EXHIBIT 10.4

 

VALEANT PHARMACEUTICALS INTERNATIONAL, INC.

SHARE UNIT GRANT AGREEMENT (PERFORMANCE VESTING)

(PERFORMANCE RESTRICTED SHARE UNITS)

(2011 Omnibus Incentive Plan)

 

Valeant Pharmaceuticals International, Inc. (the “Company”), pursuant to
Section 7(c)(v) of the Company’s 2011 Omnibus Incentive Plan (including the
Addendum thereto) (the “Plan”), hereby awards to Participant a Share Unit in the
amount set forth below convertible into an equivalent number of Common Shares
(the “Award”).  This Award is subject to all of the terms and conditions as set
forth herein (the “Agreement”) and in the Plan, which is incorporated herein in
its entirety.  Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Plan.  In the event of any conflict between the terms
in the Agreement and the Plan, the terms of the Plan shall control.  For
avoidance of doubt, any terms contained in the Agreement but are not in the Plan
shall not constitute a conflict and such terms in the Agreement shall control.

 

Participant:

Equity Grant Date:

Number of Share Units Subject to Award:

 

The details of your Award are as follows.

 

1.                                      CONSIDERATION.  Consideration for this
Award is satisfied by your services to the Company.

 

2.                                      VESTING.

 

(a)                                 In General. Subject to the provisions of the
Plan and the acceleration provisions contained herein, your Award will vest as
follows, provided that vesting will cease upon termination of your employment. 
Any Share Units that did not become vested prior to your termination of
employment or that do not become vested according to the provisions in this
Section 2 shall be forfeited immediately following the date of your termination
of employment.  The Share Units subject to this Award shall vest in accordance
with the following performance thresholds, provided that Participant’s
employment continues until each vesting date:

 

(i)                 Single Vesting Share Price

 

If at the date that is 3 months prior to the third anniversary of the Equity
Grant Date (the “First Primary Measurement Date”), the Adjusted Share Price (as
defined below) equals or exceeds the Single Vesting Share Price (as defined
below), Participant shall vest in 25% of the Share Units subject to the Award.

 

If at the date that is the third anniversary of the Equity Grant Date (the
“Second Primary Measurement Date”), the Adjusted Share Price equals or exceeds
the Single Vesting Share Price, Participant shall vest in an additional 50% of
the Share Units subject to the Award.

 

If at the date that is 3 months following the third anniversary of the Equity
Grant Date (the “Third Primary Measurement Date”), the Adjusted Share Price
equals or

 

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exceeds the Single Vesting Share Price, Participant shall vest in an additional
25% of the Share Units subject to the Award.

 

(ii)              Double Vesting Share Price

 

If at the First Primary Measurement Date, the Adjusted Share Price equals or
exceeds the Double Vesting Share Price (as defined below), Participant shall
vest in 50% of the Share Units subject to the Award.

 

If at the Second Primary Measurement Date, the Adjusted Share Price equals or
exceeds the Double Vesting Share Price, Participant shall vest in an additional
100% of the Share Units subject to the Award.

 

If at the Third Primary Measurement Date, the Adjusted Share Price equals or
exceeds the Double Vesting Share Price, Participant shall vest in an additional
50% of the Share Units subject to the Award.

 

(iii)           Triple Vesting Share Price

 

If at the First Primary Measurement Date, the Adjusted Share Price equals or
exceeds the Triple Vesting Share Price (as defined below), Participant shall
vest in 75% of the Share Units subject to the Award.

 

If at the Second Primary Measurement Date, the Adjusted Share Price equals or
exceeds the Triple Vesting Share Price, Participant shall vest in an additional
150% of the Share Units subject to the Award.

 

If at the Third Primary Measurement Date, the Adjusted Share Price equals or
exceeds the Triple Vesting Share Price, Participant shall vest in an additional
75% of the Share Units subject to the Award.

 

(iv)          Additional Vesting

 

Any Share Units that could have been vested under any of clauses (i), (ii) or
(iii) above that do not become vested on the First Primary Measurement Date, the
Second Primary Measurement Date or the Third Primary Measurement Date, may
become vested on each of the applicable dates that is one year following each
such date, respectively, based upon the Adjusted Share Price on the applicable
measurement date, provided that Participant remains employed by the Company
through the applicable vesting date.

 

(v)             Interpolation

 

If the Adjusted Share Price on a measurement date set forth in clauses (i),
(ii) and (iii), as well as clause (iv), is between the Single Vesting Share
Price and the Double Vesting Share Price or is between the Double Vesting Share
Price and the Triple Vesting Share Price, Participant shall vest in a number of
Share Units that is the mathematical linear interpolation between the number of
Share Units which would vest at defined ends of the applicable spectrum.

 

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(vi)          Accelerated Vesting

 

Notwithstanding the foregoing vesting provisions, if on any date between the
date that is one year following the Equity Grant Date and the Second Primary
Measurement Date, the Adjusted Share Price on such date:

 

(A) exceeds $        , then Participant will become vested in [Insert # of Share
Units subject to the Award] of the Share Units that could have been earned under
clause (i) above;

 

(B) exceeds $        , then Participant will become vested in the additional
[Insert # of Share Units subject to the Award] of the Share Units that could
have been earned under clause (ii) above; and

 

(C) exceeds $        , then Participant will become vested in the additional
[Insert # of Share Units subject to the Award] of the Share Units that could
have been earned under clause (iii) above;

 

provided, that the vesting that takes place pursuant to this clause (vi) if the
Adjusted Share Price target is achieved shall only take place the first time
such Adjusted Share Price target is achieved on such vesting date, there is no
interpolation of vesting pursuant to this clause (vi), and to vest in any of the
Share Units pursuant to this clause (vi) the Participant must remain employed by
the Company on the applicable vesting date.

 

(vii)  Forfeiture

 

Any Share Units that are not vested as of the date that is one year following
the Third Primary Measurement Date shall be immediately forfeited.

 

(viii) Definitions

 

For purposes of this Agreement, the following terms shall have the following
meanings:

 

(A)  “Adjusted Share Price” means the sum of (x) the average of the closing
prices of the Common Shares during the 20 consecutive trading days starting on
the specified measurement date (or if such measurement date does not fall on a
trading day, the immediately following trading day) (“Average Share Price”); and
(y) the value that would be derived from the number of Common Shares (including
fractions thereof) that would have been purchased had an amount equal to each
dividend paid on a Common Share after the Equity Grant Date and on or prior to
the applicable measurement date been deemed invested on the dividend payment
date, based on the Market Price of the Common Shares on such dividend payment
date.

 

(B)  “Single Vesting Share Price,” “Double Vesting Share Price” and “Triple
Vesting Share Price” means the Adjusted Share Prices equal to a compound annual
share price appreciation (the “Annual Compound TSR”) of 15%, 30% and 45%,
respectively, as measured from a base price of $[XX] over a measurement period
from the Equity Grant Date to the last trading day of the period used to
calculate the Adjusted Share Price.

 

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(b)                                 Vesting Acceleration in Event of Death. 
Notwithstanding the foregoing and any other provisions of the Plan to the
contrary, in the event that your employment is terminated by the Company due to
your death after the first anniversary of the Equity Grant Date, the performance
thresholds applicable to the Share Units will be applied as though the date of
termination was the end of the twenty consecutive trading-day average
measurement period and the Share Units so earned will vest in a manner
consistent with the vesting thresholds described in Section 2(a) of this
Agreement (e.g., the number of Share Units subject to the Award specified above
at an Annual Compound TSR of 15%, two times the number of Share Units subject to
the Award specified above at an Annual Compound TSR of 30%, and three times the
number of Share Units subject to the Award specified above at an Annual Compound
TSR of 45%; provided that you will vest in a number of Share Units that is the
mathematical linear interpolation between the number of Share Units which would
vest for performance between the Annual Compound TSR thresholds), but based on
the Annual Compound TSR determined through the date of termination. 
Notwithstanding the immediately preceding sentence, if death occurs prior to the
first anniversary of the Equity Grant Date, the measurement date will still be
the date of termination, but the Annual Compound TSR will be determined based on
an assumed measurement period of one year.

 

(c)                                  Vesting Acceleration in Event of Disability
or Termination by the Company Without Cause or by You for Good Reason. 
Notwithstanding the foregoing and any other provisions of the Plan to the
contrary and subject to Section 2(d) below, in the event that your employment is
terminated by the Company without Cause or by you for Good Reason, or in the
event of your Disability, in each case, following the date that is the one-year
anniversary of the Equity Grant Date, the performance thresholds applicable to
the Share Units will be applied as though your Termination Date was the end of
the twenty consecutive trading-day average measurement period and the Share
Units so earned will vest in a manner consistent with the vesting thresholds
described in Section 2(a) of this Agreement, but based on the Annual Compound
TSR determined through your Termination Date, provided, however, that in the
event you are entitled to benefits pursuant to this Section 2(c), only a pro
rata portion of such calculated Share Units will vest upon termination based on
a fraction, the numerator of which is the number of days from the Equity Grant
Date through the Termination Date, and the denominator of which is the number of
days from the Equity Grant Date through the third anniversary of the Equity
Grant Date.  Notwithstanding the immediately preceding sentence, if termination
of employment for a reason set forth in this Section 2(c) occurs prior to the
first anniversary of the Equity Grant Date, the Share Units will be forfeited.

 

(d)                                 Treatment of Share Units in Event of Change
of Control. Notwithstanding the foregoing and any other provisions of the Plan
to the contrary, in the event of a Change of Control, the Share Units will be
converted into a number of time-based restricted stock units (the “Resulting
RSUs”), determined by applying the performance thresholds applicable to the
Share Units as though the sum of (i) the Market Price of the Common Shares on
the date of the Change of Control and (ii) the value that would be derived from
the number of Common Shares (including fractions thereof) that would have been
purchased had an amount equal to each dividend paid on a Common Share after the
Equity Grant Date and on or prior to the applicable measurement date been deemed
invested on the dividend payment date, based on the Market Price of the Common
Shares on such dividend payment date was the Adjusted Share Price, with the
number of Resulting RSUs equal to the number of Share Units that would have
vested based on the Annual Compound TSR determined through the Change of
Control.  Notwithstanding the immediately preceding sentence, if termination
following a Change of Control occurs prior to the first anniversary of the
Equity Grant Date, the measurement date will still be the date of the Change of
Control, but the Annual Compound TSR will be determined based on an assumed
measurement period of one year.  The Resulting RSUs will vest on the third
anniversary of the Equity Grant Date, subject to your continued employment;
provided that in the event of involuntary termination of your employment by the
Company without Cause or by you with Good Reason within the twelve (12) months
following a Change

 

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of Control, the vesting and payment of such Resulting RSUs will be accelerated
to your Termination Date.  Any Share Units that did not become Resulting RSUs
will be forfeited on a Change of Control.

 

3.                                      COMMON SHARE OWNERSHIP REQUIREMENTS. 
You agree to comply with any Common Share ownership requirements adopted by the
Company applicable to you, which shall be on the same terms as similarly
situated executives of the Company.

 

4.                                      DISTRIBUTION OF COMMON SHARES.  The
Company will deliver to you a number of Common Shares equal to the number of
vested Share Units subject to your Award as soon as practicable, but in any
event no later than forty five (45) days following the date of vesting.

 

5.                                      NUMBER OF SHARES.   The number of Common
Shares subject to your Award may be adjusted from time to time for capital
adjustments, as provided in the Plan.  The Company will establish a bookkeeping
account to reflect the number of Share Units standing to your credit from time
to time.  However, you will not be deemed to be the holder of, or to have any of
the rights of a shareholder with respect to, any Common Shares subject to your
Award (including but not limited to shareholder voting rights) unless and until
the shares have been delivered to you in accordance with Section 4 of this
Agreement.

 

6.                                      DIVIDEND EQUIVALENTS.  The bookkeeping
account maintained for the Award granted pursuant to this Agreement shall, until
the vesting date or termination and cancellation or forfeiture of the Share
Units pursuant to the terms of the Plan, be allocated additional Share Units on
the payment date of dividends on the Company’s Common Shares. Such dividends
will be converted into additional Common Shares covered by the Share Units by
dividing (i) the aggregate amount or value of the dividends paid with respect to
that number of Common Shares equal to the number of shares covered by the Share
Units by (ii) the Market Price per Common Share on the payment date for such
dividend. Any such additional Share Units shall have the same vesting dates and
vest in accordance with the same terms as the Share Units granted under this
Agreement.

 

7.                                      COMPLIANCE WITH SECTION 409A OF THE
INTERNAL REVENUE CODE.  This Agreement is intended to comply with the
requirements of section 409A of the Code and its corresponding regulations and
related guidance, and shall in all respects be administered and interpreted in
accordance with such requirements.  Notwithstanding any provision in this
Agreement to the contrary, settlement of vested Share Units to Common Shares may
only be made under this Agreement upon an event or in a manner permitted by
section 409A of the Code.  Settlement and delivery of Common Shares on account
of a termination of employment under this Agreement may only be made upon a
“separation from service” under section 409A of the Code and, if you are a
“specified employee” (as defined in section 409A of the Code and determined in
the sole discretion of the Company in accordance with the requirements of
section 409A of the Code) at the time of your separation from service, in no
event may settlement and delivery of Common Shares on account of your separation
from service occur prior to the date which is six months following your
separation from service.  In no event may you designate the calendar year of
settlement and delivery of Common Shares.

 

8.                                      SECURITIES LAW COMPLIANCE.  You may not
be issued any Common Shares under your Award unless the shares are either
(i) then registered under the Securities Act of 1934 as amended (the “Securities
Act”), or (ii) the Company has determined that such issuance would be exempt
from the registration requirements of the Securities Act.  Your Award must also
comply with other applicable laws and regulations governing the Award, and you
shall not receive such shares if the Company determines that such receipt would
not be in material compliance with such laws and regulations.

 

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9.                                      RESTRICTIVE LEGENDS.  The Common Shares
issued under your Award shall be endorsed with appropriate legends, if any,
determined by the Company.

 

10.                               TRANSFERABILITY.  Your Award is not
transferable, except by will or by the laws of descent and distribution. 
Notwithstanding the foregoing, by delivering written notice to the Company, in a
form satisfactory to the Company, you may designate a third party who, in the
event of your death, will thereafter be entitled to receive any distribution of
Common Shares pursuant to Section 4 of this Agreement.

 

11.                               AWARD NOT A SERVICE CONTRACT.  Your Award is
not an employment or service contract, and nothing in your Award will be deemed
to create in any way whatsoever any obligation on your part to continue in the
service of the Company, or on the part of the Company to continue such service. 
In addition, nothing in your Award will obligate the Company, their respective
shareholders, boards of directors or employees to continue any relationship that
you might have as an employee of the Company.

 

12.                               UNSECURED OBLIGATION.  Your Award is unfunded,
and as a holder of a vested Share Unit, you will be considered an unsecured
creditor of the Company with respect to the Company’s obligation, if any, to
issue Common Shares pursuant to this Agreement.  You will not have voting or any
other rights as a shareholder of the Company with respect to the Common Shares
subject to your Award until such Common Shares are issued to you pursuant to
Section 4 of this Agreement.  Upon such issuance, you will obtain full voting
and other rights as a shareholder of the Company.  Nothing contained in this
Agreement, and no action taken pursuant to its provisions, will create or be
construed to create a trust of any kind or a fiduciary relationship between you
and the Company or any other person.

 

13.                               WITHHOLDING OBLIGATIONS.  On or before the
time you receive a distribution of Common Shares pursuant to your Award, or at
any time thereafter as requested by the Company, you hereby authorize any
required withholding from the Common Shares, payroll and any other amounts
payable or issuable to you and/or otherwise agree to make adequate provision in
cash for any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Company which arise in connection with your Award
(the “Withholding Taxes”).  Participant may direct the Company to (i) withhold,
from Common Shares otherwise issuable upon settlement of the Award, a portion of
those Common Shares with an aggregate Market Price (defined as in Section 3 of
the Plan but measured as of the delivery date) equal to the amount of the
applicable withholding taxes; provided, however, that the number of such Common
Shares so withheld shall not exceed the amount necessary to satisfy the
Company’s required tax withholding obligations using the minimum statutory
withholding tax rates, and (ii) make a cash payment equal to such fair market
value directly to the appropriate taxing authorities, as provided in the
Agreement.

 

14.                               NOTICES.  Any notices provided for in your
Award or the Plan shall be given in writing and shall be deemed effectively
given upon receipt or, in the case of notices delivered by the Company to you,
five (5) days after deposit in the mail, postage prepaid, addressed to you at
the last address you provided to the Company.

 

15.                               HEADINGS.  The headings of the Sections in
this Agreement are inserted for convenience only and will not be deemed to
constitute a part of this Agreement or to affect the meaning of this Agreement.

 

16.                               AMENDMENT.  Nothing in this Agreement shall
restrict the Company’s ability to exercise its discretionary authority pursuant
to Section 4 of the Plan; provided, however, that no such action may,

 

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without your consent, adversely affect your rights under your Award and this
Agreement.  Without limiting the foregoing, the Company’s Board (or appropriate
committee thereof) reserves the right to change, by written notice to you, the
provisions of this Agreement in any way it may deem necessary or advisable to
carry out the purpose of the grant as a result of any change in applicable laws
or regulations or any future law, regulation, ruling, or judicial decision,
provided that any such change will be applicable only to rights relating to that
portion of the Award which is then subject to restrictions as provided herein.

 

17.                               MISCELLANEOUS.

 

(a)                                 The rights and obligations of the Company
under your Award will be transferable by the Company to any one or more persons
or entities, and all covenants and agreements hereunder will inure to the
benefit of, and be enforceable by the Company’s successors and assigns.

 

(b)                                 You agree upon request to execute any
further documents or instruments necessary or desirable in the sole
determination of the Company to carry out the purposes or intent of your Award.

 

(c)                                  You acknowledge and agree that you have
reviewed your Award in its entirety, have had an opportunity to obtain the
advice of counsel prior to executing and accepting your Award and fully
understand all provisions of your Award.

 

(d)                                 This Agreement will be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.

 

(e)                                  All obligations of the Company under the
Plan and this Agreement will be binding on any successor to the Company, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

 

18.                               GOVERNING PLAN DOCUMENT.  Your Award is
subject to all the provisions of the Plan, the provisions of which are hereby
made a part of your Award, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan.  In the event of any conflict between the
provisions of your Award and those of the Plan, the provisions of the Plan will
control; provided, however, that Section 4 of this Agreement will govern the
timing of any distribution of Common Shares under your Award.  The Board (or
appropriate committee thereof) will have the power to interpret the Plan and
this Agreement and to adopt such rules for the administration, interpretation,
and application of the Plan as are consistent therewith and to interpret or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Board (or appropriate committee thereof) will be
final and binding upon you, the Company, and all other interested persons. No
member of the Board (or appropriate committee thereof) will be personally liable
for any action, determination, or interpretation made in good faith with respect
to the Plan or this Agreement.

 

19.                               EFFECT ON OTHER EMPLOYEE BENEFIT PLANS.  The
value of the Award subject to this Agreement will not be included as
compensation, earnings, salaries, or other similar terms used when calculating
the employee’s benefits under any employee benefit plan sponsored by the Company
except as such plan otherwise expressly provides. The Company expressly reserves
its rights to amend, modify, or terminate any of the Company’s employee benefit
plans.

 

20.                               CHOICE OF LAW.  The interpretation,
performance and enforcement of this Agreement will be governed by the laws of
the Province of Ontario and the laws of Canada.

 

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21.                               SEVERABILITY.  If all or any part of this
Agreement or the Plan is declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity will not invalidate any
portion of this Agreement or the Plan not declared to be unlawful or invalid.
Any Section of this Agreement (or part of such a Section) so declared to be
unlawful or invalid will, if possible, be construed in a manner which will give
effect to the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.

 

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