Vice President, General Counsel and Chief Legal Officer, Head of Corporate and Business Development | | 2015 2014 | | | 778,846 715,385 | | | — — |
| | — 21,389,884 | | | — — |
| | 955,688 1,800,000 | | | 41,264 26,978 | | | 1,775,798 23,932,247 | | ||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||||||
Current Officers | ||||||||||||||||||||||||
Joseph C. Papa(5) Chief Executive Officer | 2017 | 1,500,000 | — | — | — | 2,981,250 | 413,858 | 4,895,108 | ||||||||||||||||
2016 | 980,769 | 9,125,000 | 41,994,406 | 10,000,007 | — | 617,665 | 62,717,846 | |||||||||||||||||
Paul S. Herendeen Executive Vice President and Chief Financial Officer | 2017 | 1,000,000 | — | — | — | 1,590,000 | 7,950 | 2,597,950 | ||||||||||||||||
2016 | 346,154 | 10,400,000 | 4,690,500 | 15,937,869 | — | — | 31,374,523 | |||||||||||||||||
Christina M. Ackermann Executive Vice President and General Counsel | 2017 | 600,000 | — | 906,030 | 360,006 | 636,000 | 293,116 | 2,795,152 | ||||||||||||||||
2016 | 230,769 | 1,800,000 | 2,109,143 | 599,987 | — | 13,306 | 4,753,204 | |||||||||||||||||
Thomas J. Appio(6) Executive Vice President, Company Group Chairman, International | 2017 | 650,000 | — | 1,133,771 | 180,012 | 669,500 | 796,003 | 3,429,286 | ||||||||||||||||
William D. Humphries(6) Executive Vice President, Company Group Chairman, Dermatology | 2017 | 750,000 | 3,000,000 | (7) | 3,225,011 | 899,995 | 551,250 | 7,950 | 8,434,206 | |||||||||||||||
| (1) | This column represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for all stock awards granted in 2017, which includes PSUs and RSUs. The grant date fair value of PSU awards |
The number of PSUs that are ultimately distributed to Mr. Papa and Ms. Ackermann, Mr. Appio and Mr. Humphries will be determined based on (i) the Company’s stock price at the end of the measurement period for their respective awards. If25% of the total PSU award, and (ii) ROTC, which will be measured over three-years, from 2017 through 2019 for 75% of the total PSU award. The grant date fair value was calculated based onassuming a 200% payout, which is the maximum outcome of the performance conditions, the value in the table would be $60,952,065$1,060,556 for Ms. Ackermann, $530,278 for Mr. PapaAppio and $1,771,709$2,679,527 for Ms. Ackermann.
As described in further detail in the Compensation Discussion and Analysis on page 52, the equity awards granted to Messrs. Papa and Herendeen are front-loaded, and it is not expected that Mr. Papa or Mr. Herendeen will receive additional equity grants before the fourth and third anniversaries of their respective commencement dates.Humphries.
50
| (2) | For the |
| (3) |
|
| (4) | For 2017, amounts in this column for |
Name | Executive Allowance(A) | Severance | Health and Welfare(B) | 401(k) Match | Personal Use of Aircraft(C) | |||||||||||||||
Current Officers | ||||||||||||||||||||
Joseph C. Papa | — | — | — | — | $ | 617,665 | ||||||||||||||
Paul S. Herendeen | — | — | — | — | — | |||||||||||||||
Christina M. Ackermann | — | — | — | — | — | |||||||||||||||
Former Officers | ||||||||||||||||||||
J. Michael Pearson | $ | 25,962 | $ | 10,460,342 | $ | 45,157 | $ | 7,950 | $ | 150,504 | ||||||||||
Howard B. Schiller | — | — | — | $ | 7,950 | $ | 208,523 | |||||||||||||
Robert L. Rosiello | — | — | $ | 44,504 | — | — | ||||||||||||||
Dr. Ari S. Kellen | — | — | $ | 44,504 | $ | 7,950 | $ | 37,460 | ||||||||||||
Anne C. Whitaker | — | — | $ | 44,645 | $ | 5,538 | — | |||||||||||||
Robert R. Chai-Onn | — | $ | 3,300,492 | $ | 46,496 | $ | 7,950 | — | ||||||||||||
Name | Life Insurance | Relocation | Consulting | Medicare Taxes(D) | ||||||||||||||||
Current Officers | ||||||||||||||||||||
Joseph C. Papa | — | — | — | — | ||||||||||||||||
Paul S. Herendeen | — | — | — | — | ||||||||||||||||
Christina M. Ackermann | — | $ | 13,306 | — | — | |||||||||||||||
Former Officers | ||||||||||||||||||||
J. Michael Pearson | $ | 112,332 | — | $ | 499,998 | $ | 2,204 | |||||||||||||
Howard B. Schiller | — | — | — | $ | 1,098 | |||||||||||||||
Robert L. Rosiello | $ | 109,000 | — | — | — | |||||||||||||||
Dr. Ari S. Kellen | — | — | — | — | ||||||||||||||||
Anne C. Whitaker | — | — | — | — | ||||||||||||||||
Robert R. Chai-Onn | — | — | — | — | ||||||||||||||||
Papa | Herendeen | Ackermann | Appio | Humphries | |||||||||||
401(k) Match | $ | 3,923 | $ | 7,950 | $ | 5,538 | $ | 7,950 | $ | 7,950 | |||||
Use of Company Aircraft | $ | 409,935 | (A) | — | — | — | — | ||||||||
Relocation | — | — | $ | 185,705 | — | — | |||||||||
Gross up | $ | 101,873 | (B) | $ | 27,524 | (C) | — | ||||||||
Expat Program Benefits | — | — | — | $ | 760,529 | — | |||||||||
| (A) |
|
|
Amount includes the value of |
|
| (C) | This amount represents the reimbursement related to |
| (5) | Mr. Papa is Chairman of the |
|
|
| (6) | Compensation for 2016 and 2015 is not shown for Mr. |
| (7) | Mr. Humphries was appointed |
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants of Plan-Based Awards
The following table provides information on the grants of plan-based awards to the Named Executive OfficersNEOs during the year ended December 31, 2016.2017.
Estimated Future Payouts |
Estimated Future | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options(4) (#) | Exercise or Base Price of Option Awards(5) ($/Sh) | Grant Date Fair Value(6) ($) | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold ($) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||
Current Officers | ||||||||||||||||||||||||||||||||||||||||||||
Joseph C. Papa | 05/02/16 | 0 | 933,416 | 1,866,832 | 29,803,973 | |||||||||||||||||||||||||||||||||||||||
| 05/02/16 | 373,367 | (7) | 12,190,433 | |||||||||||||||||||||||||||||||||||||||||
| 06/09/16 | 682,652 | 23.92 | 10,000,007 | |||||||||||||||||||||||||||||||||||||||||
| N/A | 0 | 2,250,000 | 4,500,000 | |||||||||||||||||||||||||||||||||||||||||
Paul S. Herendeen | 08/22/16 | 150,000 | (8) | 4,690,500 | ||||||||||||||||||||||||||||||||||||||||
| 08/22/16 | 1,000,000 | 28.74 | 15,937,869 | |||||||||||||||||||||||||||||||||||||||||
| N/A | 0 | 1,200,000 | 2,400,000 | |||||||||||||||||||||||||||||||||||||||||
Christina M. Ackermann | 08/08/16 | 0 | 26,306 | 78,918 | 1,124,845 | |||||||||||||||||||||||||||||||||||||||
| 08/08/16 | 43,844 | (8) | 984,298 | |||||||||||||||||||||||||||||||||||||||||
| 08/10/16 | 39,469 | 27.32 | 599,987 | |||||||||||||||||||||||||||||||||||||||||
| N/A | 0 | 480,000 | 960,000 | |||||||||||||||||||||||||||||||||||||||||
Former Officers | ||||||||||||||||||||||||||||||||||||||||||||
J. Michael Pearson | N/A | 0 | 2,000,000 | 4,000,000 | ||||||||||||||||||||||||||||||||||||||||
Robert L. Rosiello | 05/12/16 | 84,975 | (9) | 2,118,427 | ||||||||||||||||||||||||||||||||||||||||
| N/A | 0 | 1,200,000 | 2,400,000 | |||||||||||||||||||||||||||||||||||||||||
Ari S. Kellen | 05/12/16 | 115,324 | (9) | 2,875,027 | ||||||||||||||||||||||||||||||||||||||||
| N/A | 0 | 1,200,000 | 2,400,000 | |||||||||||||||||||||||||||||||||||||||||
Anne C. Whitaker | 05/12/16 | 37,935 | (9) | 945,720 | ||||||||||||||||||||||||||||||||||||||||
| N/A | 0 | 600,000 | 1,200,000 | |||||||||||||||||||||||||||||||||||||||||
Robert R. Chai-Onn | 05/12/16 | 60,697 | (9) | 1,513,176 | ||||||||||||||||||||||||||||||||||||||||
| N/A | 0 | 900,000 | 1,800,000 | |||||||||||||||||||||||||||||||||||||||||
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options(4) (#) | Exercise or Base Price of Option Awards(5) ($/Sh) | Grant Date Fair Value(6) ($) | |||||||||||||||||||||||||||||||
Name | Grant Date | Committee Action Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||
Joseph C. Papa | ||||||||||||||||||||||||||||||||||||
2017 AIP | 2/20/2017 | 2/20/2017 | 0 | 2,250,000 | 4,500,000 | |||||||||||||||||||||||||||||||
Paul S. Herendeen | ||||||||||||||||||||||||||||||||||||
2017 AIP | 2/20/2017 | 2/20/2017 | 0 | 1,200,000 | 2,400,000 | |||||||||||||||||||||||||||||||
Christina M. Ackermann | ||||||||||||||||||||||||||||||||||||
2017 AIP | 2/20/2017 | 2/20/2017 | 0 | 480,000 | 960,000 | |||||||||||||||||||||||||||||||
2017 ROTC PSU | 1/6/2017 | 12/23/2016 | 6,144 | 24,574 | 49,148 | 394,167 | ||||||||||||||||||||||||||||||
2017 TSR PSU | 1/6/2017 | 12/23/2016 | 2,048 | 8,192 | 16,384 | 136,111 | ||||||||||||||||||||||||||||||
2017 RSU | 1/6/2017 | 12/23/2016 | 24,575 | 375,752 | ||||||||||||||||||||||||||||||||
2017 Options | 3/1/2017 | 12/23/2016 | 60,345 | 14.38 | 360,006 | |||||||||||||||||||||||||||||||
Thomas J. Appio | ||||||||||||||||||||||||||||||||||||
2017 AIP | 2/20/2017 | 2/20/2017 | 0 | 520,000 | 1,040,000 | |||||||||||||||||||||||||||||||
2017 ROTC PSU | 1/6/2017 | 12/23/2016 | 3,072 | 12,287 | 24,574 | 197,083 | ||||||||||||||||||||||||||||||
2017 TSR PSU | 1/6/2017 | 12/23/2016 | 1,024 | 4,096 | 8,192 | 68,055 | ||||||||||||||||||||||||||||||
2017 RSU | 1/6/2017 | 12/23/2016 | 12,287 | 187,868 | ||||||||||||||||||||||||||||||||
2017 Options | 3/1/2017 | 12/23/2016 | 30,174 | 14.38 | 180,012 | |||||||||||||||||||||||||||||||
2017 Retention RSU | 3/28/2017 | 8/5/2016 | 63,742 | 680,765 | ||||||||||||||||||||||||||||||||
William D. Humphries | ||||||||||||||||||||||||||||||||||||
2017 AIP | 2/20/2017 | 2/20/2017 | 0 | 600,000 | 1,200,000 | |||||||||||||||||||||||||||||||
2017 ROTC PSU | 1/2/2017 | 9/30/2016 | 15,376 | 61,502 | 123,004 | 986,492 | ||||||||||||||||||||||||||||||
2017 TSR PSU | 1/2/2017 | 9/30/2016 | 5,125 | 20,501 | 41,002 | 353,271 | ||||||||||||||||||||||||||||||
2017 RSU | 1/2/2017 | 9/30/2016 | 61,502 | 893,009 | ||||||||||||||||||||||||||||||||
2017 Make Up RSU | 1/2/2017 | 9/30/2016 | 68,336 | 992,239 | ||||||||||||||||||||||||||||||||
2017 Options | 3/1/2017 | 9/30/2016 | 150,859 | 14.38 | 899,995 | |||||||||||||||||||||||||||||||
| (1) |
|
| (2) |
|
| (3) | This column shows the number of RSUs granted in |
| (4) | This column shows the number ofnon-qualified stock options granted in |
| (5) | The non-qualified options vest 1/3 per year on the first, second and third anniversaries of the grant date and have a ten-year term. The exercise price is the closing price of the Company’s |
| (6) | This column shows the grant date fair value of each equity award computed in accordance with FASB ASC Topic 718. The grant date fair value of the TSR PSU awards |
|
| 52
|
|
Outstanding Equity Awards at FiscalYear-End
The following table provides information on the holdings of stock options and stock awards by the Named Executive OfficersNEOs as of December 31, 2016, other than Mr. Schiller, who did not hold any outstanding equity awards at such date.2017. This table includes unexercised and unvested option awards and unvested RSUs and PSUs. Each equity grant is shown separately for each Named Executive Officer.NEO. The market value of the stock awards is based on the closing market price of our Common Shares on December 31, 2016,29, 2017, which was $14.52.$20.78.
Name | Date of Grant* | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Options Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||||||
Current Officers | ||||||||||||||||||||||||||||||||||||
Joseph C. Papa | 05/02/2016 | 373,367 | (1) | 5,421,289 | ||||||||||||||||||||||||||||||||
| 05/02/2016 | 933,416 | (2) | 13,553,200 | |||||||||||||||||||||||||||||||||
| 06/09/2016 | 0 | 682,652 | (3) | 23.92 | 05/02/2026 | |||||||||||||||||||||||||||||||
Paul S. Herendeen | 08/22/2016 | 150,000 | (1) | 2,178,000 | ||||||||||||||||||||||||||||||||
| 08/22/2016 | 0 | 1,000,000 | (4) | 28.74 | 08/22/2026 | |||||||||||||||||||||||||||||||
Christina M. Ackermann | 08/08/2016 | 43,844 | (1) | 636,615 | ||||||||||||||||||||||||||||||||
| 08/08/2016 | 26,306 | (5) | 381,963 | |||||||||||||||||||||||||||||||||
| 08/10/2016 | 0 | 39,469 | (3) | 27.32 | 08/10/2026 | |||||||||||||||||||||||||||||||
Former Officers | ||||||||||||||||||||||||||||||||||||
J. Michael Pearson(6) | 08/23/2011 | 500,000 | 0 | 54.76 | 05/02/2017 | |||||||||||||||||||||||||||||||
Robert L. Rosiello | 07/01/2015 | 68,000 | (7) | 987,360 | ||||||||||||||||||||||||||||||||
| 07/01/2015 | 68,000 | (7) | 987,360 | |||||||||||||||||||||||||||||||||
| 07/20/2015 | 10,320 | (8) | 149,846 | |||||||||||||||||||||||||||||||||
| 10/20/2015 | 6,300 | (8) | 91,476 | |||||||||||||||||||||||||||||||||
| 05/12/2016 | 56,650 | (9) | 822,558 | |||||||||||||||||||||||||||||||||
Dr. Ari S. Kellen | 01/09/2014 | 75,000 | (10) | 1,089,000 | ||||||||||||||||||||||||||||||||
| 01/20/2014 | 28,087 | (11) | 407,823 | |||||||||||||||||||||||||||||||||
| 02/21/2014 | 75,000 | (12) | 1,089,000 | |||||||||||||||||||||||||||||||||
| 05/12/2016 | 76,883 | (13) | 1,116,341 | |||||||||||||||||||||||||||||||||
Anne C. Whitaker | 05/13/2015 | 37,485 | (14) | 544,282 | ||||||||||||||||||||||||||||||||
| 07/20/2015 | 5,000 | (15) | 72,600 | |||||||||||||||||||||||||||||||||
| 05/12/2016 | 25,290 | (16) | 367,211 | |||||||||||||||||||||||||||||||||
Robert R. Chai-Onn | 12/12/2013 | 77,142 | 0 | 106.49 | 10/08/2017 | |||||||||||||||||||||||||||||||
Option Awards | Stock Awards | ||||||||||||||||||||||||||
Name | Date of Grant | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Options Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||
Joseph C. Papa | 5/2/2016 | 373,367 | (1) | $ | 7,758,566 | ||||||||||||||||||||||
5/2/2016 | 933,416 | (2) | $ | 19,396,384 | |||||||||||||||||||||||
6/9/2016 | 170,663 | 511,989 | (3) | 23.92 | 5/2/2026 | ||||||||||||||||||||||
Paul S. Herendeen | 8/22/2016 | 100,000 | (4) | $ | 2,078,000 | ||||||||||||||||||||||
8/22/2016 | 333,333 | (5) | 666,667 | 28.74 | 8/22/2026 | ||||||||||||||||||||||
Christina M. Ackermann | 8/8/2016 | 29,230 | (4) | $ | 607,399 | ||||||||||||||||||||||
8/8/2016 | 26,306 | (6) | $ | 546,639 | |||||||||||||||||||||||
8/10/2016 | 9,867 | 29,602 | (3) | 27.32 | 8/10/2026 | ||||||||||||||||||||||
1/6/2017 | 24,575 | (4) | $ | 510,669 | |||||||||||||||||||||||
1/6/2017 | 16,383 | (8) | $ | 340,438 | |||||||||||||||||||||||
1/6/2017 | 8,192 | (7) | $ | 170,230 | |||||||||||||||||||||||
1/6/2017 | 16,383 | (9) | $ | 340,438 | |||||||||||||||||||||||
3/1/2017 | 0 | (5) | 60,345 | 14.38 | 3/1/2027 | ||||||||||||||||||||||
Thomas J. Appio | 8/9/2013 | 22,350 | 0 | 101.68 | 8/9/2023 | ||||||||||||||||||||||
1/6/2017 | 12,287 | (4) | $ | 255,324 | |||||||||||||||||||||||
1/6/2017 | 8,191 | (8) | $ | 170,209 | |||||||||||||||||||||||
1/6/2017 | 4,096 | (7) | $ | 85,115 | |||||||||||||||||||||||
1/6/2017 | 8,191 | (9) | $ | 170,209 | |||||||||||||||||||||||
3/1/2017 | 0 | (5) | 30,174 | 14.38 | 3/1/2027 | ||||||||||||||||||||||
3/28/2017 | 42,495 | (10) | $ | 883,046 | |||||||||||||||||||||||
William D. Humphries | 1/2/2017 | 68,336 | (4) | $ | 1,420,022 | ||||||||||||||||||||||
1/2/2017 | 61,502 | (4) | $ | 1,278,012 | |||||||||||||||||||||||
1/2/2017 | 41,001 | (8) | $ | 852,001 | |||||||||||||||||||||||
1/2/2017 | 20,501 | (11) | $ | 426,011 | |||||||||||||||||||||||
1/2/2017 | 41,001 | (9) | $ | 852,001 | |||||||||||||||||||||||
3/1/2017 | 0 | (5) | 150,859 | 14.38 | 3/1/2027 | ||||||||||||||||||||||
| RSUs are scheduled to vest 100% on the fourth anniversary of |
| (2) | As previously disclosed in our Form 8-K filing on March 12, 2018, these PSUs Mr. Papa received upon hire have been cancelled. However, since these PSUs were outstanding as of December 31, 2017, they are shown in the table above. |
| (3) | Options vest 1/4 per year on the first, second, third and fourth anniversary of the |
| RSUs vest 1/3 per year on the first, second, and third anniversary of the grant date. |
53
(5) | Options vest 1/3 per year on the first, second and third anniversary of the grant date. |
| (6) | The amount reported |
|
|
|
|
|
| (7) | The amount reported is the target number of shares. The award vests based on the closing price of the Company’s Common Shares on the vesting date. If the share price equals or exceeds $19.53, 25% of target shares delivered; if the share price equals or exceeds $29.30, 100% of target shares delivered; and if the share price equals or exceeds $58.60, 200% of target shares delivered. However, if the Company’s Total Shareholder Return between grant date and vesting date is below the 50th percentile of the TSR for |
| (8) | The amount reported is the maximum number of shares that may be earned based on the first measurement period of an award |
| (9) | The amount reported is the target number of shares |
|
| 1/3 of |
(11) | The amount reported |
|
|
|
|
|
|
Option Exercises and Stock Vested
The following table provides information regarding option exercises by the Named Executive OfficersNEOs during 20162017 and Common Shares acquired on the vesting of RSUs and PSUs held by the Named Executive OfficersNEOs during 2016.2017.
| Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Net Number of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($)(3) | ||||||||||||
Current Officers | ||||||||||||||||
Joseph C. Papa | — | — | — | — | ||||||||||||
Paul S. Herendeen | — | — | — | — | ||||||||||||
Christina M. Ackermann | — | — | — | — | ||||||||||||
Former Officers | ||||||||||||||||
J. Michael Pearson | 4,433,128 | 60,512,513 | — | — | ||||||||||||
Howard B. Schiller | — | — | 107,608 | 9,738,404 | ||||||||||||
Robert L. Rosiello | — | — | 32,480 | 605,328 | ||||||||||||
Dr. Ari S. Kellen | — | — | 47,803 | 1,524,969 | ||||||||||||
Anne C. Whitaker | — | — | 15,145 | 286,460 | ||||||||||||
Robert R. Chai-Onn | 126,157 | 2,393,109 | 20,232 | 468,573 | ||||||||||||
Option Awards | Stock Awards | |||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Net Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||
Joseph C. Papa | — | — | — | — | ||||||||
Paul S. Herendeen | — | — | 50,000 | 707,000 | ||||||||
Christina M. Ackermann | — | — | 14,614 | 224,617 | ||||||||
Thomas J. Appio | — | — | 33,477 | 419,398 | ||||||||
William D. Humphries | — | — | — | — | ||||||||
| (1) | The |
|
|
54
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Our practice is to enter into employment agreements in connection with an executive officer’s hire or if there are any material changes in their employment arrangements and to enter into separation agreements in connection with their departure in most circumstances. The following table sets forth the material termsexpected benefits to be received by each NEO in each of the following agreements:
Employment agreements fortermination scenarios. This table assumes a termination date of December 31, 2017 and a stock price of $20.78, which was the closing price of our Chairman and CEO (Mr. Papa); Executive Vice President and CFO (Mr. Herendeen); and Executive Vice President and General Counsel (Ms. Ackermann);
Separation and consulting agreements for our former CEO (Mr. Pearson); former Interim CEO (Mr. Schiller); former Executive Vice President and CFO and former Executive Vice President, Corporate Development and Strategy (Mr. Rosiello); and former Executive Vice President and Company Group Chairman (Dr. Kellen); and
Separation agreements for our former Executive Vice President and Company Group Chairman (Ms. Whitaker) and former Executive Vice President, General Counsel and Chief Legal Officer, Head of Corporate and Business Development (Mr. Chai-Onn).
Chairman and Chief Executive Officer
In April 2016, we entered into an employment agreement with Mr. Papa, our Chairman and CEO, in connection with his hiring. The initial term of Mr. Papa’s agreement commencedCommon Shares on May 2, 2016 and continues untilDecember 29, 2017, the fifth anniversarylast business day of the commencement date. Beginning at the expirationyear. The receipt of the initial term, the term will automatically renew for successive one year periods, unless either party gives notice ofnon-renewal.
Shortly following his commencement date, Mr. Papa received a cash payment equal to $8,000,000 from us to compensate him for equity-based compensation he forfeited in connection with the termination of his employment with his former employer, theafter-tax amount of which must be repaid by Mr. Papa to us if his employmentbenefits is terminated by us for cause or he voluntarily terminates his employment without “good reason” (as defined below) during the first year of his employment with us.
If Mr. Papa’s employment is terminated by us without cause, or by Mr. Papa for good reason,generally subject to his executing and not revoking a general release of claims, Mr. Papa will be entitled to receive a cash severance payment equal toclaims. Other relevant assumptions and explanations are set forth in the sum of two timesfootnotes following the sum of his annual base salary and annual target incentive, a prorated annual incentive based on our actual performance and continued health benefits for 24 months at active employee rates.table.
Pursuant to the terms of the equity award agreements that were outstanding as of December 30, 2016, if Mr. Papa’s employment is terminated by us without cause, or by Mr. Papa for good reason, in both of those circumstances (other than in connection with our change in control), as well as upon his death or disability, Mr. Papa will be entitled to (i) prorated vesting of unvested PSUs, based on our actual performance, through Mr. Papa’s termination date; (ii) accelerated vesting of unvested RSUs; and (iii) prorated vesting of unvested option awards through Mr. Papa’s termination date.
If Mr. Papa’s employment is terminated by us without cause, or by Mr. Papa for good reason, in each case within 12 months of our change in control (or during thesix-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), unvested PSUs will vest based on actual performance through Mr. Papa’s termination date (or, if later, the date of the change in control) and unvested options will vest in full.
Good Reason
Change in Control
or Disability(1) If Mr. Papa’s employment is terminated by us without cause, or by Mr. Papa for good reason, including within 12 months of our change in control (or during the six-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), or upon the expiration of his employment term, Mr. Papa will be entitled to receive a cash severance payment equal to the sum of two times the sum of his annual base salary and annual target incentive, a prorated annual incentive based on actual performance, and continued health benefits for 24 months at active employee rates, as shown above under “Termination without Cause or for Good Reason” and “Termination within 12 months of a Change in Control.” For Mr. Papa, “good reason” includes (i) a diminution of duties and responsibilities, including removing Mr. Papa from the position of CEO; (ii) any reduction in base salary or target incentive opportunity; (iii) any reduction in base salary or target incentive opportunity; (iii) any
55
relocation of Mr. Papa’s primary place of business that results in an increase of hisone-way commute by 50 miles or more; and (iv) a material breach by usthe Company of a material provision of his employment agreement.
Mr. Papa will be subject to customary restrictive covenants, includingnon-competition andnon-solicitation covenants during his employment and for two years following termination of employment for any reason.
Executive Vice President and Chief Financial Officer
In August 2016, we entered into an employment agreement with Mr. Herendeen, our Executive Vice President and CFO, in connection with his hiring. The initial term of Mr. Herendeen’s agreement commenced on
August 22, 2016 and continues until the third anniversary of the commencement date. Beginning at the expiration of the initial term, the term will automatically renew for successive one year periods, unless either party gives notice ofnon-renewal.
Shortly following his commencement date, Mr. Herendeen received a cash payment from us equal to $10,000,000 to compensate him for equity-based compensation he forfeited in connection with the termination of his employment with his former employer. If Mr. Herendeen voluntarily terminates his employment without good reason (as defined below) or his employment is terminated by us for cause duringas a result of death or disability, the firstCompany will pay any bonus earned but unpaid in respect to the fiscal year of his employment, he will be requiredpreceding the termination date, as shown above under “Termination due to repay an amount equal to theafter-tax value of $5,000,000 multiplied by a fraction, the numerator of which is the number of complete months that have elapsed from his commencement date through the date of such termination of employment, and the denominator of which is 12.
If Mr. Herendeen’s employment is terminated by us without cause,Death or by Mr. Herendeen for good reason, subject to his executing and not revoking a general release of claims,Disability.”
| (2) | Pursuant to the terms of the equity award agreements governing Mr. Papa’s 2016 RSUs, if his employment is terminated by us without cause, or by Mr. Papa for good reason, including within 12 months of our change in control (or during the six-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), or due to death or disability, Mr. Papa will be entitled to accelerated vesting of unvested RSUs, as shown above under “Termination without Cause or for Good Reason,” “Termination within 12 months of a Change in Control,” and “Termination due to Death or Disability.” |
| (3) | Pursuant to the terms of the equity award agreements governing Mr. Papa’s 2016 PSUs, if Mr. Papa’s employment was terminated by us without cause, or by Mr. Papa for good reason, including within 12 months of our change in control (or during the six-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), or due to death or disability, unvested PSUs would have vested based on actual performance through Mr. Papa’s termination date (or, if later, the date of the change in control). Based on actual performance, no PSUs would have been delivered, so no estimated incremental value is shown in the table above. Also, as previously disclosed in our Form 8-K filing on March 12, 2018, these PSUs Mr. Papa received upon hire have been cancelled. |
| (4) | Pursuant to the terms of the equity award agreements governing Messrs. Papa and Herendeen and Ms. Ackermann’s 2016 Stock Options, if their employment is terminated by us without cause, by Mr. Papa, Mr. Herendeen or Ms. Ackermann for good reason, or due to death or disability, unvested options will vest pro-rata, unless this termination is within 12 months of our change in control (or during the six-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), in which case all of unvested options will vest. Based on our closing stock price as of December 29, 2017, these stock options are underwater, so no estimated incremental value is shown in the table above. |
| (5) | If the employment of Mr. Herendeen or Mr. Humphries is terminated by us without cause, or by Mr. Herendeen or Mr. Humphries for good reason, they will be entitled to receive a cash severance payment equal to one times the sum of |
| (6) | Pursuant to the terms of the equity award agreements governing Messrs. Herendeen and Humphries and Ms. Ackermann’s RSUs received upon hire, if Mr. Herendeen, Mr. Humphries, or Ms. Ackermann’s employment is terminated by us without cause, by Mr. Herendeen or Mr. Humphries for good reason, or upon death or disability, they are entitled to accelerated vesting of unvested RSUs as shown above under “Termination without Cause or for Good Reason,” “Termination within 12 months of a Change in Control,” and “Termination due to Death or Disability.” |
| (7) | If the employment of Ms. Ackermann or Mr. Appio is terminated by us without cause, or by Ms. Ackermann or Mr. Appio for good reason, they will be entitled to receive a cash severance payment equal to one times the sum of annual base salary and annual target incentive, a prorated annual incentive for the year of termination |
56
equal to the lesser of the annual incentive he would have been entitled to receive based on our actual performance and his annual target incentive. If such termination occurs in contemplation of our change in control or within 12 months following our change in control, he will be entitled to receive a cash severance payment equal to two times the sum of his annual base salary and annual target incentive, and a prorated annual target incentivecontinued health benefits for the year of termination.
Upon a termination of Mr. Herendeen’s employment due to death or disability or upon expiration of the employment term followingnon-renewal of his employment agreement by either party, Mr. Herendeen will be entitled to receive a prorated annual incentive for the year of termination equal to the lesser of the annual incentive he would have been entitled to receive based on our actual performance and his annual target incentive.
Outstanding equity awards will be treated in accordance with the terms of the agreements memorializing their grant. Under the award agreements that were outstanding as of December 30, 2016, if Mr. Herendeen’s employment is terminated by us without cause, or by Mr. Herendeen for good reason, in both of those circumstances (other than in connection with our change in control), as well as upon his death or disability, Mr. Herendeen will be entitled to (i) accelerated vesting of unvested RSUs; and (ii) prorated vesting of unvested option awards through Mr. Herendeen’s termination date.
If Mr. Herendeen’s employment is terminated by us without cause, or by Mr. Herendeen for good reason, in each case within 12 months of our change in control (or during thesix-month period prior to a change in control if such termination was in contemplation of,at active employee rates, and, directly related to, the change in control), unvested options will vest in full.
for Ms. Ackermann, outplacement support, as shown above under “Termination without Cause or for Good Reason.” For Ms. Ackermann and Mr. Herendeen,Appio, “good reason” includes (i) a material reduction in duties and responsibilities, including removing Mr. Herendeen from the position of CFO;responsibilities; (ii) any reduction in his base salary or target incentive opportunity which is not comparable to the reductions for other similarly situated executive officers; (iii) any relocation of Mr. Herendeen’s primary place of business that results in an increase of hisone-way commute by 50 miles or more; and (iv) a material breach by us of a material provision of his employment agreement.
Mr. Herendeen will be subject to certain restrictive covenants, includingnon-competition andnon-solicitation covenants during his employment and for one year following termination of employment for any reason, and confidentiality,non-disparagement and cooperation covenants.
Executive Vice President and General Counsel
In July 2016, we entered into an employment agreement with Ms. Ackermann, our Executive Vice President and General Counsel, in connection with her hiring.
Shortly following her commencement date, Ms. Ackermann received aone-timesign-on bonus payment of $1,500,000. If Ms. Ackermann voluntarily terminates her employment without good reason (as defined below) or her employment is terminated by us for cause during the first two years of her employment, she will be required to repay a prorated portion of theafter-tax amount of $750,000, based on the portion of suchtwo-year period that has not elapsed as of the date of termination.
If Ms. Ackermann’s employment is terminated by us without cause, or by Ms. Ackermann for good reason, she will be entitled to receive a cash severance payment equal to one times the sum of her annual base salary and annual target incentive, and a prorated annual incentive for the year of termination equal to the lesser of the annual incentive she would have been entitled to receive based on our actual performance and her annual target incentive. If such termination occurs in contemplation of our change in control or within 12 months following our change in control, she will be entitled to receive a cash severance payment equal to two times the sum of her annual base salary and annual target incentive, and a prorated annual target incentive for the year of termination.
Pursuant to the terms of the equity award agreements that were outstanding as of December 30, 2016, if Ms. Ackermann’s employment is terminated by us without cause, or by Ms. Ackermann for good reason, in both of those circumstances (other than in connection with our change of control), as well as upon her death or disability, Ms. Ackermann will be entitled to (i) prorated vesting of unvested PSUs, based on our actual performance, through Ms. Ackermann’s termination date; (ii) accelerated vesting of unvested RSUs; and (iii) prorated vesting of unvested option awards through Ms. Ackermann’s termination date.
If Ms. Ackermann’s employment is terminated by us without cause, or by Ms. Ackermann for good reason, in each case within 12 months of our change of control (or during thesix-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), unvested PSUs will vest based on actual performance through Ms. Ackermann’s termination date (or, if later, the date of the change in control) and unvested options will vest in full.
For Ms. Ackermann, “good reason” includes (i) a material reduction in duties and responsibilities, including removing her from the position of General Counsel; (ii) any reduction in her base salary or target incentive opportunity which is not comparable to the reductions for other similarly situated executive officers; and (iii) a material breach by us of a material provision of hertheir employment agreement.
Former Chief Executive Officer
In May 2016, we entered into a separation If such termination occurs in contemplation of our change in control or within 12 months following our change in control, Ms. Ackermann and consulting agreement with Mr. Pearson, our former CEO. Under this agreement, subject to Mr. Pearson executing and not revoking a general release of claims, Mr. Pearson wasAppio will be entitled to receive (as defined in the termination without cause clause of his employment agreement), in addition to any unpaid base salary due to him in respect of his services prior to his termination date, (i) a prorated annual incentive in respect of the 2016 fiscal year; (ii) acash severance payment equal to $9,000,000; (iii) continued health, medical, dental and vision coverage for himself and his dependents at the rates applicable to active employees for a period of two years following his termination date; and (iv) office space andnon-exclusive access to an executive administrative assistant and IT support for a period of two years following his termination date. In addition, under his prior employment agreement, Mr. Pearson is required to hold 1,000,000 Common Shares that he received in connection with his equity awards for two years following his termination date. Based on the best information that the Company has as of the date of this Proxy Statement, Mr. Pearson is not holding this amount of Common Shares as of such date.
Mr. Pearson also agreed to provide us with consulting services through December 31, 2017, subject toone-month renewal periods if mutually agreed upon by Mr. Pearson and us. We agreed to pay Mr. Pearson $83,333 for each month (prorated for partial months) during the consulting period that services are performed through the end of 2016 and $15,000 for each month (prorated for partial months) that services are performed for the remainder of the consulting period. Mr. Pearson last provided consulting services and received payment in October 2016. We reserved the right to terminate the consulting period at any time prior to December 31, 2017 and did so in January 2017.
Mr. Pearson’s separation and consulting agreement also includes covenants addressing cooperation and mutual non-disparagement. Mr. Pearson will also continue to be bound by covenants in his prior employment agreement addressing confidentiality and prohibiting competition and solicitation of our employees through the second anniversary of his termination date.
Former Interim Chief Executive Officer
In July 2015, we entered into a separation and consulting agreement with Mr. Schiller, our former Interim CEO. Mr. Schiller became eligible to receive compensation as one of ournon-employee Directors following the termination date in accordance with ournon-employee Director compensation program as then in effect, prorated for any portion of the year for which he did not qualify as anon-employee Director. For a period beginning on July 1, 2015 and expiring on January 31, 2016, Mr. Schiller agreed to make himself available to consult with us from time to time, for which he received $2,500 per month. In addition, Mr. Schiller’s outstanding awards, other than PSUs, were eligible to continue vesting as service was rendered during the consulting period and, in the case of PSUs, were eligible to vest and be settled in 100,000 Common Shares upon the earlier to occur of the termination of the consulting period or a qualifying event under the terms of the applicable PSU award agreement. The agreement also included covenants addressing cooperation, mutual non-disparagement and confidentiality. Mr. Schiller was bound by covenants in prohibiting competition and solicitation of our employees through January 31, 2017.
Former Executive Vice President and Chief Financial Officer and Former Executive Vice President, Corporate Development and Strategy
In February 2017, we entered into a separation and consulting agreement with Mr. Rosiello, our former Executive Vice President and CFO and former Executive Vice President, Corporate Development and Strategy. Under this agreement, subject to his executing and not revoking a general release of claims, Mr. Rosiello was entitled to receive, in addition to any unpaid base salary due to him in respect of his services prior to his termination date, (i) a lump sum cash payment equal to two times the sum of his annual base salary and annual target incentive; (ii)incentive, a prorated annual target incentive for the year of termination, continued health medical, dental and vision coveragebenefits for himself and his dependents at the rates applicable to active employees for a period of two years following his termination date; and (iii) outplacement services up to an aggregate of $20,000 at Mr. Rosiello’s request until the earlier of 12 months following his termination dateat active employee rates, and, the date he secures full-timefor Ms. Ackermann, outplacement support, as shown above under “Termination within 12 months of a Change in Control.” No cash payment will be made if employment payments and benefits that are consistent with his then-existing employment arrangements.
Mr. Rosiello also agreed to provide us with consulting services through December 31, 2017, subject toone-month renewal periods if mutually agreed upon by Mr. Rosiello and us. We agreed to pay Mr. Rosiello $20,000 for each month (prorated for partial months) that services are performed. We reserved the right to terminate the consulting period at any time prior to the first anniversaryis terminated as a result of Mr. Rosiello’s termination date.
Upon a termination without cause for good reason or upon his death or disability, in each case following theone-year anniversary of the grant date, the performance thresholds applicable to the PSUs would be assessed through termination and a prorated portion of such units could vest upon termination based on a fraction, the numerator of which is the number of days from the date of grant through termination, and the denominator of which is 1,095 or 1,825 depending on whether the PSUs vest over three years or five years, respectively. In the event of a change in control of the Company, the performance-based RSUs would be converted into time-based RSUs equal to the number of RSUs that would have vested based on performance through the change in control. Upon a termination without cause or for good reason, the RSUs received pursuant to a retention letter agreement would have vested on a prorated monthly basis with a minimum vesting credit of 6 months, subject to his executing a general release of claims. The RSUs received pursuant to the Company matching program would have vested in full upon a termination (i) upon death or (ii) by us without cause, or by Mr. Rosiello for good reason, within 12 months following a Change of Control.
With respect to his actual payment in connection with his separation, Mr. Rosiello’s unvested PSUs, as well as the RSUs that he received pursuant to the Company matching program, were forfeited. The RSUs that he received pursuant to his retention letter agreement vested on a prorated monthly basis with a minimum vesting credit of six months, subject to his executing a general release of claims.
Mr. Rosiello’s separation and consulting agreement also includes covenants addressing cooperation and mutual non-disparagement. Mr. Rosiello will also continue to be bound by covenants in his prior employment agreement addressing confidentiality and prohibiting competition and solicitation of our employees through the first anniversary of his termination date.
Former Executive Vice President and Company Group Chairman — Dr. Kellen
In February 2017, we entered into a separation and consulting agreement with Dr. Kellen, our former Executive Vice President and Company Group Chairman. Under this agreement, subject to his executing and not revoking a general release of claims, Dr. Kellen was entitled to receive (i) a lump sum cash payment equal to two times the sum of his annual base salary and annual target incentive; (ii) continued health, medical, dental and vision coverage for himself and his dependents at the rates applicable to active employees for a period of two years following his termination date; and (iii) outplacement services up to an aggregate of $20,000 at Dr. Kellen’s request until the earlier of 12 months following his termination date and the date he secures full-time employment, payments and benefits that are consistent with his then-existing employment arrangements.
Dr. Kellen also agreed to provide us with consulting services through December 31, 2017, subject toone-month renewal periods if mutually agreed upon by Dr. Kellen and us. We agreed to pay Dr. Kellen $20,000 for each month (prorated for partial months) that services are performed. We reserve the right to terminate the consulting period at any time prior to the first anniversary of Dr. Kellen’s termination date or any subsequentone-month renewal period.
With respect to his actual payment in connection with his separation, Dr. Kellen’s unvested PSUs, as well as the RSUs that he received pursuant to the Company matching program, were forfeited. The RSUs that he received pursuant to his retention letter agreement vested on a prorated monthly basis with a minimum vesting credit of 6 months, subject to his executing a general release of claims.
Dr. Kellen’s separation and consulting agreement also includes covenants addressing cooperation and mutual non-disparagement. Dr. Kellen will also continue to be bound by covenants in his prior employment agreement addressing confidentiality and prohibiting competition and solicitation of our employees through the first anniversary of his termination date.
Former Executive Vice President and Company Group Chairman — Ms. Whitaker
In February 2017, we entered into a separation agreement with Ms. Whitaker, our former Executive Vice President and Company Group Chairman. Under this agreement, subject to her executing and not revoking a general release of claims, Ms. Whitaker was entitled to receive (i) a lump sum cash payment equal to two times the sum of her annual base salary and annual cash incentive; (ii) continued health medical, dental and vision coverage for herself and her dependents at the rates applicable to active employees for a period of two years following her termination date; and (iii) outplacement services up to an aggregate of $20,000 at Ms. Whitaker’s request until the earlier of 12 months following her termination date and the date she secures full-time employment, payments and benefits that are consistent with her then-existing employment arrangements.
With respect to her actual payment in connection with her separation, Ms. Whitaker’s unvested PSUs, as well as the RSUs that she received pursuant to the Company matching program, were forfeited. The RSUs that she received pursuant to her retention letter agreement vested on a prorated monthly basis with a minimum vesting credit of six months, subject to her executing a general release of claims.
Ms. Whitaker’s separation agreement also includes covenants addressing cooperation and mutual non-disparagement. Ms. Whitaker will also continue to be bound by covenants in her prior employment agreement addressing confidentiality and prohibiting competition and solicitation of our employees through the first anniversary of her termination date.
Former Executive Vice President, General Counsel and Chief Legal Officer, Head of Corporate and Business Development
In October 2016, we entered into a separation agreement with Mr. Chai-Onn, our former Executive Vice President, General Counsel and Chief Legal Officer, Head of Corporate and Business Development. Under this agreement, subject to his executing and not revoking a general release of claims, Mr. Chai-Onn was entitled to receive, in addition to any unpaid base salaryshown above under “Termination due to him in respect of his services prior to his termination date, (i) a lump sum cash payment equal to two times the sum of his annual base salary and annual target incentive; (ii) a lump sum cash payment equal to the remaining balance of the “special retention award” granted pursuant to the terms of the retention letter agreement dated May 9, 2016; (iii) continued health, medical, dental and vision coverage for himself and his dependents at the rates applicable to active employees for a period of two years following his termination date; and (iv) outplacement services up to an aggregate of $20,000 atMr. Chai-Onn’s request until the earlier of 12 months following his termination date and the date he secures full-time employment, payments and benefits that are consistent with his then-existing employment arrangements.
With respect to his actual payment in connection with his separation,Mr. Chai-Onn’s unvested PSUs, as well as the RSUs that he received pursuant to the Company matching program, were forfeited. The RSUs that he received pursuant to his retention letter agreement vested on a prorated monthly basis with a minimum vesting credit of six months, subject to his executing a general release of claims.
Mr. Chai-Onn’s separation agreement also includes covenants addressing cooperation and mutualnon-disparagement. Mr. Chai-Onn will also continue to be bound by covenants in his prior employment agreement addressing confidentiality and prohibiting competition and solicitation of our employees through the first anniversary of his termination date.
Termination/Change in Control(1)
Name | Cash Severance ($) | Benefits and Perquisites ($)(2) | Accelerated RSU Vesting ($)(3) | Accelerated Option Vesting ($)(4) | ||||||||||||
Current Officers | ||||||||||||||||
Joseph C. Papa | 7,500,000 | 44,504 | 5,421,289 | — | ||||||||||||
Paul S. Herendeen | 4,830,685 | — | 2,178,000 | — | ||||||||||||
Christina M. Ackermann | 2,348,055 | — | 636,615 | — | ||||||||||||
Former Officers | ||||||||||||||||
J. Michael Pearson(5) | — | — | — | — | ||||||||||||
Howard B. Schiller(6) | — | — | — | — | ||||||||||||
Robert L. Rosiello(7) | 4,400,000 | 64,504 | 378,415 | — | ||||||||||||
Dr. Ari S. Kellen(5) | — | — | — | — | ||||||||||||
Anne C. Whitaker(8) | — | — | — | — | ||||||||||||
Robert R. Chai-Onn(5) | — | — | — | — | ||||||||||||
Death or Disability.”
|
| (8) |
|
|
|
|
|
|
|
|
| (9) | Pursuant to the terms of the equity award agreements governing Ms. Ackermann’s, Mr. Appio’s and Mr. Humphries’ 2017 RSUs, if their employment is terminated by us without cause, by Ms. Ackermann, Mr. Appio, or Mr. Humphries for good reason, unvested RSUs will vest pro-rata, unless this termination is within 12 months of our change in control (or during the six-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control) or due to death or disability, in which case all of unvested options will vest. This vesting treatment, except in the case of death or disability shown above under “Termination due to Death or Disability,” applies beginning after the first anniversary of the grant date. Therefore, no value is shown above under “Termination without Cause or for Good Reason” or “Termination within 12 months of a Change in |
Termination/No Change in Control(1)
Name | Cash Severance ($) | Benefits and Perquisites ($)(2) | Accelerated RSU Vesting ($)(3) | Accelerated Option Vesting ($)(4) | ||||||||||||
Current Officers | ||||||||||||||||
Joseph C. Papa | 7,500,000 | 44,504 | 5,421,289 | — | ||||||||||||
Paul S. Herendeen | 2,630,685 | — | 2,178,000 | — | ||||||||||||
Christina M. Ackermann | 1,268,055 | — | 636,615 | — | ||||||||||||
Former Officers | ||||||||||||||||
J. Michael Pearson(5) | 10,460,342 | 45,157 | — | — | ||||||||||||
Howard B. Schiller(6) | — | — | — | — | ||||||||||||
Robert L. Rosiello(7) | 4,400,000 | 64,504 | 137,093 | — | ||||||||||||
Dr. Ari S. Kellen(7) | 4,400,000 | 64,504 | 186,056 | — | ||||||||||||
Anne C. Whitaker(8) | 2,700,000 | 64,645 | 96,924 | — | ||||||||||||
Robert R. Chai-Onn(9) | 3,961,159 | 66,406 | 468,581 | — | ||||||||||||
| Pursuant to the terms of the equity award agreements governing Ms. Ackermann’s, Mr. Appio’s and Mr. Humphries’ 2017 PSUs, if their employment |
| (11) | Pursuant to the terms of the equity award agreements governing Ms. Ackermann’s, Mr. Appio’s and Mr. Humphries’ 2017 Stock Options, if their employment is terminated by us without cause, or by Ms. Ackermann, Mr. Appio, or Mr. Humphries for good reason, in each case within 12 months of our change of control (or during the six-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), or in the case of death or disability, unvested options will vest in full. This vesting treatment, except in the case of death or disability shown above under “Termination due to Death or Disability,” applies beginning after the first anniversary of the grant date. Therefore, no value is shown above under “Termination without Cause or for Good Reason” or “Termination within 12 months of a Change in Control.” |
57
| (12) | Pursuant to the terms of the equity award agreement governing Mr. Appio’s retention 2017 RSUs, if Mr. Appio’s employment is terminated by us without cause, by Mr. Appio for good reason, or following non-renewal of Mr. Appio’s employment agreement by us, Mr. Appio is entitled to accelerated vesting of unvested RSUs as shown above under “Termination without Cause or for Good Reason.” |
| (13) | Mr. Humphries is entitled to continued health benefits for 24 months at active employee rates, as shown above under “Termination without Cause or for Good Reason” and “Termination within 12 months of a Change in Control.” |
2017 Pay Ratio Disclosure
Pay Ratio
In accordance with the requirements of Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K (which we collectively refer to as the “Pay Ratio Rule”), we are providing the following estimated information for 2017:
Methodology for Identifying Our Median Employee
Employee Population
To identify the median of the annual total compensation of all of our employees (other than our CEO), we first identified our total employee population from which we determined our median employee. We determined that, as of October 2, 2017, our employee population consisted of approximately 20,893 individuals (of which approximately 27% were located in the United States and 73% were located in jurisdictions outside the United States).
We selected October 2, 2017, which is within the last three months of 2017, as the date upon which we would identify the median employee.
Adjustments to our Employee Population
As permitted by the Pay Ratio Rule, we adjusted our total employee population (as described above) for purposes of identifying our median employee by excluding approximately 1,023 of our employees located in certain jurisdictions outside of the United States given the relatively small number of employees in those jurisdictions, as follows: 49 employees from Algeria, 70 employees from Australia, 47 employees from Belarus, 32 employees from Bulgaria, 20 employees from Croatia, 94 employees from Hong Kong, 46 employees from Kazakhstan, 24 employees from Lithuania, 84 employees from Malaysia, 48 employees from the Philippines, 24 employees from Portugal, 57 employees from Romania, 48 employees from Singapore, 33 employees from Slovakia, 61 employees from Slovenia, 25 employees from South Africa, 25 employees from Sweden, 17 employees from Switzerland, and 96 employees from Taiwan. There are 15 employees or less in the following jurisdictions: Austria, Belgium, Bosnia & Herzegovina, Costa Rica, Denmark, the Dominican Republic, El Salvador, Estonia, Finland, Guatemala, Honduras, Indonesia, Montenegro, Nicaragua, Norway, Panama, Peru, and Sri Lanka.
After taking into to account the above described adjustments to our employee population as permitted by the Pay Ratio Rule, our total adjusted employee population for purposes of determining our median employee consisted of approximately 19,870 individuals.
Determining our Median Employee
To identify our median employee from our adjusted employee population, we compared the amount of base salary of our employees as reflected in our payroll records and converted to U.S. Dollars. In making this determination, we annualized the compensation of our full-time employees including those who were hired in 2017 (but did not work for us for the entire fiscal year) and permanent part-time employees (reflecting what they would have earned if they had worked the entire year at their part-time schedule). We identified our median employee using this compensation measure, which was consistently applied to all our employees included in the calculation.
58
Determination of Annual Total Compensation of our Median Employee and our CEO
Once we identified our median employee, we then calculated such employee’s annual total compensation for 2017 using the same methodology we used for purposes of determining the annual total compensation of our NEOs for 2017 as set forth in the 2017 Summary Compensation Table on page 50.
Our CEO’s annual total compensation for 2017 for purposes of the Pay Ratio Rule is equal to the amount reported in the “Total” column in the 2017 Summary Compensation Table, adjusted, to the extent applicable, in a similar manner as the annual total compensation of our median employee.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | All Other Compensation ($) | Total ($) | ||||||||
Richard U. De Schutter | — | 366,975 | — | 366,975 | ||||||||
Dr. Fredric N. Eshelman | 115,885 | 249,995 | — | 365,880 | ||||||||
D. Robert Hale | 129,297 | 249,995 | — | 379,292 | ||||||||
Dr. Argeris (Jerry) N. Karabelas | 127,885 | 249,995 | — | 377,880 | ||||||||
Sarah B. Kavanagh | 120,885 | 249,995 | — | 370,880 | ||||||||
Robert N. Power | 125,885 | 249,995 | — | 375,880 | ||||||||
John A. Paulson(3) | — | 281,769 | 281,769 | |||||||||
Russel C. Robertson | — | 396,733 | — | 396,733 | ||||||||
Thomas W. Ross, Sr. | 195,885 | 249,995 | — | 445,880 | ||||||||
Amy B. Wechsler, M.D. | — | 370,664 | — | 370,664 | ||||||||
| (1) | The amounts shown in this column |
|
|
|
|
|
|
|
Termination/Death(1)
Name | Cash Severance ($) | Benefits and Perquisites ($) | Accelerated RSU Vesting ($)(2) | Accelerated Option Vesting ($)(3) | ||||||||||||
Current Officers | ||||||||||||||||
Joseph C. Papa | — | — | 5,421,289 | — | ||||||||||||
Paul S. Herendeen | 430,685 | — | 2,178,000 | — | ||||||||||||
Christina M. Ackermann | — | — | 636,615 | — | ||||||||||||
Former Officers | ||||||||||||||||
J. Michael Pearson(4) | — | — | — | — | ||||||||||||
Howard B. Schiller(5) | — | — | — | — | ||||||||||||
Robert L. Rosiello(6) | — | — | 241,322 | — | ||||||||||||
Dr. Ari S. Kellen(4) | — | — | — | — | ||||||||||||
Anne C. Whitaker(7) | — | — | — | — | ||||||||||||
Robert R. Chai-Onn(4) | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
Termination/ Disability(1)
Name | Cash Severance ($) | Benefits and Perquisites ($) | Accelerated RSU Vesting ($)(2) | Accelerated Option Vesting ($)(3) | ||||||||||||
Current Officers | ||||||||||||||||
Joseph C. Papa | — | — | 5,421,289 | — | ||||||||||||
Paul S. Herendeen | 430,685 | — | 2,178,000 | — | ||||||||||||
Christina M. Ackermann | — | — | 636,615 | — | ||||||||||||
Former Officers | ||||||||||||||||
J. Michael Pearson(4) | — | — | — | — | ||||||||||||
Howard B. Schiller(5) | — | — | — | — | ||||||||||||
Robert L. Rosiello(4) | — | — | — | — | ||||||||||||
Dr. Ari S. Kellen(4) | — | — | — | — | ||||||||||||
Anne C. Whitaker(6) | — | — | — | — | ||||||||||||
Robert R. Chai-Onn(4) | — | — | — | — | ||||||||||||
|
|
|
|
|
|
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||
William A. Ackman(2) | — | — | — | — | — | — | — | |||||||||||||
Richard U. DeSchutter(3) | — | — | — | — | — | — | �� | — | ||||||||||||
Dr. Fredric N. Eshelman(4) | 75,821 | 444,868 | — | — | — | — | 520,689 | |||||||||||||
Ronald H. Farmer(5) | — | 54,093 | (6) | — | — | — | — | 54,093 | ||||||||||||
Stephen Fraidin(7) | — | — | — | — | — | — | — | |||||||||||||
Colleen A. Goggins(5) | 43,227 | — | — | — | — | — | 43,227 | |||||||||||||
D. Robert Hale | 104,551 | 368,641 | — | — | — | — | 473,192 | |||||||||||||
Robert A. Ingram(8) | — | 463,105 | (6) | — | — | — | — | 463,105 | ||||||||||||
Dr. Argeris (Jerry) N. Karabelas(9) | 65,055 | 368,641 | — | — | — | — | 433,696 | |||||||||||||
Sarah B. Kavanagh(10) | 43,710 | 339,618 | — | — | — | — | 383,328 | |||||||||||||
Anders O. Lönner(11) | 16,501 | — | — | — | — | — | 16,501 | |||||||||||||
Theo Melas-Kyriazi(5) | — | 51,512 | (6) | — | — | — | — | 51,512 | ||||||||||||
G. Mason Morfit(5) | 34,127 | — | — | — | — | — | 34,127 | |||||||||||||
Joseph C. Papa | — | — | — | — | — | — | — | |||||||||||||
J. Michael Pearson(5) | — | — | — | — | — | — | — | |||||||||||||
Robert N. Power | 114,133 | 368,641 | — | — | — | — | 482,774 | |||||||||||||
Norma A. Provencio(5) | — | 64,401 | (6) | — | — | — | — | 64,401 | ||||||||||||
Russel C. Robertson(9) | — | 442,450 | (6) | — | — | — | — | 442,450 | ||||||||||||
Thomas W. Ross, Sr.(12) | 178,944 | 444,868 | — | — | — | — | 623,812 | |||||||||||||
Howard B. Schiller(5)(13) | 22,609 | — | — | — | — | — | 22,609 | |||||||||||||
Katharine B. Stevenson(14) | 22,420 | — | — | — | — | — | 22,420 | |||||||||||||
Amy B. Wechsler, M.D.(9) | — | 423,153 | (6) | — | — | — | — | 423,153 | ||||||||||||
|
| (2) | Directors had aggregate outstanding |
|
| (3) | Mr. |
|
|
|
|
|
|
|
|
|
|
|
At the direction of the full Board, the Nominating and Corporate Governance Committee evaluates the competitiveness ofnon-employee Directors’ compensation and makes recommendations to the full Board as appropriate. The Board can change the compensation of such Directors at any time. In making its recommendations, the Nominating and Corporate Governance Committee considers both the high level of expertise and the time commitment that Board service at the Company requires. The Nominating and Corporate Governance Committee has sole authority to retain and/or terminate compensation consultants or compensation consulting firms as the Nominating and Corporate Governance Committee may deem appropriate in recommendingnon-employee Director compensation.
59
Compensation
The annual cash retainer for eachnon-employee Director is $100,000, payable in quarterly installments. Annual cash retainers for the committee chairChairpersons of each Board committee are:receive an additional annual cash retainer, as follows: $40,000 for the Audit and Risk Committee, $25,000 for the Talent and Compensation Committee, $15,000 for the Nominating and Corporate Governance Committee, $15,000 for the Finance and Transactions Committee and $15,000 for the Conduct and Compliance Committee, each payable in quarterly installments. In addition,Members of Board committees who do not serve as chairpersons receive an additional annual committee member retainers arecash retainer as follows: $15,000 for the Audit and Risk Committee, $15,000 for the Talent and Compensation Committee, $10,000 for the Nominating and Corporate Governance Committee, $10,000 for the Finance and Transactions Committee and $10,000 for the Conduct and Compliance Committee, each payable in quarterly installments. On February 20, 2015, the Board approved annual cash retainers for the Sustainability and Environmental Subcommittee chair of $15,000 and members of $10,000 (dissolved on June 15, 2016). Directors are also reimbursed for their
out-of-pocket expenses in attendingin-person meetings. Directors are permitted to elect to receive RSUs in lieu of any of the above cash retainers. Any such RSUs so elected are deliverable at the end of a Director’s service with the Company.
In addition to the cash retainers above, it has previously been the Company’s practice to grantCompany grants eachnon-employee Director, a number of RSUs with a fair market value equal to $375,000 on the third business day following each Annual Meeting of Shareholders. However, on the third day following the 2017 Annual Meeting, eachnon-employee Director will be grantedShareholders, a number of RSUs with a fair market value equal to $250,000. These annual grants of RSUs vest and are deliverable prior to the next Annual Meeting of Shareholders, unless the Director elects to defer issuance until the Director’s separation from the Company.
Eachnon-employee Director is expected to hold or control Common Shares vested, restricted or deferred share units or a combination thereof, having a market value at least equal to five (5) times the annual Board cash retainer by not later than the fifth anniversary of his or her election or appointment to the Board or, for individuals who were Directors on May 30, 2012, not later than May 30, 2017. For each non-employee Director’s progress toward this requirement, see “Nominees for Election to the Board” starting on page 10.
In addition to the compensation described above, any Director serving as the Lead Independent Director has previously been entitled to receive an annual fee of $100,000 payable on the third day following each Annual Meeting of Shareholders. Going forward, commencing after the 2017 Annual Meeting, a Director serving as the Lead Independent Director will be entitled to receivereceives an annual fee of $75,000, payable on the third day following each Annual Meeting of Shareholders. Also, a Director serving as theNon-Executive Chairperson would be entitled to receive an annual payment of $400,000 (payable $220,000 in RSUs and $180,000 in cash). There is currently noNon-Executive Chairperson on the Board, and Mr. Papa received compensation in 20162017 only in his capacity as our CEO. See “Summary Compensation Table.” Mr. Ingram waived his compensation when he served as the InterimNon-Executive Chairman of the Board and as theNon-Executive Chairman of the Board from January 6, 2016 to May 2, 2016. Each of Mr. Ackman and Mr. Fraidin has waived compensation for his services as a Director of the Company.Table” on page 50.
EQUITY COMPENSATION PLAN INFORMATION
Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | |||||||||
| (a) | (b) | (c) | ||||||||||
Equity Compensation Plans Approved By Shareholders | 12,541,669 | (1)(2) | $ | 49.57 | 11,983,991 | |||||||
Equity Compensation Plans Not Approved By Shareholders | — | — | — | |||||||||
Total | 12,541,669 | $ | 49.57 | 11,983,991 | ||||||||
Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | ||||||
(a) | (b) | (c) | |||||||
Equity Compensation Plans Approved By Shareholders | 15,902,504 | (1)(2) | $ | 34.65 | 7,461,167 | ||||
Equity Compensation Plans Not Approved By Shareholders | — | — | — | ||||||
Total | 15,902,504 | $ | 34.65 | 7,461,167 | |||||
| (1) | Included in this amount is the maximum number of Common Shares that may be issued under each of the PSUs and annual RSUs outstanding as of December 31, |
| (2) | Included in this amount is the maximum number of Common Shares that may be issued under the Valeant 2003 and Valeant 2006 Plans representing (i) |
60
2014 Omnibus Incentive Plan
The Company’s 2014 Omnibus Incentive Plan (the “2014 Plan”) was adopted and approved by the Board and the shareholders of the Company effective as of May 20, 2014. For Information about the Plan, please see Proposal Number 3 starting on page 70.
Summary of Plan Terms
Shares Subject to the 2014 Plan
The maximum number of Common Shares that may be issued to participants pursuant to awards (all of which may be granted as incentive stock options, discussed below) is 18,368,825 including 18 million Common Shares, plus the 368,825 Common Shares under the 2011 Plan reserved but unissued and not underlying outstanding awards and the number of Common Shares becoming available for reuse after awards are terminated, forfeited, cancelled, exchanged or surrendered under the 2011 Plan and the 2007 Plan following the adoption of the 2014 Plan. In determining the number of Common Shares to be reserved for issuance under the 2014 Plan, the Company’s management and Talent and Compensation Committee evaluated the historic share usage and burn rate under the 2011 Plan and the existing terms of outstanding awards under the 2011 Plan, as discussed in “Historical Annual Plan Usage” below.
The number of Common Shares authorized for grant under the 2014 Plan is subject to adjustment, as described below. In addition, (i) the number of Common Shares issuable to insiders of the Company, at any time, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding Common Shares of the Company; (ii) the number of Common Shares issued to insiders of the Company, within any one year period, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding securities; (iii) the number of Common Shares issuable tonon-employee members of the Board, at any time, under all security-based compensation arrangements of the Company, cannot exceed 1% of the issued and outstanding securities; and (iv) the aggregate number of Common Shares that may be granted to any Covered Employee during a calendar year in the form of options, share appreciation rights, and/or share awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code shall not exceed the number of Shares initially authorized for grant, as described above.
If any Common Shares subject to an award are forfeited, canceled, exchanged or surrendered, or if an award terminates or expires without a distribution of Common Shares to the participant, the Common Shares with respect to the award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for awards under the 2014 Plan; however, the Common Shares surrendered or withheld as payment of either the exercise price of an option (including Common Shares otherwise underlying an award of a share appreciation right (“SAR”) that are retained by the Company to account for the exercise price of the SAR) and/or withholding taxes in respect of an award will no longer be available for awards under the 2014 Plan. The maximum number of Common Shares available for awards under the 2014 Plan shall not be affected by the payment of cash dividends on outstanding awards, the payment of share-denominated awards that must be settled in cash, the granting of cash awards, or, in connection with a transaction with another entity, the granting of awards to individuals who previously received awards from the other entity and are receiving awards under the 2014 Plan as a result of such transaction.
Administration of the 2014 Plan
Except as otherwise required by law, the 2014 Plan is administered by our Talent and Compensation Committee. To the extent required for employees subject to Section 162(m) of the Code, the Talent and Compensation Committee will consist of two or more individuals, each of whom, unless otherwise determined by our Board, is an “outside director” to comply with the applicable requirements of Section 162(m) of the Code and Section 16 of the U.S. Securities Act of 1934.
The Talent and Compensation Committee will determine which employees, consultants, Directors, members of our sales force and other individuals are eligible to receive awards under the 2014 Plan. In addition, the Talent and Compensation Committee will interpret the 2014 Plan and may adopt any administrative rules, regulations, procedures and guidelines governing the 2014 Plan or any awards granted under the 2014 Plan as it deems to be appropriate.
Types of Awards
The following types of awards may be made under the 2014 Plan. All of the awards described below are subject to the conditions, limitations, restrictions, exercise price, vesting and forfeiture provisions determined by the Talent and Compensation Committee, in its sole discretion, subject to such limitations as are provided in the 2014 Plan. In addition, subject to the limitations provided in the 2014 Plan and in accordance with applicable law, the Talent and Compensation Committee may accelerate or defer the vesting or payment of awards, cancel or modify outstanding awards, and waive any conditions or restrictions imposed with respect to awards or the Common Shares issued pursuant to awards.
Non-qualified Stock Options
An award of anon-qualified stock option grants a participant the right to purchase a certain number of Common Shares during a specified term in the future, after a vesting period, at an exercise price equal to at least 100% of the Market Price (as defined below) of our Common Shares on the grant date. The “Market Price” of Common Shares as of a particular date shall generally mean the closing price per Common Share on the national securities exchange on which the Common Shares are principally traded, for the last preceding date on which there was a sale of such Common Shares on such exchange (subject to certain exceptions set forth in 2014 Plan in the event that the Company is no longer traded on a national securities exchange). Unless otherwise determined by the Talent and Compensation Committee, members of the Board shall generally not be eligible to receive options. The term of anon-qualified stock option may not exceed ten years from the date of grant. The exercise price may be paid with cash, Common Shares already owned by the participant, or with the proceeds from a sale of the Common Shares subject to the option or any combination thereof. The Talent and Compensation Committee may also provide that an option may be “net exercised,” meaning that the participant would receive the Common Shares underlying the options exercised less such number of Common Shares equivalent in value to the exercise price and withholding taxes resulting from the exercise of the options. Anon-qualified stock option is an option that does not meet the qualifications of an incentive stock option as described below.
Incentive Stock Options
An incentive stock option is a stock option that meets the requirements of Section 422 of the Code, which include an exercise price of no less than 100% of Market Price on the grant date, having a term of no more than ten years, and being granted from a plan that has been approved by shareholders. Notwithstanding the foregoing, if granted to a participant who owns Common Shares representing more than 10% of the voting power of all classes of shares of the Company, its parent or one of its subsidiaries, an incentive stock option must have a term of not more than five years and have an exercise price which is at least 110% of the Market Price. In addition, if the aggregate Market Price of the Common Shares (as of the grant date) for which incentive stock options are exercisable for the first time by a participant during any calendar year exceeds $100,000, such excess will be treated asnon-qualified stock options.
Share Appreciation Rights
A share appreciation right entitles the participant to receive an amount equal to the difference between the Market Price of the Common Shares on the exercise date and the exercise price of the SAR (which may not be less than 100% of the Market Price of a Common Share on the grant date), multiplied by the number of Common
Shares subject to the SAR. A SAR may be granted in substitution for a previously granted option, and if so, the exercise price of any such SAR may not be less than 100% of the Market Price of Common Shares as determined at the time the option for which it is being substituted was granted. Payment to a participant upon the exercise of a SAR may be in cash or Common Shares (in which case, the number of Common Shares to be paid will be determined by dividing the amount calculated above by the Market Price of a Common Share at the time of payment). Unless otherwise determined by the Talent and Compensation Committee, members of the Board will generally not be eligible to receive SARs.
Restricted Shares
A restricted share award is an award of outstanding Common Shares that does not vest until after a specified period of time, or satisfaction of other vesting conditions as determined by the Talent and Compensation Committee, and which may be forfeited if conditions to vesting are not met.
Deferred Shares
A deferred share award is an unfunded, unsecured promise to deliver Common Shares to the participant in the future, if the participant satisfies the conditions to vesting, as determined by the Talent and Compensation Committee. Participants do not have voting rights, but generally receive dividend equivalent payments during the vesting period subject to the same vesting conditions as the underlying award.
Share Units
A share unit is an award denominated in Common Shares that may be settled either in Common Shares or cash, subject to terms and conditions determined by the Talent and Compensation Committee. Participants generally receive dividend equivalent payments during the vesting period subject to the same vesting conditions as the underlying award.
Share Payment
Subject to limits in the 2014 Plan, the Talent and Compensation Committee may issue unrestricted Common Shares, alone or in tandem with other awards, in such amounts and subject to such terms and conditions as the Talent and Compensation Committee determines. A share payment may be granted as, or in payment of, a bonus (including, without limitation, any compensation that is intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code), or to provide incentives or recognize special achievements or contributions.
Cash Awards
The Talent and Compensation Committee may issue awards that are payable in cash, as deemed by the Talent and Compensation Committee to be consistent with the purposes of the 2014 Plan. These cash awards will be subject to the terms, conditions, restrictions and limitations determined by the Talent and Compensation Committee from time to time. The payment of cash awards may be subject to the achievement of specified performance criteria. The 2014 Plan provides that the maximum amount of a cash award that may be granted during any annual performance period to any employee subject to Section 162(m) of the Code may not exceed $10,000,000.
Performance Criteria
Awards granted under the 2014 Plan may be subject to specified performance criteria. Performance criteria are based on the Company’s attainment of performance measurespre-established by the Talent and Compensation Committee, in its sole discretion, based on one or more of the following:
revenues, income before taxes and extraordinary items, net income, operating income, earnings before income tax, earnings before interest, taxes, depreciation and amortization, cash flow or a combination of any or all of the foregoing;
after-tax orpre-tax profits including, without limitation, those attributable to continuing and/or other operations;
the level of the Company’s bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company either in absolute terms or as it relates to a profitability ratio including operating income or EBITA;
return on capital employed, return on assets, or return on invested capital;
after-tax orpre-tax return on shareholders’ equity;
economic value added targets based on a cash flow return on investment formula;
the market price of the Common Shares;
the market capitalization or enterprise value of the Company, either in amount or relative to industry peers;
the value of an investment in the Common Shares assuming the reinvestment of dividends;
the achievement of operating margin targets or other measures of improving profitability;
the filing of one or more new drug application(s) (“NDA”) or one or more new drug submission(s) (“NDS”) or the approval of one or more NDA(s) or one or more NDS(s) by the U.S. Food and Drug Administration or the Canadian Therapeutic Products Directorate, as applicable;
the achievement of, or progress toward, a launch of one or more new drug(s);
the achievement of research and development milestones;
the achievement of other strategic milestones including, without limitation, the achievement of specific synergy capture and cost savings realization relating to integrations and the successful creation or execution of a restructuring plan for a specific business or function;
the successful completion of clinical trial phases;
licensing or acquiring new products or product platforms;
acquisition or divestiture of products or business;
the entering into new, or exiting from existing, geographic markets or industry segments; or
the attainment of a certain level of, reduction of, or other specified objectives with regard to limiting the level in or increase in, all or a portion of controllable expenses or costs or other expenses or costs.
For purposes of the first item above, “extraordinary items” includes all items of gain, loss or expense for the fiscal year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to a corporate transaction, restructuring, or related to a change in accounting principles. Each financial metric above may be on a business unit, geographic segment, total company, orper-share basis, and on a GAAP ornon-GAAP adjusted basis.
The performance criteria may be based upon the attainment of specified levels of performance under one or more of the measures described above relative to the performance of other entities. To the extent permitted under
Section 162(m) of the Code or to the extent that an award is not intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Talent and Compensation Committee, in its sole discretion, may designate additional business criteria on which the performance criteria may be based or adjust, modify or amend the previously mentioned business criteria, including to take into account actions approved by the Board or a committee thereof that affect the achievement of the original performance criteria. Performance criteria may include a threshold level of performance below which no award will be earned, a level of performance at which the target amount of an award will be earned and a level of performance at which the maximum amount of the award will be earned. To the extent permitted under Section 162(m) of the Code, the Talent and Compensation Committee shall make appropriate equitable adjustments to the performance criteria in recognition of unusual ornon-recurring events affecting us or our financial statements, in response to changes in applicable laws or regulations, including changes in generally accepted accounting principles, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles, as applicable.
Deferrals
The Talent and Compensation Committee may postpone the exercise of awards, or the issuance or delivery of Common Shares or cash pursuant to any award for such periods and upon such terms and conditions as the Talent and Compensation Committee determines. In addition, the Talent and Compensation Committee may determine that all or a portion of a payment to a participant, whether in cash and/or Common Shares, will be deferred in order to prevent the Company or any subsidiary from being denied a U.S. federal income tax deduction with respect to an award granted under the 2014 Plan. Notwithstanding this authority, the Talent and Compensation Committee will not postpone the exercise or delivery of Common Shares or cash payable in respect of awards constituting deferred compensation under Section 409A of the Code, where such postponement will cause the imposition of additional taxes under Section 409A of the Code. Section 409A of the Code provides rules that govern the manner in which compensation of various types may be deferred and imposes taxes upon compensation that is improperly deferred or accelerated.
Blackout Periods
The 2014 Plan provides that (i) if the expiration of the term of options or SARs awarded under the 2014 Plan occurs during a period self-imposed by the Company during which a participant is prohibited from trading in the Company’s securities (a “Blackout Period”) such term will be extended until the tenth business day after the end of such Blackout Period, and (ii) if share units are to be delivered during a Blackout Period, the shares subject to such Common Shares units will be delivered as soon as practicable after the end of such Blackout Period.
Dividends and Dividends Equivalents
The Talent and Compensation Committee may provide that share awards shall earn dividends or dividend equivalents, as applicable, subject to such terms, conditions, restrictions and limitations as the Talent and Compensation Committee may establish.
Adjustments
The 2014 Plan provides that the Talent and Compensation Committee will make appropriate equitable adjustments to the maximum number of Common Shares available for issuance under the 2014 Plan and other limits stated in the 2014 Plan, the number of Common Shares covered by outstanding awards, and the exercise prices and performance measures applicable to outstanding awards. These changes will be made to reflect changes in our capital structure (including a change in the number of Common Shares outstanding) on account of any share dividend, share split, reverse share split or any similar equity restructuring, or any combination or exchange of equity securities, merger, consolidation, recapitalization, reorganization or similar event, or to the
extent necessary to prevent the enlargement or diminution of participants’ rights by reason of any such transaction or event or any extraordinary dividend, divestiture or other distribution (other than ordinary cash dividends) of assets to shareholders. These adjustments will be made only to the extent they conform to the requirements of applicable provisions of the Code and other applicable laws and regulations. The Talent and Compensation Committee, in its discretion, may decline to adjust an award if it determines that the adjustment would violate applicable law or result in adverse tax consequences to the participant or to the Company. Adjustments described in this paragraph are subject to any applicable regulatory approvals.
Terminations
Unless the applicable award agreement provides otherwise or the Talent and Compensation Committee determines otherwise, vesting with respect to an award will cease upon termination of a participant’s employment or service with the Company, and unvested awards shall be forfeited upon such termination. In the case of termination for cause, vested awards shall also be forfeited.
Change of Control
The 2014 Plan provides that, unless otherwise set forth in a participant’s award agreement or employment agreement, all awards that are assumed or substituted in connection with a Change of Control transaction (as defined below) will become fully vested, exercisable and free of restrictions, and any performance conditions on those awards will be deemed to be achieved if the participant’s employment or service is terminated by the Company without “cause” (as defined in the 2014 Plan) within 12 months following the Change of Control. In addition, the 2014 Plan provides that, unless otherwise set forth in a participant’s award agreement, all awards that are not assumed or substituted in connection with the Change of Control transaction will become fully vested, exercisable and free of restrictions and any performance conditions on those awards will be deemed to be achieved immediately upon the occurrence of the Change of Control transaction.
In addition, in the event of a Change of Control transaction, the Talent and Compensation Committee may, in its discretion, (i) provide that each option and each SAR which may, by its terms, only be settled in Common Shares, will, immediately upon the occurrence of a Change in Control, be deemed to have been exercised on a “net exercise” basis, and (ii) may, in its discretion, except as would otherwise result in adverse tax consequences under Section 409A of the Code, provide that each award, other than options and SARs will, immediately upon the occurrence of the Change of Control, be cancelled in exchange for a payment in an amount equal to the excess of the consideration paid per Common Share in the Change of Control over the purchase price (if any) per Common Share subject to the award, multiplied by the number of Common Shares subject to the award.
Assignability
Except in specific circumstances described in the 2014 Plan, awards granted under the 2014 Plan may not be sold, pledged, hypothecated, assigned, margined or otherwise transferred in any manner other than by will or the laws of descent and distribution, unless and until the Common Shares underlying such award have been issued, and all restrictions applicable to such Common Shares have lapsed or have been waived by the Talent and Compensation Committee.
Amendment and Termination
The 2014 Plan and any award may be amended, suspended or terminated at any time by the Board, provided that no amendment will be made without shareholder approval if such shareholder approval is required in order to comply with applicable law or the rules of the NYSE, the rules of the Toronto Stock Exchange (“TSX”), or any other securities exchange on which the Common Shares are traded or quoted. For instance, the Board may, without shareholder approval but subject to applicable law and the provisions of the 2014 Plan, (i) amend the vesting provisions of an award or of the 2014 Plan, (ii) amend the payment provisions of an award, (iii) cancel or
modify outstanding awards, (iv) waive any restrictions imposed with respect to awards or the Common Shares issued pursuant to awards or of the 2014 Plan, (v) amend the provisions of the 2014 Plan in order to ensure its compliance with applicable securities and tax law as well as the TSX and NYSE rules, (vi) make any amendment of a clerical nature as well as any amendment clarifying any provision of the 2014 Plan, (vii) make any adjustment as described above under the heading “Adjustments”, and (viii) suspend or terminate the 2014 Plan. Except as may be required to comply with applicable tax law, no termination, suspension or amendment of the 2014 Plan may adversely affect the right of any participant with respect to a previously granted award without the participant’s written consent.
The Company will obtain shareholder approval for: (i) subject to the Talent and Compensation Committee’s right to make equitable adjustments as mentioned above, a reduction in the exercise price or purchase price of an award (or the cancellation andre-grant of an award resulting in a lower exercise price or purchase price); (ii) the extension of the original term of an option over the maximum period of 10 years described above, except if such term occurs during a Blackout Period as described above; (iii) any amendment to remove or to exceed the participation limits described in the 2014 Plan; (iv) an increase to the maximum number of Common Shares issuable under the 2014 Plan (other than adjustments in accordance with the 2014 Plan); (v) amendments to the amendment and termination section of the 2014 Plan other than amendments of a clerical nature; and (vi) any amendment that permits Awards to be transferable or assignable other than for normal estate settlement purposes or for other purposes not involving the receipt of monetary consideration.
No amendments were made to the 2014 Plan in 2016.
2011 Omnibus Incentive Plan Summary
The Company’s 2011 Omnibus Incentive Plan (the “2011 Plan”) was adopted and approved by the Board and the shareholders of the Company effective as of May 16, 2011. The Company ceased granting new awards under the 2011 Plan upon the approval of the 2014 Omnibus Incentive Plan in 2014.
Awards Under The Plan
Awards under the 2011 Plan may be granted as options (including both incentive stock options and nonqualified stock options), share appreciation rights (“SARs”), share awards (including restricted shares, deferred shares and share units that may be settled either in Common Shares or cash) or cash awards. However, no SARs or deferred shares have been granted under the 2011 Plan. Awards may be granted singly, in combination or in tandem as determined by the Talent and Compensation Committee, in its sole discretion. A maximum of 2,001,4761,542,340 Common Shares (less than 1% of the issued and outstanding Common Shares as of April 11, 2016)December 31, 2017) may be issued pursuant to the exercise of options or in connection with the vesting of share awards under the terms of the 2011 Plan.
Eligibility
Persons eligible to receive awards are any employees, Directors or individuals performing services for the Company or its subsidiaries in the capacity of a consultant, agent or otherwise, as determined by the Talent and Compensation Committee. Unless otherwise determined by the Talent and Compensation Committee, members of the Board shall generally not be eligible to receive SARs or options.
Participation Limits
Subject to adjustments made to reflect a change in the Company’s capital structure, including as a result of a stock dividend, stock split, reverse consolidation, recapitalization, reorganization or divestiture or other similar event (“
(“capital structure adjustments”), the aggregate number of Common Shares that may be granted to any “covered employee” during a calendar year in the form of options, SARs, and/or share awards intended to qualify
as “performance-based compensation” (such terms having the meanings given in Section 162(m) of the Code, including any rules and regulations thereunder) shall not exceed 1,000,000 Common Shares (computed based on maximum performance).
Furthermore, (i) the number of Common Shares issuable to persons who are reporting insiders (as defined in National Instrument55-104 — Insider Reporting Requirements and Exemptions of the Canadian Securities Administrators), at any time, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding Common Shares of the Company; and (ii) the number of Common Shares issued to such insiders, within any one year period, under all security-based compensation arrangements of the Company, cannot exceed 10% of its issued and outstanding securities.
Expiration of Options and SARs
Generally options and SARs are granted for a term determined by the Talent and Compensation Committee but not to exceed 10 years (the “Original Term”). For options granted as incentive stock options to certain participants, the Original Term shall not exceed five years. If the Original Term of an option and SAR held by a participant expires during a Company blackout period applicable to the participant which prohibits the participant from trading in Company securities, the term of such option shall be extended until the tenth business day following the end of the Company blackout period.
Exercise Price of Options and SARs
The exercise price per share for each option and SAR is not less than 100% of the closing price of the Common Shares on the trading day immediately preceding the date of grant.
61
Vesting
Awards under the 2011 Plan are subject to such vesting provisions as the Talent and Compensation Committee may determine. Options currently outstanding vest in equal installments over a period of three or four years after the date of grant or 100% on the third or fourth anniversary of the grant date. Share units generally vest 100% on the third anniversary of the date of grant.
Dividend Equivalents
The Talent and Compensation Committee may provide that share awards earn dividends or dividend equivalents in the form of additional share awards, subject to such terms, conditions, restrictions and limitations as it may establish from time to time. Notwithstanding the foregoing, dividends or dividend equivalents may not be paid with respect to any share award subject to the achievement of performance criteria, unless and until the relevant performance criteria have been satisfied. Generally, holders of share units receive dividend equivalents which are subject to vesting in line with the underlying award to which they relate.
Termination of Employment
Except as otherwise provided in a participant’s employment agreement or letter, in the event that the optionholder’s employment is terminated by reason of death, disability, termination by the Company without cause or the participant voluntarily resigns, the right to exercise such option terminates on the date that is 90 days from the participant’s termination (but in no event beyond the Original Term). Any options or share units that are unvested and do not vest on the termination date are cancelled and forfeited.
In the event that the optionholder’s employment is terminated by the Company without cause within one year following a change of control, all unvested options will vest on such termination and the optionholder will have one year following such a termination to exercise the option (but in no event beyond the Original Term). In
the case of a holder of share units whose employment is terminated by the Company within one year following a change of control, a number of the holder’s share units will vest on such termination equal to the number of share units granted multiplied by a fraction, the numerator of which is the number of completed months between the date of grant and the date of termination and the denominator of which isthirty-six (36). Any remaining unvested share units which do not vest on the termination date will be cancelled and forfeited on the date of termination.
In the event that the optionholder’s employment is terminated by the Company for cause prior to the exercise of the option, the option shall terminate and expire as of the date of termination of the employment. In the case of a holder of share units whose employment is terminated by the Company for cause, all of the holder’s share units shall terminate as of the date of termination of the employment.
Nontransferability
Awards granted under the 2011 Plan, and during any period of restriction on transferability, Common Shares issued in connection with the exercise of an option, may not be sold, pledged, hypothecated, assigned, margined or otherwise transferred in any manner other than by will or the laws of descent and distribution, unless and until the Common Shares underlying such award have been issued, and all restrictions applicable to such Common Shares have lapsed or have been waived by the Talent and Compensation Committee. Notwithstanding the foregoing, the Talent and Compensation Committee may, in its sole discretion, permit (on such terms, conditions and limitations as it may establish) nonqualified stock options and/or Common Shares issued in connection with an option exercise to be transferred to a member of a participant’s immediate family or to a trust or similar vehicle for the benefit of a participant’s immediate family members.
Amendment and Termination
The 2011 Plan and any award may be amended, suspended or terminated at any time by the Board, provided that no amendment shall be made without shareholder approval if such shareholder approval is required in order to comply with applicable law or the rules of the NYSE, the rules of the TSX, or any other securities exchange on which the Common Shares are traded or quoted. Under the 2011 Plan, the Company shall obtain shareholder approval for: (i) a reduction in the exercise price or purchase price of an award (or the cancellation andre-grant of an award resulting in a lower exercise price or purchase price), except where the reduction is made to reflect a chance in the Company’s capital structure, including as a result of a capital structure adjustment; (ii) the extension of the Original
62
Term of an option; (iii) any amendment to remove or to exceed the participation limits described above; (iv) an increase to the maximum number of Common Shares issuable under the 2011 Plan (other than adjustments made to reflect a change in the Company’s capital structure, including as a result of a capital structure adjustment); (v) amendments to the amendment provision of the 2011 Plan other than amendments of a clerical nature; and (vi) any amendment that permits awards to be transferable or assignable other than for normal estate settlement purposes or for other purposes not involving the receipt of monetary consideration.
Without shareholder approval, the Board has the discretion to make certain amendments to the 2011 Plan, including: (i) amend the vesting provisions of an award, (ii) amend the payment provisions of an award, (iii) cancel or modify outstanding awards, (iv) waive any restrictions imposed with respect to awards or the Common Shares issued pursuant to awards, (v) make amendments to the 2011 Plan to ensure compliance with applicable securities and tax law as well as the TSX and NYSE rules, (vi) make any amendment of a clerical nature as well as any amendment clarifying any provision of the 2011 Plan, (vii) make any adjustment to reflect a change in the Company’s capital structure, including as a result of capital structure adjustments, and (viii) suspend or terminate the 2011 Plan.
Except for adjustments to awards made in connection with a change of control of the Company, no termination, suspension or amendment of the 2011 Plan or any award shall adversely affect the right of any participant with respect to any award theretofore granted, as determined by the Talent and Compensation Committee, without such participant’s written consent.
No amendments were made to the 2011 Plan in 2016.2017.
2007 Equity Compensation Plan
The Company’s 2007 Equity Compensation Plan (the “2007 Plan”) was adopted and approved by the Board and the shareholders of the Company effective as of May 16, 2007. The Company ceased granting new awards under the 2007 Plan upon the approval of the 2011 Omnibus Incentive Plan in 2011.
Awards Under The 2007 Plan
Awards under the 2007 Plan may be granted as options and RSUs.
Eligibility
Persons eligible to receive awards are employees, officers, Directors and “consultants” (as defined in National Instrument45-106 — Prospectus and Registration Exemptions of the Canadian securities administrators) of the Company and its subsidiaries and affiliates.
Participation Limits
Under the current terms of the 2007 Plan:
| (a) | the number of Common Shares reserved for “insiders” (as defined in the TSX Company Manual) issuable, at any time, under the 2007 Plan and under any other security-based compensation arrangements, will not exceed 10% of issued and outstanding Common Shares; |
| (b) | the number of Common Shares issued to such insiders, within any one-year period, under the 2007 Plan and under any other security-based compensation arrangements, will not exceed 10% of issued and outstanding Common Shares; |
| (c) | the total number of options and RSUs in aggregate granted pursuant to the 2007 Plan to any one participant during any calendar year must not exceed 20% of the total number of options and RSUs in aggregate granted pursuant to the Plan during such calendar year; |
| (d) | the number of Common Shares to be issued under the 2007 Plan to any one participant during each calendar year during the term of the 2007 Plan shall not exceed the lesser of (i) 5% of the issued and outstanding Common Shares or (ii) 7,987,450 Common Shares; |
| (e) | the number of Common Shares reserved for issuance and issued pursuant to the 2007 Plan to any one participant at any time must not exceed 25% of the total number of Common Shares that may be issued from treasury under the Plan; and |
(a) the number of Common Shares reserved for “insiders” (as defined in the TSX Company Manual) issuable, at any time, under the 2007 Plan and under any other security-based compensation arrangements, will not exceed 10% of issued and outstanding Common Shares;
(b) the number of Common Shares issued to such insiders, within anyone-year period, under the 2007 Plan and under any other security-based compensation arrangements, will not exceed 10% of issued and outstanding Common Shares;63
(c) the total number of options and RSUs in aggregate granted pursuant to the 2007 Plan to any one participant during any calendar year must not exceed 20% of the total number of options and RSUs in aggregate granted pursuant to the Plan during such calendar year;TABLE OF CONTENTS
| (f) | the maximum number of Common Shares issuable in respect of RSUs, that are subject to performance goals, during any calendar year, to any one participant, shall be 300,000 Common Shares (subject to any decrease pursuant to adjustments made in connection with a change in the Company’s capital structure, or an amalgamation, combination, merger or other reorganization involving the Company); provided, however, that if the performance period is less than three consecutive fiscal years, such maximum number of Common Shares above shall be determined by multiplying 300,000 by a fraction, the numerator of which is the number of days in the performance period and denominator of which is 1095. |
(d) the number of Common Shares to be issued under the 2007 Plan to any one participant during each calendar year during the term of the 2007 Plan shall not exceed the lesser of (i) 5% of the issued and outstanding Common Shares or (ii) 7,987,450 Common Shares;
(e) the number of Common Shares reserved for issuance and issued pursuant to the 2007 Plan to any one participant at any time must not exceed 25% of the total number of Common Shares that may be issued from treasury under the Plan; and
(f) the maximum number of Common Shares issuable in respect of RSUs, that are subject to performance goals, during any calendar year, to any one participant, shall be 300,000 Common Shares (subject to any decrease pursuant to adjustments made in connection with a change in the Company’s capital structure, or an amalgamation, combination, merger or other reorganization involving the Company); provided, however, that if the performance period is less than three consecutive fiscal years, such maximum number of Common Shares above shall be determined by multiplying 300,000 by a fraction, the numerator of which is the number of days in the performance period and denominator of which is 1095.
Expiration of Options
The 2007 Plan provides for a maximum option term of 5 years. Options currently outstanding under the 2007 Plan generally expire on the fifth anniversary of the date of grant. However, if the term of an option expires
during a Company blackout period applicable to the participant which prohibits the participant from trading in Company securities, the term of such option shall be extended until the tenth business day following the end of the Company blackout period.
Exercise Price of Options
The exercise price per share for each option or SAR is not less than 100% of the volume weighted average trading price of the Common Shares for the five trading days immediately preceding the date of grant.
Vesting
Awards under the 2007 Plan are subject to such vesting provisions as the Talent and Compensation Committee may determine. Options generally vest in equal installments over a period of three or four years following the date of grant. RSUs generally vest 100% on the third anniversary of the date of grant. Vesting of RSUs also may be subject to the attainment of specified performance goals.
Dividend Equivalents
RSUs earn dividend equivalents in the form of additional RSUs. Dividend equivalents vest in line with the underlying award to which they relate.
Termination of Employment or Service
Options granted under the Plan to an employee or officer option holder are forfeited upon termination of employment or term of office with the Company, except in certain cases including disability, death, retirement and termination without cause or resignation. Any options held by an option holder that are not exercisable at the date of death, disability, retirement or termination, immediately expire and are cancelled on such date. Employee options that are exercisable at the date of death, disability, retirement or termination expire on the earlier of (a) the original term of the option and (b) either (i) 180 days from the date of death, disability or retirement or (ii) 60 days from the date of termination without cause or resignation. Consultant options that are exercisable at the date of death or disability of the consultant or termination of the consulting relationship expire on the earlier of (a) the original term of the option and (b) 60 days from the date of death, disability or termination. Where an employee or officer option holder’s employment or term of office is terminated for cause, or a consultant’s consulting arrangement is terminated for the consultant’s breach of the consulting arrangement, any options held by the option holder, whether or not exercisable at the termination date, immediately expire and are cancelled on such date. Notwithstanding the foregoing provisions, the Board may permit the exercise of any options held in the manner and on the terms as authorized by the Board, including the right for the Board to accelerate the vesting of options, provided that the Board may not authorize the exercise of an option beyond the expiration of the applicable exercise period.
Where an RSU holder’s employment, term of office or consulting arrangement terminates by reason of (a) in the case of an employee or officer RSU holder, voluntary resignation, or termination by the Company or one of its affiliates for cause or (b) in the case of a consultant RSU holder, voluntary termination or termination by the Company or one of its affiliates for breach of the consulting arrangement, then any RSUs that are unvested on the date of such termination or resignation will be forfeited and cancelled on the termination date. Where the RSU holder’s employment terminates due to death, disability or retirement or termination without cause, or a consultant
64
RSU holder’s consulting arrangement is terminated by the Company or one of its affiliates other than as a result of a breach, then prorated RSUs will vest, based on the number of days of active service from the grant date to the date of death, disability, retirement or termination compared to the number of days from the grant date to the vesting date, and the remainder are cancelled.
In addition to the foregoing, the 2007 Plan provides that:
(a) if an option holder or RSU holder engages in a business that competes with that of the Company, or any activity that would be considered detrimental to the Company (i) prior to any exercise of an option, all options held by the option holder will terminate and expire; (ii) during theone-year period following the date an option is exercised or becomes vested, the option holder will be required to pay to the Company an amount equal to any gain realized as a result of the exercise of the option; (iii) prior to any vesting of RSUs, all RSUs held by the RSU holder will terminate and be cancelled; or (iv) during theone-year period commencing on the date one or more RSUs vest, the RSU holder will be required to pay to us an amount equal to the market price of the Common Shares and/or the cash amount received by the RSU holder, plus any other gain realized as a result of the vesting of the RSUs, issuance of the Common Shares and/or payment of the cash amount; and
(b) if an option holder or RSU holder has been employed by the Company or one of its affiliates for at least 10 consecutive years, the Plan provides that, provided that the sum of the holder’s age and the years of service with the Company, or its affiliate, equals or exceeds 70, upon the retirement, death, disability or termination (other than in the case of a termination for cause) (i) all of the unvested options held by such holder will immediately vest and become exercisable, (ii) all such vested options shall expire on the earlier of (A) the expiration of the term of such options, and (B) one year following the retirement, death, disability or termination with us, and (iii) all unvested RSUs held by such holder will immediately vest (other than for RSU holders who are subject to U.S. taxation, in which case the Plan provides for special vesting rules).
| (a) | if an option holder or RSU holder engages in a business that competes with that of the Company, or any activity that would be considered detrimental to the Company (i) prior to any exercise of an option, all options held by the option holder will terminate and expire; (ii) during the one-year period following the date an option is exercised or becomes vested, the option holder will be required to pay to the Company an amount equal to any gain realized as a result of the exercise of the option; (iii) prior to any vesting of RSUs, all RSUs held by the RSU holder will terminate and be cancelled; or (iv) during the one-year period commencing on the date one or more RSUs vest, the RSU holder will be required to pay to us an amount equal to the market price of the Common Shares and/or the cash amount received by the RSU holder, plus any other gain realized as a result of the vesting of the RSUs, issuance of the Common Shares and/or payment of the cash amount; and |
| (b) | if an option holder or RSU holder has been employed by the Company or one of its affiliates for at least 10 consecutive years, the Plan provides that, provided that the sum of the holder’s age and the years of service with the Company, or its affiliate, equals or exceeds 70, upon the retirement, death, disability or termination (other than in the case of a termination for cause) (i) all of the unvested options held by such holder will immediately vest and become exercisable, (ii) all such vested options shall expire on the earlier of (A) the expiration of the term of such options, and (B) one year following the retirement, death, disability or termination with us, and (iii) all unvested RSUs held by such holder will immediately vest (other than for RSU holders who are subject to U.S. taxation, in which case the Plan provides for special vesting rules). |
On a change in control, the Board may, without the consent of any participant, take such steps as are necessary or desirable to cause the conversion or exchange of outstanding options or RSUs into or for cash or options, units, rights or other securities of substantially equivalent value in any entity participating in or resulting from the change in control. Alternatively, the Board may accelerate the vesting of any or all outstanding options or RSUs so that they are exercisable conditional upon or prior to the completion of the change in control.
Nontransferability
No assignment or transfer of options or RSUs, whether voluntary, involuntary, by operation of law or otherwise, vests any interest or right in any assignee or transferee and immediately upon any assignment or transfer, or any attempt to make the same, such options or RSUs will terminate and be of no further force or effect.
Notwithstanding the foregoing, the Talent and Compensation Committee may, in its sole discretion, permit (on
(on such terms, conditions and limitations as it may establish) nonqualified stock options and/or Common Shares issued in connection with an option exercise to be transferred to a member of a participant’s immediate family or to a trust or similar vehicle for the benefit of a participant’s immediate family members.
Amendment and Termination
The Board may, without notice, at any time or from time to time for any purpose whatsoever, amend, suspend, discontinue or terminate this 2007 Plan or any award granted under this 2007 Plan.
No amendment shall be made without shareholder approval if such shareholder approval is required in order to comply with applicable law or the rules of the NYSE, the rules of the TSX, or any other securities exchange on which the Common Shares are traded or quoted. Under the 2007 Plan, the Company shall obtain shareholder approval for any amendment (i) to increase the number of Common Shares reserved for issuance under the 2007 Plan; (ii) that would reduce the exercise price of an option (including a cancellation and reissue of an option constituting a reduction of the exercise price); (iii) to extend the term of an outstanding option beyond the originally scheduled expiry date for that option; (iv) to the eligible participants under the 2007 Plan that would
permit the introduction or reintroduction ofnon-employee Directors to participate under the 2007 Plan on a discretionary basis; (v) that would alter the transferability or assignability of options or RSUs; and (vi) to provide for other types of compensation through equity issuance, in each case unless the change results from an adjustment made in connection with a change in the Company’s capital structure, or an amalgamation, combination, merger or other reorganization involving the Company.
65
Without shareholder approval, the Board has the discretion to make certain amendments to the 2007 Plan, including: (i) amend the vesting provisions of an award, (ii) amend the payment provisions of an award, (iii) cancel or modify outstanding awards, (iv) waive any restrictions imposed with respect to awards or the Common Shares issued pursuant to awards, (v) make amendments to the 2007 Plan to ensure compliance with applicable securities and tax law as well as the TSX and NYSE rules, (vi) make any amendment of a clerical nature, as well as any amendment clarifying any provision of the 2007 Plan, (vii) make any adjustment to reflect a change in the Company’s capital structure, including as a result of capital structure adjustments, and (viii) suspend or terminate the 2007 Plan.
Except for adjustments to awards made in connection with a change of control of the Company, no termination, suspension or amendment of the 2007 Plan or any award shall adversely affect the right of any participant with respect to any award theretofore granted, as determined by the Talent and Compensation Committee, without such participant’s written consent.
No amendments were made to the 2007 Plan in 2016.2017.
Option and RSU Plans
As of February 28, 2017, 12,403,495March 5, 2018, 12,461,186 Common Shares (3.57% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2003 Plan and 165,080208,817 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2003 Plan. As of February 28, 2017,March 5, 2018, a total of 137,23714,005 Common Shares (less than 1% of the issued and outstanding Common Shares) remained reserved for issuance under the 2003 Plan, representing (i) 79,495 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 57,742 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan. There were no stock options outstanding under the plan as of March 5, 2018.
As of February 28, 2017,March 5, 2018, 74,096 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2006 Plan and 2,704,8832,762,518 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2006 Plan. As of February 28, 2017,March 5, 2018, a total of 2,181,8242,124,189 Common Shares (less than 1% of the issued and outstanding Common Shares) remained reserved for issuance under the 2006 Plan representing (i) 0 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 2,181,824 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan. There were no stock options outstanding under the plan as of March 5, 2018.
As of February 28, 2017,March 5, 2018, 4,301,303 Common Shares (1.24%(1.23% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2007 Plan and 3,573,8463,576,355 (1.03% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2007 Plan. As of February 28, 2017,March 5, 2018, a total of 508,339505,830 Common Shares (less than 1% of the issued and outstanding Common Shares) remained reserved for issuance under the 2007 Plan representing (i) 0 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 508,339 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan. TheThere were no stock options outstanding under the plan as of March 5, 2018.The Company ceased granting new awards under the 2007 Plan upon the approval of the 2011 Plan in 2011.
As of February 28, 2017,March 5, 2018, 425,124 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2011 Plan and 2,547,1312,555,260 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2011 Plan. As of February 28, 2017,March 5, 2018, a total of 2,001,4761,050,459 Common Shares (less than 1% of the issued and outstanding Common Shares) remained reserved for issuance under the 2011 Plan, representing (i) 1,315,998425,124 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 685,478558,578 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan. The Company ceased granting new awards under the 2011 Plan upon the approval of the 2014 Plan in 2014.
As of February 28, 2017,March 5, 2018, 2,128 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2014 Plan and 519,6011,767,241 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2014 Plan. As of February 28, 2017,March 5, 2018, a total of 7,594,50611,944,380 Common Shares (2.18%(3.42% of the issued and outstanding Common Shares) remained reserved for issuance under the 2014 Plan, representing (i) 2,634,0823,883,624 Common Shares (less than 1%(1.11% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 4,960,4248,060,756 Common Shares (1.43%(2.31% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan.
66
The Report of the Audit and Risk Committee of the Board 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 we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.
The Audit and Risk Committee, comprised of independent directors, is delegated by the Board to monitor the integrity of our financial statements, the auditors’ qualifications and independence, the performance of the auditors and our internal auditors, and the Company’s compliance with legal and regulatory requirements.
Management has primary responsibility for our financial statements and the overall reporting process as well as establishing and maintaining our internal controls. PricewaterhouseCoopers LLP, our auditors for fiscal year ended December 31, 2016,2017, had the responsibility for expressing an opinion as to whether the audited financial statements have been prepared in accordance with generally accepted accounting principles in the United States in all material respects and on the effectiveness of our internal controls over financial reporting.
The Audit and Risk Committee met with management and the auditors to review and discuss the audited financial statements for the year ended December 31, 2016,2017, as well as management’s assessment of the effectiveness of our internal controls over financial reporting and the auditor’s assessment of our internal controls over financial reporting. The auditors, as well as the internal auditors, had full access to the Audit and Risk Committee, including regular meetings without management present.
The Audit and Risk Committee received from and discussed with the auditors the written report and the letter from the auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the auditor’s communications with the Audit and Risk Committee concerning independence and has discussed with the auditor the auditor’s independence. Additionally, the committee discussed with the auditors the matters required by Auditing Standard No. 16, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board.
The Audit and Risk Committee acts only in an oversight capacity and must rely on the information provided to it and on the representations made by management and the auditors. Based on the aforementioned reviews and
discussions, and the report of the auditors, the Audit and Risk Committee recommended to the Board that the audited financial statements for the year ended December 31, 2016,2017, be included in the Company’s Annual Report filed with the SEC.
Audit and Risk Committee
Russel C. Robertson, Chairperson
D. Robert Hale
Sarah B. Kavanagh
Robert N. Power
67
Certain Related-Party Transactions
As described above, the Board has adopted the Standards, which set out the Board’s expectations for the conduct of our Directors, officers and employees in their dealings on behalf of the Company. Our conflict of interest policy is set forth in our Standards of Business Conduct and requires that Directors, officers and employees avoid situations in which they have a potential or actual conflict of interest with the Company. Directors, officers or employees involved in any of the types of relationships described in our conflict of interest policy are required to immediately and fully disclose the relevant circumstances to their immediate supervisors, in the case of officers or employees, or to the Audit and Risk Committee, in the case of Directors. The Audit and Risk Committee reviews transactions or proposed transactions in which an executive officer has an interest that conflicts with the Company’s interests and makes recommendations to the Board regarding any such transaction. The Audit and Risk Committee also conducts such reviews in cases where the conflict, or potential conflict, involves a member of the Board. Our conflict of interest policy states that the following are types of outside activities that can create conflicts:
Ownership by a Director or employee or any member of the Director’s or employee’s family of a substantial interest in any concern that does business with the Company, whether as a supplier, dealer or customer, or are a competitor (except in the case of a publicly owned corporation whose securities are traded on the open market).
Since January 1, 2016,2017, the Company was involved in the following related-party transactions each of which has been approved or ratified by the Audit and Risk Committee:
Joseph C. Papa’s son, Matthew Papa, Product Manager, has been employed by the Company since September 2016. In 2016, he2017, Matthew Papa received $34,615an aggregate of $159,149 in compensation.
Richard U. DeSchutter and
68
J. Michael Pearson’sbrother-in-law, Robert Brabandt, Director of Corporate Procurement/ Real Estate, has been employed by the Company since September 2010. In 2016, Mr. Brabandt received $511,989 which included his salary, bonuses and equity grant.
On February 10, 2017, the Company, Valeant Pharmaceuticals International and J. Michael Pearson (together, the “Valeant Parties”) and Pershing Square Capital Management, L.P., Pershing Square Holdings, Ltd., Pershing Square International, Ltd., Pershing Square, L.P., Pershing Square II, L.P., PS Management GP, LLC, PS Fund 1, LLC, Pershing Square GP, LLC (together, “Pershing Square”), and William A. Ackman (“Ackman” and, together with Pershing Square, the “Pershing Square Parties”) entered into a litigation management agreement (the “Litigation Management Agreement”). In part, the Litigation Management Agreement (a) allocates potential costs and expenses (including legal fees) among the parties in the event of a settlement of the pending litigationIn reAllergan, Inc. Proxy ViolationSecs.Litig. that is approved by both parties and (b) provides that the Pershing Square Parties, as shareholders, forbear from commencing actions as to certain legal claims relating to the Company for a defined period of time. The Litigation Management Agreement will terminate on November 1, 2017 if a settlement is not yet obtained, unless extended by the parties. In connection with the entrance into the Litigation Management Agreement, on February 10, 2017 the Valeant Parties and the Pershing Square Parties entered into a mutual release of claims where each party will release the other parties from certain claims, including those arising out of any purchase of security of the Company. Pershing Square Holdings, Ltd., Pershing Square International, Ltd., Pershing Square L.P., Pershing Square II, L.P., PS Management GP LLC, PS Fund 1, LLC and Pershing Square GP, LLC are investment funds managed by Pershing Square Capital Management, L.P. William A. Ackman and Stephen Fraidin, both currently members of the Company’s Board, are the CEO and Vice Chairman of Pershing Square Capital Management, L.P. The mutual release will go into effect upon the later of satisfaction of the payment obligations that each party would have in connection with any settlement of the California action pursuant to the Litigation Management Agreement and the date of entry of final judgment, and will not occur if the Litigation Management Agreement is terminated.
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Board is committed to excellence in governance. At our 20112017 Annual Meeting of Shareholders, our Board recommended and shareholders approved, in anon-binding advisory vote, that anon-binding advisory vote on executive compensation be held every year. The Board determined that our shareholders should vote on asay-on-pay proposal every year, consistent with the preference expressed by our shareholders at the 20112017 Annual Meeting of Shareholders. Proposal No. 2 provides the Company’s shareholders with an opportunity to provide an advisory vote related to compensation of the Company’s Named Executive Officers.
The Company has a“pay-for-performance” “pay-for-performance” philosophy that forms the foundation of all decisions regarding compensation of the Company’s Named Executive Officers. This compensation philosophy and the program structure approved by the Talent and Compensation Committee have been central to the Company’s ability to attract, retain and motivate individuals who can achieve superior shareholder returns. The Talent and Compensation Committee is engaged in reevaluating such compensation philosophy and the Company’s compensation programs and practices. Please refer to “Executive Compensation — Compensation Discussion and Analysis — Executive Summary” for an overview of the compensation of the Company’s Named Executive Officers.
Pursuant to Schedule 14A of the Exchange Act, we are asking for shareholder approval, in an advisory resolution, of the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with SEC rules, which disclosure includes the disclosure under “Executive Compensation —Compensation Discussion and Analysis,” the compensation tables and the narrative discussion following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the executive compensation policies and practices described in this Proxy Statement. This advisory vote gives you as a shareholder the opportunity to endorse or not endorse the compensation of our Named Executive Officers through the following resolution:
Resolved, that the shareholders approve, in an advisory resolution, the compensation paid to the Named Executive Officers, as disclosed in the Compensation Discussion and Analysis section and compensation tables, as well as the other narrative executive compensation disclosures, contained in this Proxy Statement.
This vote is advisory and therefore not binding on the Company, the Talent and Compensation Committee of the Board or the Board. The Board and the Talent and Compensation Committee value the opinions of our shareholders and to the extent there is any significant vote against the Named Executive Officer compensation as disclosed in this Proxy Statement, we will consider those shareholders’ concerns, and the Talent and Compensation Committee will evaluate whether any actions are necessary to address those concerns. As noted above, partly in response to the disappointing 68% of votes in favor of our executive compensation program at the 2017 Annual Meeting of Shareholders and 62% of votes in favor of our executive compensation program at the 2016 Annual Meeting of Shareholders, certain changes have been made to these programs. See “2016“2017 Shareholder Engagement”. Shareholders had previously endorsed the design and administration of our executive compensation programs by significant margins, with votes in favor of these programs at our 2014 and 2015 Annual Meeting of Shareholders of 98% and 90%, respectively..
The Board recommends that the shareholders vote FOR Proposal No. 2.
69
ADVISORY VOTE ONAPPROVAL OF AMENDMENT TO THE FREQUENCYCOMPANY’S 2014 OMNIBUS INCENTIVE PLAN TO INCREASE THE NUMBER OF ADVISORY VOTES ON EXECUTIVE COMPENSATIONCOMMON SHARES AUTHORIZED UNDER THE PLAN
As described in Proposal No. 2 above, we are providingThe Company’s 2014 Omnibus Incentive Plan (the “2014 Plan”) was approved by our shareholders withat the opportunity2014 annual meeting. An aggregate of approximately 18 million common shares of the Company no par value per share (“Common Shares”) had been reserved for issuance under the 2014 Plan. As ofDecember 31, 2017, only 7,461,000 Common Shares were available for further issuance. On February 22, 2018, the Board of Directors approved an amendment to cast an advisory vote on the compensation2014 Plan, subject to approval by the shareholders at the Annual Meeting, to increase the number of Common Shares authorized for issuance under the 2014 Plan (the “Amended 2014 Plan”). We are asking our shareholders to approve the increase in the number of Common Shares authorized for issuance under the 2014 Plan by 11,900,000 at the Annual Meeting. The proposed 11,900,000 additional Common Shares, which represents 3.4% of the Common Shares of the Company outstanding as of March 5, 2018, is expected to allow us to make grants under the Amended 2014 Plan for approximately two to three years.
We believe that increasing the number of Common Shares issuable under the 2014 Plan is necessary in order to allow Valeant to continue to align the long-term financial interests of employees, members of the Board, consultants, members of our Named Executive Officers.
Section 14Asales force and other service providers of the Exchange Act requires us to allow our shareholders the opportunity to cast an advisory vote on how often we should include advisory votes on the compensation of our Named Executive Officers in our proxy materials for future shareholder meetings. Under this proposal, shareholders may vote to have the“say-on-pay” vote ever year, every two years or every three years, or may abstain from voting.
Our Board has determined that an annual advisory vote on executive compensation is the most appropriate alternative for the Company. The Board’s determination was influenced by the fact that meaningful portionsCompany and its subsidiaries with those of the Company’s shareholders, to attract and retain those individuals by providing compensation of our Named Executive Officersopportunities that are evaluated, adjustedcompetitive with other companies and approved on an annual basis, and that it is importantprovide incentives to have regular visibility intothose individuals who contribute significantly to the long-term incentives that help drive our performance metrics. As partand growth of the annual review process,Company and its subsidiaries. As of the filing of this Proxy Statement, the number of persons eligible to participate in the Amended 2014 Plan is approximately 3,500. A copy of the Amended 2014 Plan is attached to this proxy statement as Exhibit A.
In addition to the amendment increasing the number of Common Shares issuable under the 2014 Plan, the Amended 2014 Plan includes the following amendments that do not require shareholder approval as shareholder approval is not required under amendment provisions of the 2014 Plan: (i) introduction of a $750,000 aggregate fair market value limit on Awards (in either equity, cash or other compensation) that can be granted in any calendar year to a Participant who is a non-employee director; (ii) housekeeping changes to address recent changes to Section 162(m) of the Internal Revenue Code; (iii) Awards are expressly subject to the Company’s clawback policy; and (iv) Awards not assumed or substituted in connection with a Change of Control will only vest on a pro rata basis.
The Board believes that the Amended 2014 Plan is in the best interest of shareholders and supports this proposal for the following reasons:
70
As a shareholder of the Company, you are invited to vote with respect to the Amended 2014 Plan through the following resolution:
Resolved that the shareholders approve the Amended 2014 Plan, including the increase to the maximum number of Common Shares subject to Awards which may be issued pursuant to the Amended 2014 Plan, by 11,900,000 Common Shares.
The Board of Directors of the Company recommends that the Shareholders vote “FOR” Proposal No. 3.
The following is taken into considerationa summary of the Amended 2014 Plan which is qualified in its entirety by the full text of the Amended 2014 Plan, a copy of which is included as Exhibit A to this Proxy Statement. The capitalized terms not otherwise defined in this summary have the meaning assigned to them in the Amended 2014 Plan. For the avoidance of doubt, the changes to the 2014 Plan incorporated in the Amended 2014 Plan and described below will only be applicable to equity awards granted after approval of the Amended 2014 Plan at the Annual Meeting.
Summary of Plan Terms
Common Shares Subject to the Amended 2014 Plan
The Common Shares of the Company issued or to be issued under the Amended 2014 Plan consists of authorized but unissued Common Shares or issued Common Shares that have been reacquired by the Company in any manner. Subject to adjustment made in connection with a recapitalization, change in control and certain other events set forth in the Amended 2014 Plan, the maximum number of Common Shares subject to Awards which may be issued pursuant to the Amended 2014 Plan will be equal to the sum of (i) 18,368,825 Common Shares (subject to the 2014 Plan as previously approved by Shareholders at the 2014 annual meeting), (ii) 11,900,000 Common Shares and (iii) the number of Common Shares becoming available for reuse after awards are terminated, forfeited, cancelled, exchanged or surrendered following the Effective Date under the Company’s 2011 Omnibus Incentive Plan and the 2007 Equity Compensation Plan.
In determining the number of Common Shares to be reserved for issuance under the Amended 2014 Plan, the Company’s management and Talent and Compensation Committee evaluated the historic share usage and burn rate under the 2014 Plan and the existing terms of outstanding Awards under the 2014 Plan, as discussed in “Historical Annual Common Share Usage” below.
The number of Common Shares authorized for grant under the Amended 2014 Plan is subject to adjustment, as described below. In addition, (i) the number of Common Shares issuable to Insiders, at any time, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding Common Shares of the Company; (ii) the number of Common Shares issued to Insiders, within any one year period, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding securities; (iii) the number of Common Shares issuable to non-employee members of the Board of Directors, at any time, under all security-based compensation arrangements of the Company, cannot exceed 1% of issued and outstanding Common Shares of the Company; and (iv) the aggregate number of Common Shares that may be granted prior to November 2, 2017 to any employee covered by Section 162(m) of the Internal Revenue Code during a calendar year in the form of options, share appreciation rights, and/or share awards and intended to qualify as “performance-based compensation” thereunder was not permitted to exceed the number of Common Shares initially authorized for grant.
Subject to adjustment, as described below, in any calendar year, no Participant who is a non-employee director of the Company shall be granted Awards, in either equity, cash or other compensation, with an aggregate fair market value as of the grant date or payment date, as applicable, in excess of $750,000.
If any Common Shares subject to an Award are forfeited, canceled, exchanged or surrendered, or if an Award terminates or expires without a distribution of Common Shares to the participant, the Common Shares with respect to the Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Amended 2014 Plan; however, the Common Shares surrendered or withheld as payment of either the exercise price of an option (including Common Shares otherwise underlying an award of a SAR that are retained by the Company to account for the exercise price of the SAR) and/or withholding taxes in respect of an Award will no longer be available for Awards under the Amended 2014 Plan. The maximum number of Common Shares available for Awards under the Amended 2014 Plan shall not be affected by the payment of cash
71
dividends on outstanding Awards, the payment of share-denominated awards that must be settled in cash, the granting of cash awards, or, in connection with a transaction with another entity, the granting of Awards to individuals who previously received Awards from the other entity and are receiving Awards under the Amended 2014 Plan as a result of such transaction.
Administration of the Amended 2014 Plan
Except as otherwise required by law or as designated otherwise by the Board of Directors, the Amended 2014 Plan will be administered by our Talent and Compensation Committee. The Talent and Compensation Committee will interpret the Amended 2014 Plan and may adopt any administrative rules, regulations, procedures and guidelines governing the Amended 2014 Plan or any Awards granted under the Amended 2014 Plan as it deems to be appropriate.
As of the date of this Proxy, we expect that approximately 3,500 employees and 10 Directors will be eligible to receive Awards under the Amended 2014 Plan. The basis for participation in the Amended 2014 Plan is the Talent and Compensation Committee’s decision, in its sole discretion, that an Award to an eligible participant will further the Amended 2014 Plan’s purposes. In exercising its discretion, the Talent and Compensation Committee will consider the recommendations of management and the purposes of the Amended 2014 Plan, which are to continue to align the long-term financial interests of employees, Directors, consultants, members of our sales force and other service providers of the Company and its subsidiaries with those of the Company’s shareholders, to attract and retain those individuals by providing compensation opportunities that are competitive with other companies and provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company and its subsidiaries. In recent years, all eligible Directors have received Awards under the 2014 Plan (unless such compensation was waived) and approximately 13% of our employees have received Awards under the 2014 Plan.
The following types of Awards may be made under the Amended 2014 Plan. All of the Awards described below are subject to the conditions, limitations, restrictions, exercise price, vesting and forfeiture provisions determined by the Talent and Compensation Committee, in making decisions with respectits sole discretion, subject to executive compensation. By providing an advisory vote on executive compensation on an annual basis, our shareholders will be able to provide us with direct input on our compensation philosophy, policies and practicessuch limitations as disclosedare provided in the management proxy circularAmended 2014 Plan. In addition, subject to the limitations provided in the Amended 2014 Plan and proxy statement every year. We understand that our shareholders may have different views as to what is the best approach for the Company, and we look forward to hearing from our shareholders on this agenda item every year. Accordingly, our Board recommends that the advisory vote on executive compensation be held every year. This advisory vote gives you as a shareholder the opportunity to vote on the frequency of advisory votes on executive compensation for our Named Executive Officers through the following resolution:
Resolved, that the shareholders wish the Company to include an advisory vote on the compensation of the Company’s Named Executive Officers pursuant to Rule14a-21(b) of the Exchange Act:
Every Year;
Every Two Years;
Every Three Years; or
Abstain.
While we believe that a vote every year is the best choice for us, you are not voting to approve or disapprove our recommendation of every year, but rather to make your own choice among a vote of once every year, every two years or every three years. You may also abstain from voting on this proposal.
This vote is advisory and therefore not binding on the Company,in accordance with applicable law, the Talent and Compensation Committee may accelerate or defer the vesting or payment of awards, cancel or modify outstanding Awards, and waive any conditions or restrictions imposed with respect to Awards or the Common Shares issued pursuant to Awards. As of March 5, 2018, the equity awards outstanding under our equity compensation plans were held by a total of 3,113 current and former employees and non-employee directors (3,073 current and former employees and non-employee directors held outstanding Awards granted under the 2014 Plan).
Non-qualified Stock Options
An award of a non-qualified stock option grants a participant the right to purchase a certain number of Common Shares during a specified term in the future, after a vesting period, at an exercise price equal to at least 100% of the Board orMarket Price (as defined below) of our Common Shares on the Board.grant date. The Board and“Market Price” of Common Shares as of a particular date shall generally mean the closing price per Common Share on the national securities exchange on which the Common Shares are principally traded, for the last preceding date on which there was a sale of such Common Shares on such exchange (subject to certain exceptions set forth in the Amended 2014 Plan in the event that the Company is no longer traded on a national securities exchange). The repricing of non-qualified stock options is prohibited. Unless otherwise determined by the Talent and Compensation Committee, valueDirectors shall generally not be eligible to receive options. The term of a non-qualified stock option may not exceed ten years from the opinionsdate of our shareholders andgrant. The exercise price may be paid with cash, Common Shares already owned by the participant, or with the proceeds from a sale of the Common Shares subject to the option. The Talent and Compensation Committee may also provide that an option may be “net exercised”, meaning that the participant would receive the number of whole Common Shares equal to (A) the difference between (x) the aggregate Market Price of the Common Shares subject to the portion of such option then being exercised and (y) the aggregate exercise price for all such Common Shares under the portion thereof then being exercised plus (to the extent thereit would not give rise to adverse accounting consequences pursuant to applicable accounting principles or to adverse tax consequences to the Participants under Canadian federal, provincial or territorial tax laws) the amount of withholding tax due upon exercise divided by (B)
72
the Market Price of a Common Share on the date of exercise. Any fractional share that would result from such equation shall be canceled. A non-qualified stock option is an option that does not meet the qualifications of an incentive stock option as described below.
Incentive Stock Options
An incentive stock option is a stock option that meets the requirements of Section 422 of the Code, which include an exercise price of no less than 100% of Market Price on the grant date, a term of no more than ten years, and that the option be granted from a plan that has been approved by shareholders. The repricing of incentive stock options is prohibited. Notwithstanding the foregoing, if granted to a participant who owns shares representing more than 10% of the voting power of all classes of shares of the Company, its parent or one of its subsidiaries, an incentive stock option must have a term of not more than five years and have an exercise price which is at least 110% of the Market Price. In addition, if the aggregate Market Price of the Common Shares (as of the grant date) for which incentive stock options are exercisable for the first time by a participant during any significant vote againstcalendar year exceeds $100,000, such excess will be treated as non-qualified stock options.
Share Appreciation Rights
A share appreciation right (“SAR”) entitles the Named Executive Officerparticipant to receive an amount equal to the difference between the Market Price of the Company’s Common Shares on the exercise date and the exercise price of the SAR (which may not be less than 100% of the Market Price of a Common Share on the grant date), multiplied by the number of Common Shares subject to the SAR. A SAR may be granted in substitution for a previously granted option, and if so, the exercise price of any such SAR may not be less than 100% of the Market Price of Common Shares as determined at the time the option for which it is being substituted was granted. Payment to a participant upon the exercise of a SAR may be in cash or Common Shares (in which case, the number of Common Shares to be paid will be determined by dividing the amount calculated above by the Market Price of a Common Share at the time of payment). Unless otherwise determined by the Talent and Compensation Committee, Directors shall generally not be eligible to receive SARs.
Restricted Shares
A restricted share award is an award of outstanding Common Shares that does not vest until after a specified period of time, or satisfaction of other vesting conditions as determined by the Talent and Compensation Committee, and which may be forfeited if conditions to vesting are not met. Participants generally accrued (but are not paid) dividends or dividend equivalents on the Common Shares subject to their award during the vesting period (unless the awards are subject to performance-vesting criteria) and are also generally entitled to provide voting instructions with respect to the Common Shares underlying their awards.
Deferred Shares
A deferred share award is an unfunded, unsecured promise to deliver Common Shares to the participant in the future, if the participant satisfies the conditions to vesting, as determined by the Talent and Compensation Committee. Participants do not have voting rights, but generally accrue (but are not paid) dividend equivalent payments during the vesting period subject to the same vesting conditions as the underlying award.
Share Units
A share unit is an award denominated in Common Shares that may be settled either in shares or cash, subject to terms and conditions determined by the Talent and Compensation Committee. Participants generally accrue (but are not paid) dividend equivalent payments during the vesting period subject to the same vesting conditions as the underlying award.
Share Payment
Subject to limits in the Amended 2014 Plan, the Talent and Compensation Committee may issue unrestricted Common Shares, alone or in tandem with other Awards, in such amounts and subject to such terms and conditions as the Talent and Compensation Committee determines. A share payment may be granted as, or in payment of, a bonus (including, without limitation, any compensation that is intended to qualify as disclosedperformance-based compensation for purposes of Section 162(m) of the Code), or to provide incentives or recognize special achievements or contributions.
73
Cash Awards
The Talent and Compensation Committee may issue awards that are payable in cash, as deemed by the Talent and Compensation Committee to be consistent with the purposes of the Amended 2014 Plan. These cash awards will be subject to the terms, conditions, restrictions and limitations determined by the Talent and Compensation Committee from time to time. The payment of cash awards may be subject to the achievement of specified performance criteria. The Amended 2014 Plan provides that the maximum amount of a cash award that may be granted during any annual performance period to any Participant (other than a non-employee director of the Company) may not exceed $10,000,000.
Performance Criteria
Awards granted under the Amended 2014 Plan may be subject to specified performance criteria. Performance criteria are based on the Company’s attainment of performance measures pre-established by the Talent and Compensation Committee, in its sole discretion, based on one or more of the following:
74
For purposes of the first item above, “extraordinary items” includes all items of gain, loss or expense for the fiscal year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to a corporate transaction, restructuring, or related to a change in accounting principles. Each financial metric above may be on a business unit, geographic segment, total company, or per-share basis, and on a GAAP or non-GAAP adjusted basis.
The performance criteria may be based upon the attainment of specified levels of performance under one or more of the measures described above relative to the performance of other entities. The Talent and Compensation Committee may designate additional business criteria on which the performance criteria may be based or adjust, modify or amend the previously mentioned business criteria, including to take into account actions approved by the Board or a committee thereof that affect the achievement of the original performance criteria. Performance criteria may include a threshold level of performance below which no Award will be earned, a level of performance at which the target amount of an Award will be earned and a level of performance at which the maximum amount of the Award will be earned. The Talent and Compensation Committee shall make appropriate equitable adjustments to the performance criteria in recognition of unusual or non-recurring events affecting us or our financial statements, in response to changes in applicable laws or regulations, including changes in generally accepted accounting principles, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles, as applicable.
Deferrals
The Talent and Compensation Committee may postpone the exercise of Awards, or the issuance or delivery of shares or cash pursuant to any Award for such periods and upon such terms and conditions as the Talent and Compensation Committee determines. In addition, the Talent and Compensation Committee may determine that all or a portion of a payment to a participant, whether in cash and/or shares, will be deferred in order to prevent the Company or any subsidiary from being denied a U.S. federal income tax deduction with respect to an award granted under the Amended 2014 Plan. Notwithstanding this Proxy Statement, we will consider those shareholders’ concerns, andauthority, the Talent and Compensation Committee will evaluate whethernot postpone the exercise or delivery of shares or cash payable in respect of Awards constituting deferred compensation under Section 409A of the Code, where such postponement will cause the imposition of additional taxes under Section 409A of the Code. Section 409A of the Code provides rules that govern the manner in which compensation of various types may be deferred and imposes taxes upon compensation that is improperly deferred or accelerated.
Blackout Periods
The Amended 2014 Plan provides that (i) if the expiration of the term of options or SARs awarded under the Amended 2014 Plan occurs during a period self-imposed by the Company during which a participant is prohibited from trading in the Company’s securities (a “Blackout Period”) such term will be extended until the tenth business day after the end of such Blackout Period, and (ii) if share units are to be delivered during a Blackout Period, the shares subject to such share units will be delivered as soon as practicable after the end of such Blackout Period.
Dividends and Dividends Equivalents
The Talent and Compensation Committee may provide that Share Awards shall earn dividends or dividend equivalents, as applicable, subject to such terms, conditions, restrictions and limitations as the Talent and Compensation Committee may establish. Notwithstanding the foregoing, dividends or dividend equivalents (i) shall have the same vesting dates and shall be paid in accordance with the same terms as the Awards to which they relate and (ii) with respect to any actions are Award subject to the achievement of performance criteria, shall not be paid unless and until the relevant performance criteria have been satisfied.
Adjustments
The Amended 2014 Plan will provide that the Talent and Compensation Committee will make appropriate equitable adjustments to the maximum number of Common Shares available for issuance under the Amended 2014 Plan and other limits stated in the Amended 2014 Plan, the number Common Shares covered by outstanding Awards, and the exercise prices and performance measures applicable to outstanding Awards. These changes will be made to reflect changes in our capital structure (including a change in the number of Common Shares outstanding) on account of any share dividend, share split, reverse share split or any similar equity restructuring, or any combination or exchange of equity securities, merger, consolidation, recapitalization, reorganization or similar event, or to the extent
75
necessary to address those concerns.
prevent the enlargement or diminution of participants’ rights by reason of any such transaction or event or any extraordinary dividend, divestiture or other distribution (other than ordinary cash dividends) of assets to shareholders. These adjustments will be made only to the extent they conform to the requirements of applicable provisions of the Code and other applicable laws and regulations. The Board recommendsTalent and Compensation Committee, in its discretion, may decline to adjust an Award if it determines that the adjustment would violate applicable law or result in adverse tax consequences to the participant or to the Company. Adjustments described in this paragraph are subject to any applicable regulatory approvals.
Terminations
Unless the applicable award agreement provides otherwise or the Talent and Compensation Committee determines otherwise, vesting with respect to an Award will cease upon termination of a participant’s employment or service with the Company, and unvested Awards shall be forfeited upon such termination. In the case of termination for cause, vested awards shall also be forfeited.
Change of Control
The Amended 2014 Plan will provide that, unless otherwise set forth in a participant’s award agreement or employment agreement, all Awards that are assumed or substituted in connection with a Change of Control transaction (as defined in the Amended 2014 plan) will become fully vested, exercisable and free of restrictions, and any performance conditions on those Awards will be deemed to be achieved if the participant’s employment or service is terminated by the Company without “cause” (as defined in the Amended 2014 Plan) within 12 months following the Change of Control. In addition, the Amended 2014 Plan provides that, unless otherwise set forth in a participant’s award agreement, all Awards that are not assumed or substituted in connection with the Change of Control transaction will become fully vested (on a pro rata basis), exercisable and free of restrictions and any performance conditions on those Awards will be deemed to be achieved at target (on a pro rata basis) immediately upon the occurrence of the Change of Control transaction.
In addition, in the event of a Change of Control transaction, the Talent and Compensation Committee may, in its discretion, (i) provide that each option and each SAR which may, by its terms, only be settled in shares, will, immediately upon the occurrence of a Change in Control, be deemed to have been exercised on a “net exercise” basis, and (ii) may, in its discretion, except as would otherwise result in adverse tax consequences under Section 409A of the Code, provide that each Award, other than options and SARs will, immediately upon the occurrence of the Change of Control, be cancelled in exchange for a payment in an amount equal to the excess of the consideration paid per Common Share in the Change of Control over the purchase price (if any) per Common Share subject to the Award, multiplied by the number of Common Shares subject to the Award.
Assignability
Except in specific circumstances described in the Amended 2014 Plan, Awards granted under the Amended 2014 Plan may not be sold, pledged, hypothecated, assigned, margined or otherwise transferred in any manner other than by will or the laws of descent and distribution, unless and until the Common Shares underlying such Award have been issued, and all restrictions applicable to such Common Shares have lapsed or have been waived by the Talent and Compensation Committee.
Amendment and Termination
Subject to the approval of shareholders votethat we are seeking at the Annual Meeting, the Amended 2014 Plan will be effective as of April 30, 2018 and will remain in effect until the earlier of (i) the date all Common Shares subject to the Amended 2014 Plan have been purchased or acquired or (ii) April 30, 2028.
The Amended 2014 Plan and any Award may be amended, suspended or terminated at any time by the Board, provided that no amendment will be made without shareholder approval if such shareholder approval is required in order to comply with applicable law or the rules of the NYSE, the rules of the Toronto Stock Exchange (“TSX”), or any other securities exchange on which the Common Shares are traded or quoted. For instance, the Board may, without shareholder approval but subject to applicable law and the provisions of the Amended 2014 Plan, (i) amend the vesting provisions of an Award or of the Amended 2014 Plan, (ii) amend the payment provisions of an Award, (iii) cancel or modify outstanding Awards, (iv) waive any restrictions imposed with respect to Awards or the Common Shares issued pursuant to Awards or of the Amended 2014 Plan, (v) amend the provisions of the Amended 2014 Plan
76
in order to ensure its compliance with applicable securities and tax law as well as the TSX and NYSE rules, (vi) make any amendment of a clerical nature as well as any amendment clarifying any provision of the Amended 2014 Plan, (vii) make any adjustment as described above under the heading “Adjustments”, and (viii) suspend or terminate the Amended 2014 Plan. Except as may be required to comply with applicable tax law, no termination, suspension or amendment of the 2014 Plan may adversely affect the right of any participant with respect to a previously granted Award without the participant’s written consent.
The Company will obtain shareholder approval for: (i) subject to the Talent and Compensation Committee’s right to make equitable adjustments as mentioned above, a reduction in the exercise price or purchase price of an Award (or the cancellation and re-grant of an Award resulting in a lower exercise price or purchase price); (ii) the extension of the original term of an option over the maximum period of 10 years described above, except if such term occurs during a Blackout Period as described above; (iii) any amendment to remove or to exceed the participation limits described in the Amended 2014 Plan; (iv) an increase to the maximum number of Common Shares issuable under the Amended 2014 Plan (other than adjustments in accordance with the 2014 Plan); (v) amendments to the amendment and termination section of the Amended 2014 Plan other than amendments of a clerical nature; and (vi) any amendment that permits Awards to be transferable or assignable other than for EVERY YEARnormal estate settlement purposes or for other purposes not involving the receipt of monetary consideration.
Clawback
Awards under the Amended 2014 Plan are subject to our Clawback Policy (adopted February 21, 2017), available on Proposal No. 3.
Historical Annual Common Share Usage
As of December 31, 2017, there were 4,500,000 Common Shares subject to outstanding options (1.3% of Common Shares Outstanding) and 6,500,000 Common Shares subject to outstanding unit awards (1.9% of Common Shares Outstanding) under all plans, as well as 7,461,000 Common Shares available for future grant (2.1% of Common Shares Outstanding). In total, the Company had 18,461,000 Common Shares subject to outstanding equity awards or available for future equity awards under the 2014 Plan and predecessor plans, which represented approximately 5% of fully diluted Common Shares outstanding (or “Overhang Percentage”). The 11,900,000 million new Common Shares proposed to be included in the Amended 2014 Plan share reserve would increase the overhang percentage by an additional 3% to approximately 8%. The options outstanding as of December 31, 2017 have a weighted average exercise price of $34.65 and a weighted average remaining life of 8.1 years.
The Company’s gross burn rate for the last fiscal year was 1.7% and average gross burn rate for fiscal year 2015 through fiscal year 2017 was 1.3%. Burn rate does not take into account equity awards that have been cancelled or forfeited. Burn rate with respect to each year is calculated by dividing the total number of Common Shares subject to stock options and full value awards (such as restricted stock units) granted during the year (assuming achievement of the maximum performance levels for outstanding performance awards) by the total weighted-average number of Common Shares outstanding during the period. Using the ISS Proxy Advisory Services methodology for calculating burn rate, the Company’s three-year average (ISS adjusted) burn rate for equity grants made in fiscal year 2015, 2016 and 2017 was 1.45%, which was less than the allowable burn rate of 7.08% under ISS policy, based on the Company’s industry group. The Company’s burn rate calculation using the standard TSX methodology for the year ended 2017 was 1.60%, for the year ended 2016 was 1.64%, and for the year ended 2015 was 0.55%. This burn rate calculation assumes performance based Share Units at target. Performance-based Share Units granted in 2015 and 2016 generally can pay out at a maximum of 3 times target, and performance-based Share Units granted in 2017 can pay out at a maximum of 2 times target.
Amended 2014 Plan Benefits
The Amended 2014 Plan was designed by the Talent and Compensation Committee, as part of a comprehensive compensation strategy to provide long-term broad-based incentives for employees to contribute to the growth of the Company and its subsidiaries.
If approved by the shareholders, participants in the Amended 2014 Plan will be eligible for annual long-term awards which may include performance shares, stock options, restricted stock and share payments (or other Awards permitted under the Amended 2014 Plan). The level and types of Awards will be fixed by the Talent and
77
Compensation Committee in light of the participants’ targeted long-term incentive level. The Talent and Compensation Committee may impose additional conditions or restrictions to the vesting of such Awards as it deems appropriate, including, but not limited to, the achievement of performance goals based on one or more business criteria.
Awards under the Amended 2014 Plan are made at the discretion of the Talent and Compensation Committee and are not determinable at this time, except for the Awards set forth below. Moreover, the ultimate value of any grants that are made will depend on the value of the underlying Common Shares at the time of settlement, which likewise is not determinable at this time. Please refer to the “Grants of Plan-Based Awards Table” to review equity and equity-based awards made to our NEOs in 2017.
Name | Number of Units (#) | Number of Options (#) | ||||
Joseph C. Papa | 454,609 | 338,058 | ||||
Paul S. Herendeen | 139,223 | 177,482 | ||||
Christina M. Ackermann | 47,733 | 60,853 | ||||
Thomas J. Appio | 51,711 | 65,923 | ||||
William D. Humphries | — | — | ||||
Current Executive Officer Group (includes 5 individuals)1 | 693,276 | 642,316 | ||||
Non-Executive Director Group (includes 10 individual(s))2 | — | — | ||||
Non-Executive Officer Employee Group (includes 2,792 individuals) | 2,778,030 | 1,441,815 | ||||
| 1. | Current Executive Officer Group includes the five individuals whose awards are individually listed above. |
| 2. | Grants not yet made in 2018 to the Non-Executive Director Group. |
U.S. Federal Income Tax Consequences of Amended 2014 Plan Awards
The following is a brief summary of the principal United States federal income tax consequences of transactions under the Amended 2014 Plan, based on current United States federal income tax laws. This summary is not intended to be exhaustive, does not constitute tax advice and, among other things, does not describe state, local or foreign tax consequences, which may be substantially different. In particular, this summary does not address Canadian federal, provincial or territorial income tax consequences, including those applicable to employees resident in or whose employment is exercised in Canada.
Non-Qualified Stock Options
Generally, a participant will not recognize taxable income on the grant or vesting of a non-qualified stock option. Upon the exercise of a non-qualified stock option, a participant will recognize ordinary income in an amount equal to the difference between the Market Price of our Common Shares received on the date of exercise and the option cost (number of Common Shares purchased multiplied by the exercise price per Common Share). The Company will ordinarily be entitled to a deduction on the exercise date equal to the ordinary income recognized by the participant upon exercise.
Incentive Stock Options
No taxable income is recognized by a participant on the grant or vesting of an incentive stock option. If a participant exercises an incentive stock option in accordance with its terms and does not dispose of the Common Shares acquired within two years after the date of the grant of the incentive stock option or within one year after the date of exercise, the participant will be entitled to treat any gain related to the exercise of the incentive stock option as capital gain (instead of ordinary income). In this case, the Company will not be entitled to a deduction by reason of the grant or exercise of the incentive stock option, however the excess of the Market Price over the exercise price of the Common Shares acquired is an item of adjustment in computing alternative minimum tax of the participant. If a participant holds the Common Shares acquired for at least one year from the exercise date and does not sell or otherwise dispose of the Common Shares for at least two years from the grant date, the participant’s gain or loss upon a subsequent sale will be long-term capital gain or loss equal to the difference between the amount realized on the sale and the participant’s basis in the Common Shares acquired. If a participant sells or otherwise disposes of the
78
Common Shares acquired without satisfying the required minimum holding period, such “disqualifying disposition” will give rise to ordinary income equal to the excess of the Market Price of the Common Shares acquired on the exercise date (or, if less, the amount realized upon disqualifying disposition) over the participant’s tax basis in the Common Shares acquired. The Company will ordinarily be entitled to a deduction equal to the amount of the ordinary income resulting from a disqualifying disposition.
Share Appreciation Rights
Generally, a participant will not recognize taxable income upon the grant or vesting of a SAR, but will recognize ordinary income upon the exercise of a SAR in an amount equal to the cash amount received upon exercise (if the SAR is cash-settled) or the difference between the Market Price of our Common Shares received from the exercise of the SAR and the amount, if any, paid by the participant in connection with the exercise of the SAR. The participant will recognize ordinary income upon the exercise of a SAR regardless of whether our Common Shares acquired upon the exercise of the SAR are subject to further restrictions on sale or transferability. The participant’s basis in the Common Shares will be equal to the ordinary income attributable to the exercise and the amount, if any, paid in connection with the exercise of the SAR. The participant’s holding period for Common Shares acquired pursuant to the exercise of a SAR begins on the exercise date. Upon the exercise of a SAR, the Company will ordinarily be entitled to a deduction in the amount of the ordinary income recognized by the participant.
Restricted Shares
A participant generally will not be taxed at the time of a restricted share award but will recognize taxable income when the award vests or otherwise is no longer subject to a substantial risk of forfeiture. The amount of taxable income will be the Market Price of the Common Shares at that time.
Participants may elect to be taxed at the time of grant by making an election under Section 83(b) of the Code within 30 days of the award date. If a restricted share award subject to the Section 83(b) election is subsequently canceled, no deduction will be allowed for the amount previously recognized as income, and no tax previously paid will be refunded. Unless a participant makes a Section 83(b) election, dividends paid to a participant on Common Shares of an unvested restricted share award will be taxable to the participant as ordinary income. If the participant made a Section 83(b) election, the dividends will be taxable to the participant as dividend income.
The Company will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant. Unless a participant has made a Section 83(b) election, the Company will also be entitled to a deduction, for federal income tax purposes, for dividends paid on restricted share awards.
Deferred Shares
A participant will generally not recognize taxable income on a deferred share award until Common Shares subject to the award are distributed. The amount of this ordinary income will be the Market Price of our Common Shares on the date of distribution. Any dividend equivalents paid on deferred share awards are taxable as ordinary income when paid to the participant.
The Company will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant. The Company will also be entitled to a deduction, for federal income tax purposes, on any dividend equivalent payments made to the participant.
Share Units
Awards of share units are treated, for federal income tax purposes, in substantially the same manner as deferred share awards.
Share Awards
A participant will generally recognize taxable income on the grant of unrestricted shares, in an amount equal to the Market Price of the Common Shares on the grant date. The Company will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant.
Cash Awards
A participant will generally recognize taxable income upon the payment of a cash award, in an amount equal to the amount of the cash received. The Company will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant.
79
Withholding
To the extent required by law, the Company will withhold from any amount paid in settlement of an Award amounts of withholding and other taxes due or take other action as the Company deems advisable to enable the Company and the participant to satisfy withholding and tax obligations related to any Awards.
APPOINTMENT OF AUDITORS
The Audit and Risk Committee recommended to the Board that PwC be put before the shareholders at the Meeting for appointment as our auditors to serve until the close of the 20182019 Annual Meeting of Shareholders. The Board has accepted and endorsed this recommendation.
Under the BCBCA, at each annual meeting of shareholders, shareholders of a corporation appoint, by a majority of votes cast in respect of that proposal, an auditor to hold office until the close of the next annual meeting of shareholders. Notwithstanding the foregoing, if an auditor is not appointed at a meeting of shareholders, the incumbent auditor continues in office until a successor is appointed. PwC currently serves as auditor of the Company and, therefore, shall continue to serve as the Company’s auditor in the event that this proposal is not adopted by the shareholders.
Representatives of PwC will be present at the Meeting and will have an opportunity to make a statement if desired. Further, the representatives will be available to respond to appropriate shareholder questions directed to him or her.
A simple majority of votes cast at the Meeting, whether in person, or by proxy or otherwise, will be required to appoint PwC. You may either vote “For” the appointment of PwC or “Withhold” your vote with respect to such appointment. If you vote “For” the appointment of PwC, your Common Shares will be voted accordingly. If you select “Withhold” with respect to the appointment of PwC, your vote will not be counted as a vote cast for the purposes of appointing PwC.
As a shareholder of the Company, you are invited to vote with respect to the appointment of PwC as the auditors for the Company to hold office until the close of the 20182019 Annual Meeting of Shareholders and to authorize the Board to fix the auditors’ remuneration through the following resolution:
Resolved that the shareholders hereby appoint PwC as auditors for the Company to hold office until the close of the 20182019 Annual Meeting of Shareholders and the Board of Directors of the Company is hereby authorized to fix the auditors’ remuneration.
The Board recommends that the shareholders vote FOR Proposal No. 4.
80
For fiscal years ended December 31, 20152016 and December 31, 2016,2017, PwC was our appointed auditor. Principal Auditor fee includes fees paid to PwC and affiliated PwC network firms through the world. The table below summarizes the fees (expressed in thousands of U.S. dollars) paid by the Company and its consolidated subsidiaries to PwC during 20152016 and 2016.2017.
| 2015 | 2016 | |||||||||||||||
| ($) | (%) | ($) | (%) | |||||||||||||
Audit Fees | 20,477 | 82 | 16,173 | 77 | ||||||||||||
Audit-Related Fees(1) | 271 | 1 | 1,687 | 8 | ||||||||||||
Tax Fees(2) | 4,129 | 17 | 3,228 | 15 | ||||||||||||
All Other Fees(3) | 2 | * | 2 | * | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 24,879 | 100 | 21,090 | 100 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
2016 | 2017 | |||||||||||
($) | (%) | ($) | (%) | |||||||||
Audit Fees | 16,173 | 77 | 16,310 | 82 | ||||||||
Audit-Related Fees(1) | 1,687 | 8 | 1,200 | 6 | ||||||||
Tax Fees(2) | 3,228 | 15 | 2,383 | 12 | ||||||||
All Other Fees(3) | 2 | * | 34 | * | ||||||||
Total | 21,090 | 100 | 19,927 | 100 | ||||||||
Notes:
| * | Less than one percent. |
| (1) | Audit-related services are generally related to audits of financial statements prepared for special purposes, assignments relating to due diligence investigations and procedures and employee benefit plan audits. |
| (2) | Tax services are professional services rendered by our auditors for tax compliance and tax consulting primarily related to international transfer pricing. |
| (3) | All other fees are amounts paid for miscellaneous permissible products and services. |
Audit Fees
The aggregate fees billed for professional services rendered by PwC for the fiscal years ended December 31, 20152016 and December 31, 20162017 for the audit of our consolidated annual financial statements and the reviews of the financial statements included in our Forms10-Q, the audits of our internal control over financial reporting with the objective of obtaining reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects, services related to our financing activities, such as comfort letters and consents, or services that are normally provided by PwC in connection with statutory and regulatory filings or engagements in 20152016 and 2016,2017, were approximately $20.5$16.2 million and $16.2$16.3 million, respectively. The decrease between 2015 and 2016 is primarily a result of additional audit work performed in connection with the audit of our December 31, 2015 consolidated financial statements resulting from the Ad Hoc Committee’s review, identification of material weaknesses in internal control over financial reporting and the resulting delay in filing of the 2015 Form10-K.
Audit-Related Fees
The Audit and Risk Committee believes that the provision of thenon-audit services referenced above is compatible with maintaining PwC’s independence.
Audit-related services are generally related to audits of financial statements prepared for special purposes, employee benefit plan audits and assignments relating to due diligence investigations and procedures.
The aggregate fees billed for audit-related services rendered by PwC during the fiscal year ended December 31, 20152016 and December 31, 20162017 that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not included in “Audit Fees” above were approximately $0.3$1.7 million and $1.7$1.2 million, respectively.
Tax Fees
Tax services are professional services rendered by our auditors for tax compliance and tax consulting primarily related to international transfer pricing. The aggregate fees billed for tax services rendered by PwC during the fiscal years ended December 31, 20152016 and December 31, 20162017 were approximately $4.1$3.2 million and $3.2$2.4 million, respectively.
All Other Fees
There were insignificant amounts paid for miscellaneous permissible products and services as reported above to PwC during the fiscal years ended December 31, 20152016 and December 31, 2016.2017. PwC did not provide any financial information systems design or implementation services to the Company during 2015 and 2016.2016 or 2017.
81
All fees described above were approved by the Audit and Risk Committee of our Board under itspre-approval policy.
Audit and Risk Committee’sPre-Approval ofNon-Audit Services
The Audit and Risk Committee chooses and appoints (through nomination to the Company’s shareholders) the Company’s auditors to audit our financial statements. The Audit and Risk Committeepre-approvesnon-audit pre-approves non-audit services that may be provided to the Company and its subsidiaries by its auditors. The Audit and Risk Committee is not permitted to approve any engagement of the Company’s auditors if the services to be performed either fall into a category of services that are not permitted by applicable law or the services would be inconsistent with maintaining the auditors’ independence.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
FOR THE 20182019 ANNUAL MEETING OF SHAREHOLDERS
A shareholder who is entitled to vote at the 20182019 Annual Meeting of Shareholders may raise a proposal for consideration at such Annual Meeting of Shareholders. We will consider such proposal for inclusion in the proxy materials for the 20182019 Annual Meeting only if our Corporate Secretary receives such proposal (at 2150 Saint Elzear Blvd. West, Laval, Quebec, H7L 4A8, Canada, or by facsimile514-744-6272): (i) submitted pursuant to Rule14a-8 (“Rule14a-8”) of the General Rules and Regulations promulgated under the Exchange Act, on or before December 30, 2017,November 21, 2018, or (ii) submitted pursuant to Part 5, Division 7 of the BCBCA on or before February 2, 2018.January 30, 2019. The use of certified mail, return receipt, is advised. In addition, in the event the Company does not receive a shareholder proposal by March 15, 2018,13, 2019, the proxy to be solicited by the Board for the 20182019 Annual Meeting of Shareholders will confer discretionary authority on the holders of the proxy to vote the Common Shares if the proposal is presented at the 20182019 Annual Meeting of Shareholders without any discussion of the proposal in the proxy materials for that meeting.
If the date of the 20182019 Annual Meeting of Shareholders is advanced or delayed more than 30 days from the date of the Annual Meeting, shareholder proposals intended to be included in the proxy statement for the 20182019 Annual Meeting of Shareholders must be received by us within a reasonable time before we begin to print and mail the proxy statement, or provide a notice to you with respect to accessing such proxy statement over the Internet, for the 20182019 Annual Meeting of Shareholders.
The Company’s Articles provide that shareholders seeking to nominate candidates for election as Directors must provide timely notice in writing to the Company’s secretary by personal delivery or facsimile transmission at the number shown on the Company’s issuer profile on SEDAR atwww.sedar.com. The purpose of this advance notice requirement is to: (i) inform the Company of nominees for election at a shareholder meeting
proposed by a shareholder sufficiently in advance of such meeting; (ii) provide an opportunity to inform all shareholders of any potential proxy contest and proposed Director nominees sufficiently in advance of the meeting; and (iii) enable the Board to make informed recommendations or present alternatives to shareholders.
To be timely, a shareholder’s notice must be received by the Company: (i) in the case of an annual general meeting, not later than the close of business on the 50th day before the meeting date or, if the first public announcement of the date of such meeting is less than 60 days prior to the meeting date, the close of business on the 10th day following the day on which public announcement of the date of such annual general meeting was first made by the Company; and (ii) in the case of a special meeting called for the purpose of electing Directors, not later than the close of business on the 15th day following the day on which public announcement of the date of the special meeting is first made by the Company. The Company’s Articles also prescribe the proper written form for a shareholder’s notice as well as additional requirements in connection with nominations. Shareholders who failed to comply with the advance notice requirements would not be entitled to make nominations for Directors at the Annual General or Special Meeting of Shareholders.
COMMUNICATION WITH THE BOARD OF DIRECTORS
Shareholders and other interested parties may contact the Company’s Directors or independent directors in writing, as a group or individually, by directing their correspondence to the attention of Valeant Investor Relations, Valeant Pharmaceuticals International, Inc., 2150 Saint Elzear Blvd. West, Laval, Quebec, H7L 4A8, Canada.
82
Shareholders and other interested parties may also contact the Company’s Directors by calling the Company’s helpline in the United States and Canada at(888) 451-4510. Additional international telephone numbers are included in our Business Ethics Reporting Policy, which is available on our website atwww.valeant.com (under the tab “About” and under the subtab “Corporate Governance”). The Corporate Secretary will log incoming information and forward appropriate messages promptly to the Director(s). Communications are distributed to the Board 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 will not be distributed to the Board, such as 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 anynon-employee Director upon request.
Communications that include information better addressed by the Audit and Risk Committee will be addressed directly by that Committee.
ANNUAL REPORT AND ADDITIONAL INFORMATION
Our financial information is contained in the Company’s consolidated annual financial statements and related MD&A for the fiscal year ended December 31, 2016.2017. Our Annual Report is available on the Internet at our website at www.valeant.com or on SEDAR at www.sedar.com or through the SEC’s electronic data system called EDGAR at www.sec.gov. To request a printed copy of our Annual Report or consolidated financial statements and related MD&A as of and for the year ended December 31, 2016,2017, which we will provide to you without charge, either write to Valeant Investor Relations at Valeant Pharmaceuticals International, Inc., 2150 Saint Elzear Blvd. West, Laval, Quebec H7L 4A8, Canada, or send an email to Valeant Investor Relations at ir@valeant.com. Neither the Annual Report nor the consolidated financial statements and related MD&A as of and for the year ended December 31, 20162017 form part of the material for the solicitation of proxies. Additional information relating to the Company may be found on SEDAR at www.sedar.com or on EDGAR at www.sec.gov.
We will bear the entire cost of solicitation, including the preparation, assembly, Internet hosting, maintaining a dedicated call line and printing and mailing the Proxy Statement and form of Proxy Card. In addition to soliciting proxies by telephone, Internet and mail, Directors, officers or employees of the Company may, without special compensation, solicit proxies in person, by telephone, telegraph, courier service, advertisement, telecopier or other electronic means. We have retained D.F. King to assist in the solicitation of proxies. We will pay fees to D.F. King of $10,000, plus reasonableout-of-pocket expenses incurred by them. We will bear the entire cost of solicitation, including the preparation, assembly, Internet hosting, maintaining a dedicated call line, and printing and mailing the Proxy Statement and form of Proxy Card. We will pay those entities holding Common Shares in the names of their beneficial owners, such as brokers, nominees, fiduciaries and other custodians for their reasonable fees and expenses in forwarding solicitation material to their beneficial owners and for obtaining their instructions.
HOUSEHOLDING OF PROXY MATERIALS
Companies and intermediaries (e.g., brokers) are permitted under the SEC’s rules to satisfy the delivery requirements for proxy materials and annual reports with respect to two or more shareholders sharing the same address by delivering a single management proxy circular and proxy statement addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for shareholders and cost savings for companies.
A number of brokers with account holders who are our shareholders “household” our proxy materials. A single management proxy circular and proxy statement or Notice Regarding Internet Availability of Proxy Materials, as applicable, will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If you prefer to receive multiple copies of the separate management proxy circular and proxy statement or Notice Regarding Internet Availability of Proxy Materials, as applicable, at the same address for the Annual Meeting or for any future Annual Meetings of Shareholders, additional copies will be provided promptly
83
upon written or oral request to your broker, or by contacting us at Valeant Pharmaceuticals International, Inc., Attn: Investor Relations, 2150 Saint Elzear Blvd. West, Laval, Quebec H7L 4A8, Canada, telephone514-744-6792. Shareholders who currently receive multiple copies of the Proxy Statement or Notice Regarding Internet Availability of Proxy Materials at their address and would like to request “householding” of their communications should contact their broker.
If any other matters are properly presented for consideration 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 recommendation of the Board, the designated proxyholders intend to vote the Common Shares represented by the Proxies appointing them on such matters in accordance with the recommendation of the Board and the authority to do so is included in the Proxy.
As of the date this Proxy Statement, the Board knows of no other matters which are likely to come before the Meeting.
By Order of the Board of Directors,
Joseph C. Papa
Chairman of the Board and Chief Executive Officer
By Order of the Board of Directors, | |
| | |
Joseph C. Papa Chairman of the Board and Chief Executive Officer |
Laval, Quebec
March 21, 2018
March 23, 2017
WE WILL MAIL WITHOUT CHARGE UPON WRITTEN REQUEST A COPY OF OUR MOST RECENT ANNUAL REPORT, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO: CORPORATE SECRETARY, VALEANT PHARMACEUTICALS INTERNATIONAL, INC., 2150 SAINT ELZEAR BLVD. WEST, LAVAL, QUEBEC H7L 4A8, CANADA. THE ANNUAL REPORT IS ALSO AVAILABLE FREE OF CHARGE ON THE COMPANY WEBSITE:WWW.VALEANT.COM.
84
VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
2014 OMNIBUS INCENTIVE PLAN
(As Amended and Restated, Effective as of April 30, 2018)
| 1. | Purpose and Background |
The purposes of the Amended and Restated 2014 Omnibus Incentive Plan (the “Plan”) are to (i) align the long-term financial interests of employees, directors, consultants, agents and other service providers of the Company and its Subsidiaries with those of the Company’s shareholders; (ii) attract and retain those individuals by providing compensation opportunities that are competitive with other companies; and (iii) provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company and its Subsidiaries.
Valeant Pharmaceuticals International, Inc., a British Columbia corporation, adopted the 2014 Omnibus Incentive Plan (the “2014 Plan”) effective as of April 7, 2014, which was approved by the shareholders at the 2014 annual meeting. The 2014 Plan reserved approximately 18 million Common Shares for the issuance of Awards. As of December 31, 2017, only 7,461,000 Common Shares were available for further issuance. On February 22, 2018, the Board of Directors amended and restated the 2014 Plan to increase the number of authorized Common Shares by an additional 11,900,000 Common Shares. The Plan, as amended and restated, has been adopted and approved by the Board (defined below) and shall be effective as of April 30, 2018 (the “Effective Date”), subject to the approval of shareholders.
| 2. | Term |
Subject to the right of the Board to amend or terminate the Plan at any time pursuant to Section 18 hereof, the Plan shall remain in effect until the earlier of (i) the date all Common Shares subject to the Plan have been purchased or acquired according to the Plan’s provisions or (ii) the tenth anniversary of the Effective Date. No Awards shall be granted under the Plan after such termination date, but Awards granted prior to such termination date shall remain outstanding in accordance with their terms.
| 3. | Definitions |
“Award” shall mean an Option, SAR, Share Award or Cash Award granted under the Plan.
“Award Agreement” shall mean any written agreement, contract, or other instrument or document evidencing an Award.
“Board” shall mean the Board of Directors of the Company.
“Blackout Period” means a period self-imposed by the Company (within the meaning of Section 613(m) of the TSX Company Manual) when the Participant is prohibited from trading in the Company’s securities.
“Business Day” means any day, other than a Saturday, Sunday or statutory or civic holiday, on which banks in Toronto, Ontario are open for business.
“Cash Award” means cash awarded under Section 7(d) of the Plan, including cash awarded as a bonus or upon the attainment of Performance Criteria or otherwise as permitted under the Plan.
“Cause” shall have the meaning set forth in the Participant’s employment agreement with the Company, as in effect on the date an Award is granted; provided that if no such agreement or definition exists, “Cause” shall mean, unless otherwise specified in the Award Agreement: (i) conviction of any felony or indictable offense (other than one related to a vehicular offense) or other criminal act involving fraud; (ii) willful misconduct that results in a material economic detriment to the Company; (iii) material violation of Company policies and directives, which is not cured after written notice and an opportunity for cure; (iv) continued refusal by the Participant to perform the Participant’s duties after written notice identifying the deficiencies and an opportunity for cure; (v) a material violation by the Participant of any material covenants to the Company and (vi) such other actions constituting cause under applicable common law. No action or inaction shall be deemed willful if not demonstrably willful and if taken or not taken by
A-1
the Participant in good faith and with the understanding that such action or inaction was not adverse to the best interests of the Company. Reference in this definition to the Company shall also include direct and indirect Subsidiaries of the Company, and materiality shall be measured based on the action or inaction and the impact upon the Company taken as a whole.
“Change of Control” shall have the meaning set forth in Section 10.
“Code” shall mean the U.S. Internal Revenue Code of 1986, as amended, including any rules and regulations promulgated thereunder and any successor thereto.
“Committee” shall mean the Board or a committee designated by the Board to administer the Plan.
“Common Shares” shall mean the common shares of the Company, no par value per share.
“Company” shall mean Valeant Pharmaceuticals International, Inc., a Canadian corporation.
“Deferred Shares” shall mean an Award payable in Common Shares at the end of a specified deferral period that is subject to the terms, conditions and limitations described or referred to in Section 7(c)(iv).
“Disability” shall mean, unless otherwise provided in an Award Agreement, that the Participant is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company; provided, that, if applicable to the Award, “Disability” shall be determined in a manner consistent with Section 409A of the Code.
“Eligible Recipient” shall mean (i) any employee (including any officer) of the Company or any Subsidiary, (ii) any director of the Company or any Subsidiary or (iii) any individual performing services for the Company or a Subsidiary in the capacity of a consultant, agent or otherwise.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder and any successor thereto.
“Good Reason” shall have the meaning set forth in the Participant’s employment agreement with the Company, as in effect on the date an Award is granted; provided that if no such agreement or definition exists, “Good Reason” shall mean, unless otherwise specified in the Award Agreement, the occurrence of any of the events or conditions described in clauses (i) and (ii) immediately below which are not cured by the Company (if susceptible to cure by the Company) within thirty (30) days after the Company has received written notice from the Participant which notice must be provided by the Participant within ninety (90) days of the initial existence of the event or condition constituting Good Reason specifying the particular events or conditions which constitute Good Reason and the specific cure requested by the Participant: (i) any material reduction in the Participant’s duties or responsibilities as in effect immediately prior thereto; provided that diminution of responsibility shall not include any such diminution resulting from a promotion, death or Disability, the termination of the Participant’s employment for Cause, or the Participant’s termination of employment other than for Good Reason; and (ii) any reduction in the Participant’s base salary or target bonus opportunity which is not comparable to reductions in the base salary or target bonus opportunity of other similarly-situated employees at the Company.
“Insider” shall mean a reporting insider, as defined in National Instrument 55-104 — Insider Reporting Requirements and Exemptions of the Canadian Securities Administrators.
“ISO” shall mean an Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the Code.
“Market Price” shall mean, with respect to Common Shares, (i) the closing price per Common Share on the national securities exchange on which the Common Shares are principally traded (as of the Effective Date, the New York Stock Exchange) for the last preceding date on which there was a sale of such Common Shares on such exchange, or (ii) if the Common Shares are not then listed on a national securities exchange but are then traded in an over-the-counter market, the average of the closing bid and asked prices for the Common Shares in such over-the-counter market for the last preceding date on which there was a sale of such Common Shares in such market, or (iii) if the Common Shares are not then listed on a national securities exchange or traded in an over-the-counter
A-2
market, such value as the Committee, using any reasonable method of valuation, shall determine. With respect to property other than Common Shares, the Market Price shall mean the fair market value of such other property determined by such methods or procedures as shall be established from time to time by the Committee.
“Nonqualified Stock Option” shall mean an Option that is granted to a Participant that is not designated as an ISO.
“Option” shall mean the right to purchase a specified number of Common Shares at a stated exercise price for a specified period of time subject to the terms, conditions and limitations described or referred to in Section 7(a). The term “Option” as used in the Plan includes the terms “Nonqualified Stock Option” and “ISO.”
“Original Term” shall have the meaning set forth in Section 7(a).
“Participant” shall mean an Eligible Recipient who has been granted an Award under the Plan.
“Performance Criteria” shall mean performance criteria based on the attainment by the Company or any Subsidiary (or any division or business unit of such entity) of performance measures pre-established by the Committee in its sole discretion, based on one or more of the following:
| (i) | revenues, income before taxes and extraordinary items, net income, operating income, earnings before income tax, earnings before interest, taxes, depreciation and amortization, cash flow or a combination of any or all of the foregoing; |
| (ii) | after-tax or pre-tax profits including, without limitation, that attributable to continuing and/or other operations; |
| (iii) | the level of the Company’s bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company either in absolute terms or as it relates to a profitability ratio including operating income or EBITA; |
| (iv) | return on capital employed, return on assets, or return on invested capital; |
| (v) | after-tax or pre-tax return on stockholders’ equity; |
| (vi) | economic value added targets based on a cash flow return on investment formula; |
| (vii) | the Market Price of the Common Shares; |
| (viii) | the market capitalization or enterprise value of the Company, either in amount or relative to industry peers; |
| (ix) | the value of an investment in the Common Shares assuming the reinvestment of dividends; |
| (x) | the achievement of operating margin targets or other measures of improving profitability; |
| (xi) | the filing of one or more new drug application(s) (“NDA”) or one or more new drug submission(s) (“NDS”) or the approval of one or more NDA(s) or one or more NDS(s) by the U.S. Food and Drug Administration or the Canadian Therapeutic Products Directorate, as applicable; |
| (xii) | the achievement of, or progress toward, a launch of one or more new drug(s); |
| (xiii) | the achievement of research and development milestones; |
| (xiv) | the achievement of other strategic milestones including, without limitation, the achievement of specific synergy capture and cost savings realization relating to integrations and the successful creation or execution of a restructuring plan for a specific business or function; |
| (xv) | the successful completion of clinical trial phases; |
| (xvi) | licensing or acquiring new products or product platforms; |
| (xvii) | acquisition or divestiture of products or business; |
| (xviii) | the entering into new, or exiting from existing, geographic markets or industry segments; or |
| (xix) | the attainment of a certain level of, reduction of, or other specified objectives with regard to limiting the level in or increase in, all or a portion of controllable expenses or costs or other expenses or costs. |
A-3
For purposes of item (i) above, “extraordinary items” shall mean all items of gain, loss or expense for the fiscal year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to a corporate transaction (including, without limitation, a disposition or acquisition) or restructuring or related to a change in accounting principles, all as determined in accordance with standards established by Opinion No. 30 of the Accounting Principles Board. Each financial metric described in item (i) above may be on a business unit, geographic segment, total company or per-share basis, and on a GAAP or non-GAAP adjusted basis. The Performance Criteria may be based upon the attainment of specified levels of performance under one or more of the measures described above relative to the performance of other entities. The Committee may designate additional business criteria on which the Performance Criteria may be based or adjust, modify or amend the aforementioned business criteria, including to take into account actions approved by the Board or a committee thereof that affect the achievement of the original performance criteria. Performance Criteria may include a threshold level of performance below which no Award will be earned, a level of performance at which the target amount of an Award will be earned and a level of performance at which the maximum amount of the Award will be earned. The Committee, in its sole discretion, shall make equitable adjustments to the Performance Criteria in recognition of unusual or non-recurring events affecting the Company or any Subsidiary or the financial statements of the Company or any Subsidiary, in response to changes in applicable laws or regulations, including changes in generally accepted accounting principles, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles, as applicable.
“Person” shall have the meaning set forth in Section 14(d)(2) of the Exchange Act.
“Restricted Shares” shall mean an Award of Common Shares that is subject to the terms, conditions, restrictions and limitations described or referred to in Section 7(c)(iii).
“SAR” shall mean a share appreciation right that is subject to the terms, conditions, restrictions and limitations described or referred to in Section 7(b).
“Section 16(a) Officer” shall mean an Eligible Recipient who is subject to the reporting requirements of Section 16(a) of the Exchange Act.
“Separation from Service” shall have the meaning set forth in Section 1.409A-1(h) of the Treasury Regulations.
“Specified Employee” shall have the meaning set forth in Section 409A of the Code and the Treasury Regulations promulgated thereunder.
“Share Award” shall have the meaning set forth in Section 7(c)(i).
“Share Payment” shall mean a share payment that is subject to the terms, conditions, and limitations described or referred to in Section 7(c)(ii).
“Share Unit” shall mean a share unit that is subject to the terms, conditions and limitations described or referred to in Section 7(c)(v).
“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations (other than the last corporation) in the unbroken chain owns shares possessing fifty percent (50%) or more of the total combined voting power of all classes of shares in one of the other corporations in the chain (or such lesser percent as is permitted by Section 1.409A-1(b)(5)(iii)(E) of the Treasury Regulations).
“Transferred Shares” shall have the meaning set forth in Section 6(a).
“Treasury Regulations” shall mean the regulations promulgated under the Code by the United States Internal Revenue Service, as amended.
| 4. | Administration |
| (a) | Committee Authority. Subject to applicable law, the Committee shall have full and exclusive power to administer and interpret the Plan, to grant Awards and to adopt such administrative rules, regulations, procedures and guidelines governing the Plan and the Awards as it deems appropriate, in its sole discretion, from time to time. The Committee’s authority shall include, but not be limited to, the authority to |
A-4
(i) determine the type of Awards to be granted under the Plan; (ii) select Award recipients and determine the extent of their participation; (iii) determine Performance Criteria; and (iv) establish all other terms, conditions, and limitations applicable to Awards, Award programs and, if applicable, the Common Shares issued pursuant thereto. The Committee may accelerate or defer the vesting or payment of Awards, cancel or modify outstanding Awards, waive any conditions or restrictions imposed with respect to Awards or the Common Shares issued pursuant to Awards and make any and all other determinations that it deems appropriate with respect to the administration of the Plan, subject to the limitations contained in Sections 6(d) and 18 of the Plan and applicable law and listing rules with respect to all Participants.
| (b) | Administration of the Plan. The administration of the Plan shall be managed by the Committee. All determinations of the Committee shall be made by a majority of its members either present in person or participating by conference telephone at a meeting or by written consent. The Committee shall have the power to prescribe and modify the forms of Award Agreement, correct any defect, supply any omission or clarify any inconsistency in the Plan and/or in any Award Agreement and take such actions and make such administrative determinations that the Committee deems appropriate in its sole discretion. Any decision of the Committee in the administration of the Plan, as described herein, shall be final, binding and conclusive on all parties concerned, including the Company, its shareholders and Subsidiaries and all Participants. |
| (c) | Delegation of Authority. To the extent permitted by applicable law, the Committee may at any time delegate to one or more officers or directors of the Company some or all of its authority over the administration of the Plan, with respect to individuals who are not Section 16(a) Officers. |
| (d) | Indemnification. No member of the Committee or any other Person to whom any duty or power relating to the administration or interpretation of the Plan has been delegated shall be personally liable for any action or determination made with respect to the Plan, except for his or her own willful misconduct or as expressly provided by statute. The members of the Committee and its delegates, including any employee with responsibilities relating to the administration of the Plan, shall be entitled to indemnification and reimbursement from the Company, to the extent permitted by applicable law and the by-laws and policies of the Company. To the fullest extent permitted by the law, in the performance of its functions under the Plan, the Committee (and each member of the Committee and its delegates) shall be entitled to rely upon information and advice furnished by the Company’s officers, accountants, counsel and any other party they deem appropriate, and neither the Committee nor any such Person shall be liable for any action taken or not taken in reliance upon any such advice. |
| 5. | Participation |
| (a) | Eligible Recipients. Subject to applicable law and Section 7 hereof, the Committee shall determine, in its sole discretion, which Eligible Recipients shall be granted Awards under the Plan. Unless otherwise determined by the Committee, members of the Board shall generally not be eligible to receive SARs or Options. |
| (b) | Participation outside of the United States. In order to facilitate the granting of Awards to Employees who are foreign nationals or who are employed outside of the U.S., the Committee may provide for such special terms and conditions, including, without limitation, substitutes for Awards, as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. The Committee may approve any supplements to, or amendments, restatements or alternative versions of, this Plan as it may consider necessary or appropriate for the purposes of this Section 5(b) without thereby affecting the terms of this Plan as in effect for any other purpose, and the appropriate officer of the Company may certify any such documents as having been approved and adopted pursuant to properly delegated authority; provided, that no such supplements, amendments, restatements or alternative versions shall include any provisions that are inconsistent with the intent and purpose of this Plan, as then in effect; and further provided that any such action taken with respect to an Employee who is subject to Section 409A of the Code shall be taken in compliance with Section 409A of the Code. |
| 6. | Available Shares of Common Shares |
| (a) | Shares Subject to the Plan. Subject to the following provisions of this Section 6, the maximum number of Common Shares that may be issued to Participants pursuant to Awards (all of which may be granted as ISOs) shall be equal to the sum of (i) 18,368,825 Common Shares, (ii) 11,900,000 Common Shares and |
A-5
(iii) the number of Common Shares becoming available for reuse after awards are terminated, forfeited, cancelled, exchanged or surrendered following the Effective Date under the Company’s 2011 Omnibus Incentive Plan and the 2007 Equity Compensation Plan (the “Transferred Shares”). For the avoidance of doubt, the Transferred Shares shall no longer be available under the Company’s 2011 Omnibus Incentive Plan and the 2007 Equity Compensation Plan. Common Shares issued pursuant to Awards granted under the Plan may be shares that have been authorized but unissued, or have been purchased in open market transactions or otherwise.
| (b) | Forfeited and Expired Awards. If any shares subject to an Award are forfeited, canceled, exchanged or surrendered, or if an Award terminates or expires without a distribution of Common Shares to the Participant, the shares with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan. Notwithstanding the foregoing, the shares surrendered or withheld as payment of either the exercise price of an Option (including shares otherwise underlying an Award of a SAR that are retained by the Company to account for the exercise price of such SAR) and/or withholding taxes in respect of an Award shall no longer be available for Awards under the Plan. |
| (c) | Other Items Not Included in Allocation. The maximum number of Common Shares that may be issued under the Plan as set forth in Section 6(a) shall not be affected by (i) the payment in cash of dividends or dividend equivalents in connection with outstanding Awards; (ii) the granting or payment of share-denominated Awards that by their terms may be settled only in cash, (iii) the granting of Cash Awards; or (iv) Awards that are granted in connection with a transaction between the Company or a Subsidiary and another entity or business in substitution or exchange for, or conversion adjustment, assumption or replacement of, awards previously granted by such other entity to any individuals who have become Eligible Recipients as a result of such transaction. |
| (d) | Other Limitations on Shares that May be Granted under the Plan. Subject to Section 6(e), (i) the number of Common Shares issuable to Insiders, at any time, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding Common Shares of the Company; (ii) the number of Common Shares issued to Insiders, within any one year period, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding securities; (iii) the number of Common Shares issuable to non-employee members of the Board, at any time, under all security-based compensation arrangements of the Company, cannot exceed 1% of issued and outstanding Common Shares of the Company; and (iv) the aggregate number of Common Shares that may be granted prior to November 2, 2017 to any “covered employee” under Section 162(m) of the Code during a calendar year in the form of Options, Share Appreciation Rights, and/or Share Awards and intended to qualify as “performance-based compensation” under Section 162(m) of the Code was not permitted to exceed the number of Common Shares initially authorized for grant. |
| (e) | Adjustments. In the event of any change in the Company’s capital structure, including, but not limited to, a change in the number of Common Shares outstanding, on account of (i) any stock dividend, stock split, reverse stock split or any similar equity restructuring or (ii) any combination or exchange of equity securities, merger, consolidation, recapitalization, reorganization, or divesture or any other similar event affecting the Company’s capital structure, to reflect such change in the Company’s capital structure, the Committee shall make appropriate equitable adjustments to the maximum number of Common Shares that may be issued under the Plan as set forth in Section 6(a) and to the maximum number of shares that may be granted to any single individual pursuant to Section 6(d). In the event of any extraordinary dividend, divestiture or other distribution (other than ordinary cash dividends) of assets to shareholders, or any transaction or event described above, to the extent necessary to prevent the enlargement or diminution of the rights of Participants, the Committee shall make appropriate equitable adjustments to the number or kind of shares subject to an outstanding Award, the exercise price applicable to an outstanding Award, and/or any measure of performance that relates to an outstanding Award, including any applicable Performance Criteria. Any adjustment to ISOs under this Section 6(e) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code. With respect to Awards subject to Section 409A of the Code, any adjustments under this Section 6(e) shall conform to the requirements of Section 409A of the Code. Notwithstanding anything set forth herein to the contrary, the Committee may, in its discretion, decline to adjust any Award made to a Participant, if it determines that |
A-6
such adjustment would violate applicable law or result in adverse tax consequences to the Participant or to the Company. If, as a result of any adjustment under this section 6(e), a Participant would become entitled to a fractional Common Share, the Participant has the right to acquire only the adjusted number of full Common Shares and no payment or other adjustment will be made with respect to the fractional Common Shares so disregarded. Adjustments under this Section 6(e) are subject to any applicable regulatory approvals.
| 7. | Awards Under The Plan |
Awards under the Plan may be granted as Options, SARs, Share Awards or Cash Awards as described below. Awards may be granted singly, in combination or in tandem as determined by the Committee, in its sole discretion.
| (a) | Options. Options granted under the Plan shall be designated as Nonqualified Stock Options or ISOs. Options shall expire after such period, not to exceed a maximum of ten years, as may be determined by the Committee (the “Original Term”). If an Option is exercisable in installments, such installments or portions thereof that become exercisable shall remain exercisable until the Option expires or is otherwise canceled pursuant to its terms. Notwithstanding anything to the contrary in this Section 7(a), if the Original Term of an Option held by a Participant expires during a Blackout Period, the term of such Option shall be extended until the tenth Business Day following the end of the Blackout Period, at which time any unexercised portion of the Option shall expire. Except as otherwise provided in this Section 7(a), Options shall be subject to the terms, conditions, restrictions, and limitations determined by the Committee, in its sole discretion, from time to time. |
| (i) | Exercise Price. The Committee shall determine the exercise price per share for each Option, which shall not be less than 100% of the Market Price (as of the date of grant) of the Common Shares subject to the Option. |
| (ii) | Exercise of Options. Upon satisfaction of the applicable conditions relating to vesting and exercisability, as determined by the Committee, and upon provision for the payment in full of the exercise price and applicable taxes due, the Participant shall be entitled to exercise the Option and receive the number of Common Shares issuable in connection with the Option exercise. The Common Shares issued in connection with the Option exercise may be subject to such conditions and restrictions as the Committee may determine, from time to time. The exercise price of an Option and applicable withholding taxes relating to an Option exercise may be paid by methods permitted by the Committee from time to time including, but not limited to, (1) a cash payment; (2) tendering (either actually or by attestation) Common Shares owned by the Participant (for any minimum period of time that the Committee, in its discretion, may specify), valued at the Market Price at the time of exercise; (3) arranging to have the appropriate number of Common Shares issuable upon the exercise of an Option withheld or sold; or (4) any combination of the above. Additionally, the Committee may provide that an Option may be “net exercised,” meaning that upon the exercise of an Option or any portion thereof, the Company shall deliver the number of whole Common Shares equal to (A) the difference between (x) the aggregate Market Price of the Common Shares subject to the Option (or the portion of such Option then being exercised) and (y) the aggregate exercise price for all such Common Shares under the Option (or the portion thereof then being exercised) plus (to the extent it would not give rise to adverse accounting consequences pursuant to applicable accounting principles or to adverse tax consequences to the Participants under Canadian federal, provincial or territorial tax laws) the amount of withholding tax due upon exercise divided by (B) the Market Price of a Common Share on the date of exercise. Any fractional share that would result from such equation shall be canceled. |
| (iii) | ISOs. The terms and conditions of ISOs granted hereunder shall be subject to the provisions of Section 422 of the Code and the terms, conditions, limitations and administrative procedures established by the Committee from time to time in accordance with the Plan. At the discretion of the Committee, ISOs may be granted only to an employee of the Company, its “parent corporation” (as such term is defined in Section 424(e) of the Code) or a Subsidiary. |
| (1) | ISO Grants to 10% Shareholders. Notwithstanding anything to the contrary in this Section 7(a), if an ISO is granted to a Participant who owns shares representing more than ten percent of the voting power of all classes of shares of the Company, its “parent corporation” (as such term is |
A-7
defined in Section 424 (e) of the Code) or a Subsidiary, the term of the Option shall not exceed five years from the time of grant of such Option and the exercise price shall be at least 110 percent of the Market Price (as of the date of grant) of the Common Shares subject to the Option.
| (2) | $100,000 Per Year Limitation for ISOs. To the extent the aggregate Market Price (determined as of the date of grant) of the Common Shares for which ISOs are exercisable for the first time by any Participant during any calendar year (under all plans of the Company) exceeds $100,000, such excess ISOs shall be treated as Nonqualified Stock Options. |
| (3) | Disqualifying Dispositions. Each Participant awarded an ISO under the Plan shall notify the Company in writing immediately after the date he or she makes a “disqualifying disposition” of any Common Shares acquired pursuant to the exercise of such ISO. A “disqualifying disposition” is any disposition (including any sale) of such Common Shares before the later of (i) two years after the date of grant of the ISO and (ii) one year after the date the Participant acquired the Common Shares by exercising the ISO. The Company may, if determined by the Committee and in accordance with procedures established by it, retain possession of any Common Shares acquired pursuant to the exercise of an ISO as agent for the applicable Participant until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such shares. |
| (b) | Share Appreciation Rights. A SAR represents the right to receive a payment in cash, Common Shares, or a combination thereof, in an amount equal to the product of (1) the excess of the Market Price per Common Share on the date the SAR is exercised over the exercise price per Common Share of such SAR (which exercise price shall be no less than 100% of the Market Price of the Common Shares subject to the SAR as of the date the SAR was granted) and (2) the number of Common Shares subject to the portion of the SAR being exercised. If a SAR is paid in Common Shares, the number of Common Shares to be delivered will equal the amount determined to be payable in accordance with the prior sentence divided by the Market Price of a Common Share at the time of payment. The Committee shall establish the Original Term of a SAR, which shall not exceed a maximum of ten years. Notwithstanding anything to the contrary in this Section 7(b), if the Original Term of a SAR held by the Participant expires during a Blackout Period, the term of such SAR shall be extended until the tenth Business Day following the end of the Blackout Period, at which time any unexercised portion of the SAR shall expire. Except as otherwise provided in this Section 7(b), SARs shall be subject to the terms, conditions, restrictions and limitations determined by the Committee, in its sole discretion, from time to time. A SAR may only be granted to an Eligible Recipient to whom an Option could be granted under the Plan. |
| (c) | Share Awards. |
| (i) | Form of Awards. The Committee may grant Awards that are payable in Common Shares or denominated in units equivalent in value to Common Shares or are otherwise based on or related to Common Shares (“Share Awards”), including, but not limited to, Share Payments, Restricted Shares, Deferred Shares, and Share Units. Share Awards shall be subject to such terms, conditions (including, without limitation, service-based and performance-based vesting conditions), restrictions and limitations as the Committee may determine to be applicable to such Share Awards, in its sole discretion, from time to time. |
| (ii) | Share Payment. If not prohibited by applicable law, the Committee may issue unrestricted Common Shares in such amounts and subject to such terms and conditions as the Committee shall from time to time in its sole discretion determine. A Share Payment may be granted as, or in payment of, a bonus, or to provide incentives or recognize special achievements or contributions. |
| (iii) | Restricted Shares. Restricted Shares shall be subject to the terms, conditions, restrictions, and limitations determined by the Committee, in its sole discretion, from time to time. The number of Restricted Shares allocable to an Award under the Plan shall be determined by the Committee in its sole discretion. |
| (iv) | Deferred Shares. Subject to Code Section 409A to the extent applicable, Deferred Shares shall be subject to the terms, conditions, restrictions and limitations determined by the Committee, in its sole discretion, from time to time. A Participant who receives an Award of Deferred Shares shall be entitled |
A-8
to receive the number of Common Shares allocable to his or her Award, as determined by the Committee in its sole discretion, from time to time, at the end of a specified deferral period determined by the Committee. Awards of Deferred Shares represent only an unfunded, unsecured promise to deliver shares in the future and shall not give Participants any greater rights than those of an unsecured general creditor of the Company.
| (v) | Share Units. A Share Unit is an Award denominated in Common Shares that may be settled either in Common Shares or in cash, in the discretion of the Committee, and, subject to Code Section 409A to the extent applicable, shall be subject to such other terms, conditions, restrictions and limitations determined by the Committee from time to time in its sole discretion. |
| (vi) | Blackout Period. In the event that any Share Unit is scheduled by its terms to be delivered (the “Original Distribution Date”) during a Blackout Period, then, if the Participant is restricted from selling Shares during the Blackout Period, such shares subject to the Share Unit shall not be delivered on such Original Distribution Date and shall instead be delivered as soon as practicable following the expiration of the Blackout Period; provided, however, that in no event shall the delivery of the shares be delayed pursuant to this provision beyond the latest date on which such delivery could be made without violating Code Section 409A. |
| (d) | Cash Awards. The Committee may grant Awards that are payable to Participants solely in cash, as deemed by the Committee to be consistent with the purposes of the Plan, and, except as otherwise provided in this Section 7(d), such Cash Awards shall be subject to the terms, conditions, restrictions, and limitations determined by the Committee, in its sole discretion, from time to time. Awards granted pursuant to this Section 7(d) may be granted with value and payment contingent upon the achievement of Performance Criteria. The maximum amount that any Participant (other than a non-employee director of the Company) may receive with respect to a Cash Award granted pursuant to this Section 7(d) in respect of any annual performance period is $10,000,000 and for any other performance period, such amount multiplied by a fraction, the numerator of which is the number of months in the performance period and the denominator of which is twelve. Payments earned hereunder may be decreased or increased in the sole discretion of the Committee based on such factors as it deems appropriate. |
| (e) | Unless the applicable Award Agreement provides otherwise or the Committee determines otherwise, vesting with respect to an Award will cease upon termination of a Participant’s employment or service with the Company, and unvested Awards shall be forfeited upon such termination. In the case of termination for Cause, vested Awards shall also be forfeited. |
| (f) | Non-Employee Director Limitations. Subject to adjustment in accordance with Section 6(e), in any calendar year, no Participant who is a non-employee director of the Company shall be granted Options, Share Appreciation Rights, Share Awards, Cash Awards or any other compensation with an aggregate fair market value as of the grant date (as determined in accordance with applicable accounting standards) or payment date, as applicable, in excess of $750,000. |
| 8. | Dividends and Dividend Equivalents |
The Committee may, in its sole discretion, provide that Share Awards shall earn dividends or dividend equivalents, as applicable. Such dividends or dividend equivalents may be credited to an account maintained on the books of the Company. Any payment or crediting of dividends or dividend equivalents will be subject to such terms, conditions, restrictions and limitations as the Committee may establish, from time to time, in its sole discretion, including, without limitation, reinvestment in additional Common Shares or common share equivalents; provided, however, if the payment or crediting of dividends or dividend equivalents is in respect of a Share Award that is subject to Code Section 409A, then the payment or crediting of such dividends or dividend equivalents shall conform to the requirements of Code Section 409A and such requirements shall be specified in writing. Notwithstanding the foregoing, dividends or dividend equivalents (i) shall have the same vesting dates and shall be paid in accordance with the same terms as the Award to which they relate and (ii) with respect to any Award subject to the achievement of Performance Criteria, shall not be paid unless and until the relevant Performance Criteria have been satisfied, and then only to the extent determined by the Committee, as specified in the Award Agreement.
A-9
| 9. | Nontransferability |
Awards granted under the Plan, and during any period of restriction on transferability, Common Shares issued in connection with the exercise of an Option or a SAR, may not be sold, pledged, hypothecated, assigned, margined or otherwise transferred in any manner other than by will or the laws of descent and distribution, unless and until the shares underlying such Award have been issued, and all restrictions applicable to such shares have lapsed or have been waived by the Committee. No Award or interest or right therein shall be subject to the debts, contracts or engagements of a Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, lien, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy and divorce), and any attempted disposition thereof shall be null and void, of no effect, and not binding on the Company in any way. Notwithstanding the foregoing, the Committee may, in its sole discretion, permit (on such terms, conditions and limitations as it may establish) Nonqualified Stock Options and/or shares issued in connection with an Option or a SAR exercise that are subject to restrictions on transferability, to be transferred to a member of a Participant’s immediate family or to a trust or similar vehicle for the benefit of a Participant’s immediate family members. During the lifetime of a Participant, all rights with respect to Awards shall be exercisable only by such Participant or, if applicable pursuant to the preceding sentence, a permitted transferee.
| 10. | Change of Control |
| (a) | Unless otherwise determined in an Award Agreement, in the event of a Change of Control: |
| (i) | With respect to each outstanding Award that is assumed or substituted in connection with a Change of Control, in the event of a termination of a Participant’s employment or service without Cause or by the Participant for Good Reason during the 12-month period following such Change of Control, (i) such Award shall become fully vested and exercisable, (ii) the restrictions, payment conditions, and forfeiture conditions applicable to any such Award granted shall lapse, and (iii) any performance conditions imposed with respect to Awards shall be deemed to be achieved at target performance levels. |
| (ii) | With respect to each outstanding Award that is not assumed or substituted in connection with a Change of Control immediately upon the occurrence of the Change of Control, (x) such Award (including performance-based Awards) shall become fully vested and exercisable based on a fraction, the numerator of which is the number of days between the grant date and the date of the Change of Control and the denominator of which is the number of days during the period beginning on the grant date of the Award and ending on the date of vesting of the Award, (y) the restrictions, payment conditions, and forfeiture conditions applicable to any such Award granted shall lapse, and (z) any performance conditions imposed with respect to Awards shall be deemed to be achieved at target performance levels (for the avoidance of doubt, prorated in accordance with clause (x)). |
| (iii) | For purposes of this Section 10, an Award shall be considered assumed or substituted for if, following the Change of Control, the Award remains subject to the same terms and conditions that were applicable to the Award immediately prior to the Change of Control except that, if the Award related to Common Shares, the Award instead confers the right to receive common shares of the acquiring entity. |
| (iv) | Notwithstanding any other provision of the Plan, in the event of a Change of Control, the Committee (a) may, in its discretion provide that each Option and each SAR which may, by its terms, only be settled in shares shall, immediately prior to the occurrence of a Change of Control, be deemed to have been exercised on a “net exercise” basis; and (b) may, in its discretion, except as would otherwise result in adverse tax consequences under Code Section 409A, provide that each Award, other than Options and SARs which may, by their terms, only be settled in shares, shall, immediately upon the occurrence of a Change of Control, be cancelled in exchange for a payment in cash or securities in an amount equal to (i) the excess of the consideration paid per Common Share in the Change of Control over the purchase price (if any) per Common Share subject to the Award multiplied by (ii) the number of Common Shares then outstanding under the Award. |
A-10
| (b) | For purposes of this Agreement and, except to the extent as would result in a violation of Code Section 409A, a “Change of Control” shall be deemed to occur if and when the first of the following occurs: |
| (i) | the acquisition (other than from the Company), by any person (as such term is defined in Section 13(c) or 14(d) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities; |
| (ii) | the individuals who, as of the date hereof, are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least a majority of the Board, unless the election, or nomination for election by the Company’s shareholders, of any new director was approved by a vote of at least a majority of the Incumbent Board, and such new director shall be considered as a member of the Incumbent Board; |
| (iii) | the closing of an amalgamation or similar business combination (each, an “Amalgamation”) involving the Company if (i) the shareholders of the Company, immediately before such Amalgamation, do not, as a result of such Amalgamation, own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the entity resulting from such Amalgamation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Company outstanding immediately before such Amalgamation or (ii) immediately following the Amalgamation, the individuals who comprised the Board immediately prior thereto do not constitute at least a majority of the board of directors of the entity resulting from such Amalgamation (or, if the entity resulting from such Amalgamation is then a subsidiary, the ultimate parent thereof); |
| (iv) | a complete liquidation or dissolution of the Company or the closing of an agreement for the sale or other disposition of all or substantially all of the assets of the Company. |
| (c) | Notwithstanding the foregoing, a Change of Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries or (ii) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the shareholders of the Company in the same proportion as their ownership of shares in the Company immediately prior to such acquisition. In addition, notwithstanding the foregoing, solely to the extent required by Section 409A, a Change of Control shall be deemed to have occurred only if a change in the ownership or effective control of the Company or a change in ownership of a substantial portion of the assets of the Company shall also be deemed to have occurred under Section 409A. |
| 11. | Clawback |
Awards granted under the Plan are subject to any policy the Company adopts regarding the recovery of incentive compensation and any additional clawback provisions as required by law and applicable listing rules.
| 12. | Award Agreements |
Each Award under the Plan shall be evidenced by an Award Agreement (as such may be amended from time to time) that sets forth the terms, conditions, restrictions and limitations applicable to the Award, including, but not limited to, the provisions governing vesting, exercisability, payment, forfeiture, and termination of employment, all or some of which may be incorporated by reference into one or more other documents delivered or otherwise made available to a Participant in connection with an Award.
| 13. | Tax Withholding |
Participants shall be solely responsible for any applicable taxes (including, without limitation, income, payroll and excise taxes) and penalties, and any interest that accrues thereon, which they incur in connection with the receipt, vesting or exercise of an Award. The Company and its Subsidiaries shall have the right to require payment of, or may deduct from any payment made under the Plan or otherwise to a Participant, or may permit shares to be tendered or sold, including Common Shares delivered or vested in connection with an Award, in an amount sufficient to cover withholding of any federal, state, provincial, territorial, local, foreign or other governmental taxes or charges required
A-11
by law or such greater amount of withholding as the Committee shall determine from time to time and to take such other action as may be necessary to satisfy any such withholding obligations. It shall be a condition to the obligation of the Company to issue Common Shares upon the exercise of an Option, or SAR, or upon settlement of a Share Award, that the Participant pay to the Company, on demand, such amount as may be requested by the Company for the purpose of satisfying any tax withholding liability. If the amount is not paid, the Company may refuse to issue shares.
| 14. | Other Benefit and Compensation Programs |
Awards received by Participants under the Plan shall not be deemed a part of a Participant’s regular, recurring compensation for purposes of calculating payments or benefits from any Company benefit plan or severance program unless specifically provided for under the plan or program. Unless specifically set forth in an Award Agreement, Awards under the Plan are not intended as payment for compensation that otherwise would have been delivered in cash, and even if so intended, such Awards shall be subject to such vesting requirements and other terms, conditions and restrictions as may be provided in the Award Agreement.
| 15. | Unfunded Plan |
The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. The Plan shall not establish any fiduciary relationship between the Company and any Participant or other Person. To the extent any Participant holds any rights by virtue of an Award granted under the Plan, such rights shall constitute general unsecured liabilities of the Company and shall not confer upon any Participant or any other Person any right, title, or interest in any assets of the Company.
| 16. | Rights as a Shareholder |
Unless the Committee determines otherwise, a Participant shall not have any rights as a shareholder with respect to Common Shares covered by an Award until the date the Participant becomes the holder of record with respect to such shares. No adjustment will be made for dividends or other rights for which the record date is prior to such date, except as provided in Section 8.
| 17. | Future Rights |
No Eligible Recipient shall have any claim or right to be granted an Award under the Plan. There shall be no obligation of uniformity of treatment of Eligible Recipients under the Plan. Further, the Company and its Subsidiaries may adopt other compensation programs, plans or arrangements as deemed appropriate or necessary. The adoption of the Plan, or grant of an Award, shall not confer upon any Eligible Recipient any right to continued employment or service in any particular position or at any particular rate of compensation, nor shall it interfere in any way with the right of the Company or a Subsidiary to terminate the employment or service of Eligible Recipients at any time, free from any claim or liability under the Plan.
| 18. | Amendment and Termination |
| (a) | The Plan and any Award may be amended, suspended or terminated at any time by the Board, provided that no amendment shall be made without shareholder approval if such shareholder approval is required in order to comply with applicable law or the rules of the New York Stock Exchange, the rules of the Toronto Stock Exchange, or any other securities exchange on which the Common Shares are traded or quoted. Except as otherwise provided in Section 10(a), no termination, suspension or amendment of the Plan or any Award shall adversely affect the right of any Participant with respect to any Award theretofore granted, as determined by the Committee, without such Participant’s written consent. |
| (b) | Notwithstanding Section 18(a), the Company shall obtain shareholder approval for: (i) subject to Section 6(e), a reduction in the exercise price or purchase price of an Award (or the cancellation and re-grant of an Award resulting in a lower exercise price or purchase price); (ii) the extension of the Original Term of an Option; (iii) any amendment to remove or to exceed the participation limits described in Section 6(d), including but not limited to those applicable to Insiders; (iv) an increase to the maximum number of Common Shares issuable under the Plan pursuant to Section 6(a) (other than adjustments in accordance with Section 6(e)); (v) amendments to this Section 18 other than amendments of a clerical nature; and (vi) any amendment that permits Awards to be transferable or assignable other than for normal estate settlement purposes or for other purposes not involving the receipt of monetary consideration. |
A-12
| 19. | Successors and Assigns |
The Plan and any applicable Award Agreement shall be binding on all successors and assigns of a Participant, including, without limitation, the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors.
| 20. | Governing Law |
The Plan and all agreements entered into under the Plan shall be governed, construed and administered in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.
| 21. | Interpretation |
The Plan is designed and intended, to the extent applicable, to provide for grants and other transactions which are exempt under Rule 16b-3, and all provisions hereof shall be construed in a manner to so comply. Awards under the Plan are also intended to comply with Code Section 409A to the extent subject thereto, and the Plan and all Awards shall be interpreted in accordance with Code Section 409A and Treasury Regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the effective date of the Plan. Notwithstanding any provision in the Plan to the contrary, no payment or distribution under this Plan that constitutes an item of deferred compensation under Code Section 409A and becomes payable by reason of a Participant’s termination of employment or service with the Company shall be made to such Participant until such Participant’s termination of employment or service constitutes a Separation from Service. For purposes of this Plan, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Code Section 409A. If a participant is a Specified Employee, then to the extent necessary to avoid the imposition of taxes under Code Section 409A, such Participant shall not be entitled to any payments upon a termination of his or her employment or service until the earlier of: (i) the expiration of the six (6)-month period measured from the date of such Participant’s Separation from Service or (ii) the date of such Participant’s death. Upon the expiration of the applicable waiting period set forth in the preceding sentence, all payments and benefits deferred pursuant to this Section 21 (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such deferral) shall be paid to such Participant in a lump sum as soon as practicable, but in no event later than sixty (60) calendar days, following such expired period, and any remaining payments due under this Plan will be paid in accordance with the normal payment dates specified for them herein. Notwithstanding any provision of the Plan to the contrary, in no event shall the Company or any affiliate be liable to a Participant on account of an Award’s failure to (i) qualify for favorable U.S. or foreign tax treatment or (ii) avoid adverse tax treatment under U.S. or foreign law, including, without limitation, Section 409A of the Code.
A-13
VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
CHARTER OF THE
BOARD OF DIRECTORS
The board of directors (the “Board”) of Valeant Pharmaceuticals International, Inc. (the “(“CompanyValeant”) is elected by shareholders and is responsible for the stewardship of the activities and affairs of Valeant. The Board seeks to discharge such responsibility by reviewing, discussing and approving Valeant’s strategic planning and organizational structure and supervising management to oversee that the strategic planning and organizational structure preserve and enhance the business of Valeant and Valeant’s underlying value.
DUTIES OF DIRECTORS
The Board discharges its responsibility for overseeing the management of Valeant’s business by delegating to Valeant’s senior officers the responsibility forday-to-day management of Valeant. The Board discharges its responsibilities both directly and by delegation through its committees, the Audit and Risk Committee, the Nominating and Corporate Governance Committee, the Talent and Compensation Committee and the Finance and Transactions Committee.committees. In addition to these regular committees, the Board may appointad hoc committees periodically to address certain issues of a more short-term nature.
The Board’s primary roles are overseeing Valeant’s performance and the quality, depth and continuity of management needed to meet Valeant’s strategic objectives.
Other principal duties, which may be carried out directly or via one or more committees, include, but are not limited to the following categories:
Appointment of Management
| 1. | The Board is responsible for approving the appointment of the chief executive officer (the “CEO”) and all other senior management. |
| 2. | In approving the appointment of the |
| 3. | The Board from time to time delegates to senior management the authority to enter into certain types of transactions, including financial transactions, subject to specified limits. Investments and other expenditures above the specified limits, and material transactions outside the ordinary course of business are reviewed by and are subject to the prior approval of the Board. |
| 4. | The Board oversees that succession planning programs are in place, including programs to train and develop management. |
| 5. | The Board assesses and revises |
Board Organization
| 6. | The Board will receive recommendations from the Nominating and Corporate Governance Committee (the “NCG Committee”), but retains responsibility for managing its own affairs by giving its approval for its composition and size, the selection of the |
| 7. | The Board may establish committees of the Board, where required or prudent, and define their mandate. The Board may delegate to Board committees matters it is responsible for, including the approval of compensation of the Board and management, the conduct of performance evaluations and oversight of internal controls systems, but the Board retains its oversight function and ultimate responsibility for these matters and all other delegated responsibilities. |
B-1
| 8. | The Board will oversee orientation and education program for new directors and ongoing educational opportunities for continuing directors. |
Strategic Planning
| 9. | The Board has oversight responsibility to participate directly, and through its committees, in reviewing, questioning and approving the mission of Valeant and its objectives and goals. |
| 10. | The Board is responsible for participating in the development of, and reviewing and approving, the business, financial and strategic plans by which it is proposed that Valeant may reach those goals. |
Monitoring of Financial Performance and Other Financial Reporting Matters
| 11. | The Board is responsible for enhancing congruence between shareholder expectations, |
| 12. | The Board is responsible for adopting processes for monitoring Valeant’s progress toward its strategic and operational goals, and to revise and alter its direction to management in light of changing circumstances affecting Valeant. |
| 13. | The Board is responsible for approving the audited financial statements, |
| 14. | The Board is responsible for reviewing the quarterly financial statements, management’s discussion and analysis accompanying such financial statements and the quarterly earnings press release. |
| 15. | The Board is responsible for reviewing and approving material transactions outside the ordinary course of business and those matters which the Board is required to approve under the |
Risk Management
| 16. | The Board is responsible for overseeing the identification of the principal risks of Valeant’s business and the implementation of appropriate systems to effectively monitor and manage such risks with a view to the long-term viability of Valeant and achieving a proper balance between the risks incurred and the potential return to Valeant’s shareholders. |
Policies and Procedures
| 17. | The Board is responsible for: |
| (a) | approving and assessing compliance with all significant policies and procedures by which Valeant is operated; and |
| (b) | approving policies and procedures designed to ensure that Valeant operates at all times within applicable laws and regulations. |
| 18. | The Board is responsible for supporting a corporate culture of integrity and responsible stewardship. |
| 19. | The Board shall enforce its policy respecting confidential treatment of Valeant’s proprietary information and the confidentiality of Board deliberations. |
Communications and Reporting
| 20. | The Board is responsible for: |
| (a) | overseeing the accurate reporting of the financial performance and condition of Valeant to shareholders, other securityholders and regulators on a timely and regular basis; |
| (b) | encouraging effective and adequate communication with shareholders, other stakeholders and the public; and |
| (c) | ensuring the integrity and adequacy of internal controls and management information systems. |
B-2
Certain Individual Responsibilities of the Members of the Board
| 21. | Each member of the Board is expected to attend all meetings of the Board, unless adequate notification of absence is provided. |
| 22. | Each member of the Board is expected to have reviewed all materials provided in connection with a meeting in advance of such meeting and be prepared to discuss such materials at the meeting. |
REVIEW AND DISCLOSURE
The Board shall review and reassess the adequacy of this Charter for the Board of Directors (the “Charter”) periodically and otherwise as it deems appropriate and amend it accordingly. The performance of the Board shall be evaluated with reference to this Charter.
The Board shall ensure that this Charter is disclosed on the Corporation’sValeant’s website and that this Charter or a summary of it which has been approved by the Nominating and Corporate GovernanceNCG Committee is disclosed in accordance with all applicable securities laws or regulatory requirements.
Dated this 2nd day of August, 2017.
B-3
| Appendix 1 | |
Non-GAAP Information |
ThisUse of Non-GAAP
To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles, the Company uses certain non-GAAP financial measures, including in this Proxy Statement, includes the presentation and discussion of adjusted earnings per sharenon-GAAP (“including Adjusted EPSnon-GAAP”) that differs from earnings per share reported under GAAP (“GAAP EPS”)EBITDA (non-GAAP). Management uses Adjusted EPSthis non-GAAP for strategic decision making, forecasting future measure as a key metric in the evaluation of company performance and the consolidated financial results and, evaluating current performance. In addition,in part, in the determination of cash bonuses for its executive officers. The Company believes this non-GAAP measure is useful to investors in their assessment of our operating performance and the Company’s executive officers are based,valuation of our Company. In addition, this non-GAAP measure addresses questions the Company routinely receives from analysts and investors and, in part, onorder to assure that all investors have access to similar data, the achievement of certain Adjusted EPS targets. Adjusted EPSnon-GAAP excludes the impact of certain items (noted in the table below)Company has determined that may obscure trends in the Company’s underlying performance. By disclosingit is appropriate to make thisnon-GAAP measure, management intends data available to provide the reader with a meaningful, consistent comparison of the Company’s operating results and trends for the periods presented.all investors. Below is a reconciliation of Adjusted EPSEBITDA non-GAAP to GAAP EPS.EBITDA. Readers are encouraged to review this reconciliation, and should consider thisnon-GAAP measure as a supplement to, not a substitute for, or superior to, the corresponding measure calculated in accordance with GAAP.
| Twelve Months Ended December 31, | ||||
| (In millions) | 2016 | |||
Net income (loss) attributable to Valeant Pharmaceuticals International, Inc. | $ | (2,409 | ) | |
Non-GAAP adjustments: | ||||
Acquisition-related adjustments excluding amortization of finite-lived intangible assets | 33 | |||
Amortization of finite-lived intangible assets | 2,673 | |||
Goodwill impairment | 1,077 | |||
Restructuring and integration costs | 132 | |||
In-process research and development costs | 34 | |||
Asset Impairments | 422 | |||
Othernon-GAAP charges | 208 | |||
|
| |||
| 4,579 | ||||
Amortization of deferred financing costs and debt discounts | 118 | |||
Loss on extinguishment of debt | — | |||
(Gain) loss on investments, net | — | |||
Foreign exchange and other | 14 | |||
Tax effect ofnon-GAAP adjustments | (386 | ) | ||
|
| |||
Totalnon-GAAP adjustments | 4,325 | |||
Adjusted net incomenon-GAAP attributable to Valeant Pharmaceuticals International, Inc. | $ | 1,916 | ||
|
| |||
GAAP (loss) earnings per share — diluted | $ | (6.94 | ) | |
|
| |||
Adjusted earnings per sharenon-GAAP — diluted | $ | 5.47 | ||
|
| |||
Shares used in diluted per share calculation — GAAP earnings per share | 347.3 | |||
|
| |||
Shares used in diluted per share calculation — Adjusted earnings per sharenon-GAAP | 350.1 | |||
|
| |||
This Proxy Statement includes the presentationCompany believes that Adjusted EBITDA (non-GAAP), along with the GAAP measures used by management, most appropriately reflect how the Company measures the business internally and discussion ofsets operational goals and incentives. In particular, the Company believes that Adjusted RevenueEBITDA (non-GAAP) (“Adjusted Revenue(non-GAAP)”) that differs from revenue reported under GAAP (“GAAP Revenue”). Management focuses management on the Company’s underlying operational results and business performance. As a result, the Company uses Adjusted RevenueEBITDA (non-GAAP) for strategic decision making, forecasting both to assess the actual financial performance of the Company and to forecast future results and evaluatingas part of its guidance. Management believes Adjusted EBITDA (non-GAAP) is a useful measure to evaluate current performance. Adjusted EBITDA (non-GAAP) is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors. In addition, commencing in 2017, cash bonuses for the Company’s executive officers and other key employees are based, in part, on the achievement of certain Adjusted RevenueEBITDA (non-GAAP) targets.
Adjusted RevenueEBITDA (non-GAAP) reflect adjustments based on the following items:
C-1
Commencing in 2017, the Company assessed the methodology with which it was calculating this non-GAAP measure and made updates where it deemed appropriate to better reflect the underlying business. As a result, commencing with the first-quarter actual results of 2017, there are certain differences in the calculation of Adjusted EBITDA (non-GAAP) between the current presentation and the historic presentation. In particular, Adjusted EBITDA (non-GAAP) no longer includes adjustments for foreign exchange gain/loss arising from intercompany transactions. For the purposes of the Company’s actual results for the full year of 2016, the Company has calculated and presented
C-2
Adjusted EBITDA (non-GAAP) using the historic methodologies in place as of the applicable historic dates; however, the Company has also provided a reconciliation ofthat calculates Adjusted RevenueEBITDA (non-GAAP) using the new methodology, to GAAP Revenue. Readers are encouragedallow investors and readers to review this reconciliation.evaluate Adjusted RevenueEBITDA (non-GAAP) should be viewed as a supplement to, not a substitute on the same basis for or superior to, GAAP Revenue.the period presented.
Valeant Pharmaceuticals International, Inc.
(unaudited)
Twelve Months Ended, December 31 | ||||||
(in millions) | 2017 | 2016 | ||||
Net income (loss) attributable to Valeant Pharmaceuticals International, Inc. | $ | 2,404 | $ | (2,409 | ) | |
Interest expense, net | 1,828 | 1,828 | ||||
(Benefit from) provision for income taxes | (4,145 | ) | (27 | ) | ||
Depreciation and amortization | 2,858 | 2,866 | ||||
EBITDA | 2,945 | 2,258 | ||||
Adjustments: | ||||||
Restructuring and integration costs | 52 | 132 | ||||
Acquired in-process research and development costs | 5 | 34 | ||||
Goodwill impairments | 312 | 1,077 | ||||
Asset impairments | 714 | 422 | ||||
Share-based compensation | 87 | 165 | ||||
Acquisition-related adjustments excluding amortization of | ||||||
intangible assets, net of depreciation expense(d) | (289 | ) | 25 | |||
Loss on extinguishment of debt | 122 | — | ||||
Foreign exchange and other | — | 14 | ||||
Other adjustments(a) | (310 | ) | 178 | |||
Adjusted EBITDA (non-GAAP) (as reported)(e) | 3,638 | 4,305 | ||||
Foreign exchange loss on intercompany transactions | — | (14 | ) | |||
Adjusted EBITDA (non-GAAP) (as revised)(f) | $ | 3,638 | $ | 4,291 | ||
(a) Other adjustments include: | $ | (310 | ) | $ | 178 | |
Integration related inventory and technology transfer costs | — | 9 | ||||
CEO termination costs (cash severance payment) | — | 10 | ||||
Legal and other professional fees(b) | 44 | 65 | ||||
Settlement of certain disputed invoices related to transition services | — | 16 | ||||
Litigation and other matters | 227 | 59 | ||||
Net loss/(gain) on sale of assets(c) | (580 | ) | (7 | ) | ||
Acquisition related transaction costs | — | 2 | ||||
Philidor Rx Services, LLC net loss through deconsolidation as of January 31, 2016 | — | 3 | ||||
Other | (1 | ) | 21 | |||
| (a) | Represents a component of the non-GAAP adjustment of “Other non-GAAP adjustments”. The identified components, in the aggregate, represent all components of this non-GAAP adjustment. |
| (b) | Legal and other professional fees incurred in connection with recent legal and governmental proceedings, investigations and information requests related to, among other matters, our distribution, marketing, pricing, disclosure and accounting practices. |
| (c) | For the twelve months ended December 31, 2017, Net loss/(gain) on sale of assets includes the $309 million gain on the iNova sale in September of 2017, the $97 million gain on the sale of Dendreon Pharmaceuticals in June of 2017 and the $309 million gain on the sale of CeraVe, AcneFree, and AMBI skin care brands in March of 2017, offset by the $98 million loss on the sale of Sprout Pharmaceuticals in December of 2017. |
| (d) | Adjustment to Acquisition-related adjustments excluding amortization of intangible assets, net of depreciation expense, includes a fair value adjustment of $312 million reflecting a decrease in forecasted sales for a specific product line which impacted the expected future royalty payments for the twelve months ended December 31, 2017. |
| (e) | Adjusted EBITDA (non-GAAP) reported by the Company for the twelve months ended December 31, 2017 as determined using the methodology for calculating Adjusted EBITDA (non-GAAP) as of December 31, 2017. Adjusted EBITDA (non-GAAP) reported by the Company for the twelve months ended December 31, 2016 as determined using the methodology for calculating Adjusted EBITDA (non-GAAP) as of December 31, 2016. |
| (f) | As of the first quarter of 2017, non-GAAP adjustments no longer include adjustments for Foreign exchange gain/loss on intercompany transactions. For the purpose of allowing investors to evaluate Adjusted EBITDA (non-GAAP) on the same basis for all periods presented, this adjustment has been removed from the results for the twelve months ended December 31, 2016. |
C-3
| 2016 GAAP | 2016 currency impact & other (a) | 2016 excluding currency impact & other Non-GAAP | ||||||||||
Total revenues | $ | 9,674.0 | $ | 159.0 | $ | 9,833.0 | ||||||
VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
ATTN: CHRISTINA M. ACKERMANN
2150 SAINT ELZEAR BLVD. WEST
LAVAL, QUEBEC H7L 4A8
CANADA
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, United States. To be effective, your proxy card must be received by Broadridge not later than 11:59 p.m. (Eastern Daylight Time) on April 26, 2018.
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. (Eastern Daylight Time) on April 26, 2018. Have your proxy card in hand when you access the website and then follow the instructions. When voting online, you may not appoint a person as proxyholder other than the nominees specified in this proxy card.
VOTE BY TELEPHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your instructions up until 11:59 p.m. (Eastern Daylight Time) on April 26, 2018. Have your proxy card in hand when you call and then follow the instructions. When voting by telephone, you may not appoint a person as proxyholder other than the nominees specified in this proxy card.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by the Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive proxy materials electronically in future years.
|
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||
|
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M58430-Z60108 KEEP THIS PORTION FOR YOUR RECORDS
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
| DETACH AND RETURN THIS PORTION ONLY | |||||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | |||||
| VALEANT PHARMACEUTICALS INTERNATIONAL, INC. | ||||||
| The Board of Directors recommends you vote FOR proposals 1, 2, 3 and 4. | ||||||
| 1. | Election of Directors | For | Withhold | |||
| 1a. | Richard U. DeSchutter | o | o | |||
| 1b. | D. Robert Hale | o | o | |||
| 1c. | Dr. Argeris (Jerry) N. Karabelas | o | o | |||
| 1d. | Sarah B. Kavanagh | o | o | |||
| 1e. | Joseph C. Papa | o | o | |||
| 1f. | John A. Paulson | o | o | |||
| 1g. | Robert N. Power | o | o | |||
| 1h. | Russel C. Robertson | o | o | |||
| 1i. | Thomas W. Ross, Sr. | o | o | |||
| 1j. | Amy B. Wechsler, M.D. | o | o | |||
| For | Against | Abstain | |||||||||||||
| |||||||||||||||
| |||||||||||||||
|
|
| |||||||||||||
|
|
| |||||||||||||
|
|
| |||||||||||||
|
|
| |||||||||||||
| The approval, in an advisory resolution, of the compensation of our Named Executive Officers as disclosed in the Compensation Discussion and Analysis section, executive compensation tables and accompanying narrative discussions contained in the Management Proxy Circular and Proxy Statement. | o | o | o | |||||||||
|
|
| |||||||||||
|
| ||||||||||||
| 3. |
|
|
|
| |||||||||
| o | o | o | |||||||||||
| For | Withhold | ||||||||||||
| 4. | To appoint PricewaterhouseCoopers LLP as the auditors for the Company to hold office until the close of the |
|
| ||||||||||
| Without limiting the general powers hereby conferred, the undersigned hereby directs the proxyholder to vote the Common Shares represented by this proxy in the manner set forth above. | |||||||||||||
| THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF THE COMPANY. THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED, WHERE THE SHAREHOLDER HAS GIVEN A CHOICE, AS DIRECTED OR, IF NO DIRECTION IS GIVEN, FOR EACH OF 1, 2, 3 AND 4. THE PERSON OR PERSONS APPOINTED UNDER THIS PROXY ARE CONFERRED WITH DISCRETIONARY AUTHORITY WITH RESPECT TO AMENDMENTS OR VARIATIONS OF THOSE MATTERS SPECIFIED IN THIS PROXY AND THE NOTICE OF MEETING AND WITH RESPECT TO ANY OTHER MATTERS WHICH MAY BE PROPERLY BROUGHT BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF WHETHER OR NOT THE AMENDMENT, VARIATION OR OTHER MATTER IS OR IS NOT ROUTINE OR CONTESTED. THIS FORM OF PROXY SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND MANAGEMENT PROXY CIRCULAR AND PROXY STATEMENT. | |||||||||||||
| The undersigned hereby revokes any prior proxies. | |||||||||||||
Without limiting the general powers hereby conferred, the undersigned hereby directs the proxyholder to vote the Common Shares represented by this proxy in the manner set forth above.
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF THE COMPANY. THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED, WHERE THE SHAREHOLDER HAS GIVEN A CHOICE, AS DIRECTED OR, IF NO DIRECTION IS GIVEN, FOR EACH OF 1, 2 AND 4 AND EVERY YEAR WITH RESPECT TO PROPOSAL 3. THE PERSON OR PERSONS APPOINTED UNDER THIS PROXY ARE CONFERRED WITH DISCRETIONARY AUTHORITY WITH RESPECT TO AMENDMENTS OR VARIATIONS OF THOSE MATTERS SPECIFIED IN THIS PROXY AND THE NOTICE OF MEETING AND WITH RESPECT TO ANY OTHER MATTERS WHICH MAY BE PROPERLY BROUGHT BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF WHETHER OR NOT THE AMENDMENT, VARIATION OR OTHER MATTER IS OR IS NOT ROUTINE OR CONTESTED. THIS FORM OF PROXY SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND MANAGEMENT PROXY CIRCULAR AND PROXY STATEMENT.
The undersigned hereby revokes any prior proxies.
| Signature [PLEASE SIGN WITHIN BOX] | Date | ||||||
| Signature | Date | ||||||
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice of Annual Meeting of Shareholders and Management Proxy Circular, and Proxy Statement
and Annual Report are available at www.proxyvote.com.
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — M58431-Z60108
| E39198-P02445 |
VALEANT PHARMACEUTICALS INTERNATIONAL, INC.
INSTRUMENT OF PROXY FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON MONDAY, APRIL 30, 2018
The undersigned hereby appoints Joseph C. Papa and Christina M. Ackermann, or instead of either of the foregoing, __________________________ as proxyholder of the undersigned, with full power of substitution, to attend, vote and act for and on behalf of the undersigned at the Annual Meeting (the “Meeting”) of the shareholders (the “Shareholders”) of Valeant Pharmaceuticals International, Inc. (the “Company”) to be held on April 30, 2018 at 9:00 a.m. (local time) at 2150 Saint Elzear Blvd. West, Laval, Quebec H7L 4A8, Canada and at any adjournment of the Meeting, and on every ballot that may take place in consequence thereof to the same extent and with the same powers as if the undersigned were personally present at the Meeting, with authority to vote at the proxyholder’s discretion except as otherwise specified on the reverse side.
NOTES:
| 1. | ||||||
| ||||||
| ||||||
| A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON OR COMPANY, WHO NEED NOT BE A SHAREHOLDER, TO ATTEND AND ACT ON ITS, HIS OR HER BEHALF AT THE MEETING OTHER THAN THE PERSONS DESIGNATED IN THIS FORM OF PROXY. THIS RIGHT MAY BE EXERCISED BY INSERTING SUCH OTHER PERSON’S OR COMPANY’S NAME IN THE BLANK SPACE PROVIDED FOR THAT PURPOSE IN THE PARAGRAPH ABOVE OR BY COMPLETING ANOTHER PROPER FORM OF PROXY AND, IN EITHER CASE, BY DELIVERING THE COMPLETED FORM OF PROXY TO THE COMPANY AS INDICATED ON THE REVERSE SIDE. | |||||
| ||||||
2. | This form of proxy must be dated and executed by the Shareholder (using exactly the same name in which the | |||||
| ||||||
3. | In order for this form of proxy to be effective, it must be signed and deposited with Vote Processing, c/o Broadridge, 51 Mercedes Way,Edgewood, NY 11717, United States, so that it arrives prior to 11:59 p.m. (Eastern Daylight Time) on April | |||||
|
|