Document:

Exhibit 4.2

 

[FORM OF NOTE]

 

 

	
REGISTERED

	
$80,000,000

	
PRICING SUPPLEMENT No. 1138

CERTIFICATE NO. 1

	
CUSIP: 25154W 704

ISIN: US25154W7048

 

 

POWERSHARES DB ITALIAN TREASURY BOND FUTURES EXCHANGE TRADED NOTES DUE MARCH 31, 2021

Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the Issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.

 

  

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Deutsche Bank AG, acting through its London Branch

SERIES A

 

POWERSHARES DB ITALIAN TREASURY BOND FUTURES EXCHANGE TRADED NOTES DUE MARCH 31, 2021 (THE “SECURITY”)

	
Original Issue Date

	 	
March 25, 2011

	 	 	 
	
Maturity Date

	 	
March 31, 2021 or the next Business Day if such day is not a Business Day, subject to postponement as described under “Market Disruption Events”.

	 	 	 
	
Final Valuation Date

	 	
March 26, 2021 or the next Trading Day if such day is not a Trading Day, subject to postponement as described under “Market Disruption Events”.

	 	 	 
	
Inception Date

	 	
March 22, 2011

	 	 	 
	
Specified Currency

	 	
The Security will be denominated in U.S. dollars.

	 	 	 
	
Issue Price

	 	
100%

	 	 	 
	
Face Amount

	 	
$20 per Security

	 	 	 
	
Minimum Denominations

	 	
N.A.

	 	 	 
	
Coupon Rate

	 	
N.A.

	 	 	 
	
Coupon Payment Date(s)

	 	
N.A.

	 	 	 
	
Coupon Period(s)

	 	
N.A.

	 	 	 
	
Coupon Accrual Date

	 	
N.A.

	 	 	 
	
Initial Redemption Date

	 	
N.A.

	 	 	 
	
Redemption Dates

	 	
N.A.

 

  

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Redemption Notice Period

	 	
N.A.

	 	 	 
	
Initial Redemption Percentage

	 	
N.A.

	 	 	 
	
Annual Redemption Percentage

	 	
N.A.

	 	 	 
	
Optional Repayment Date(s)

	 	
N.A.

	 	 	 
	
Applicability of Modified Payment Upon Acceleration

	 	
N.A.

	 	 	 
	
Tax Redemption

	 	
N.A.

	 	 	 
	
Payment of Additional Tax Amounts

	 	
N.A.

	 	 	 
	
Other Provisions

	 	
See below. To the extent the Other Provisions are inconsistent with any other provision of this Security, the Other Provisions will control.

 

Deutsche Bank Aktiengesellschaft, a stock corporation (Aktiengesellschaft) organized under the laws of the Federal Republic of Germany acting through its London Branch, (together with its successors and assigns, the “Issuer”), for value received, hereby promises to pay to Cede & Co., or registered assignees, the amount in cash, as determined in accordance with the provisions set forth under “Payment at Maturity” below, due with respect to the Current Outstanding Face Amount specified on Schedule I hereto on the Maturity Date specified herein (except to the extent previously redeemed or repaid) and to pay a coupon, if applicable, thereon at the Coupon Rate per annum specified above from and including the Coupon Accrual Date specified above until but excluding the date the face amount is paid or duly made available for payment (except as provided below) weekly, monthly, quarterly, semi-annually or annually in arrears on the Coupon Payment Dates specified above in each year commencing on the Coupon Payment Date next succeeding the Coupon Accrual Date specified above, and at maturity (or on any redemption or repayment date); provided, however, that if the Coupon Accrual Date occurs between a Record Date, as defined below, and the next succeeding Coupon Payment Date, coupon payments will commence on the second Coupon Payment Date succeeding the Coupon Accrual Date to the registered Holder of this Security on the Record Date with respect to such second Coupon Payment Date.

 

If applicable, coupons on this Security will accrue from and including the most recent Coupon Payment Date to which a coupon has been paid or duly 

 

  

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provided for, or, if no coupon has been paid or duly provided for, from and including the Coupon Accrual Date, until but excluding the date the principal hereof has been paid or duly made available for payment (except as provided below). The coupon so payable, and punctually paid or duly provided for, on any Coupon Payment Date will, subject to certain exceptions described herein, be paid to the person in whose name this Security (or one or more predecessor Securities) is registered at the close of business on the date 15 calendar days prior to such Coupon Payment Date (whether or not a Business Day (as defined on the reverse of this Security)) (each such date, a “Record Date”); provided, however, that any coupon payable at maturity (or on any redemption or repayment date) will be payable to the person to whom the principal hereof shall be payable.

 

Payment of the principal of this Security, premium, if any, and any coupon, if applicable, due at maturity on this Security (or any redemption or repayment date), unless this Security is denominated in a Specified Currency other than U.S. dollars and is to be paid in whole or in part in such Specified Currency, will be made in immediately available funds upon surrender of this Security at the office or agency of the Paying Agent, as defined on the reverse hereof, maintained for that purpose in the Borough of Manhattan, the City of New York, or at such other paying agency as the Issuer may determine, in U.S. dollars.  U.S. dollar payments of coupons, other than coupons due at maturity or any date of redemption or repayment, will be made by U.S. dollar check mailed to the address of the person entitled thereto as such address shall appear in the Security register.  A Holder of U.S. $10,000,000 (or the equivalent in a Specified Currency) or more in face amount of Securities having the same Coupon Payment Date, the coupon on which is payable in U.S. dollars, will be entitled to receive coupon payments, other than coupon payments due at maturity or on any date of redemption or repayment, by wire transfer of immediately available funds if appropriate wire transfer instructions have been received by the Paying Agent in writing not less than 15 calendar days prior to the applicable Coupon Payment Date.

 

If this Security is denominated in a Specified Currency other than U.S. dollars, and the Holder does not elect (in whole or in part) to receive payment in U.S. dollars pursuant to the next succeeding paragraph, payments of principal, premium, if any, and coupons with regard to this Security will be made by wire transfer of immediately available funds to an account maintained by the Holder hereof with a bank located outside the United States if appropriate wire transfer instructions have been received by the Paying Agent in writing not less than 15 calendar days prior to the applicable payment date; provided, that if such wire transfer instructions are not received, such payments will be made by check payable in such Specified Currency mailed to the address of the person entitled thereto as such address shall appear in the Security register; and provided, further, that payment of the principal of this Security, any premium and the coupon due at maturity, if any, (or on any redemption or repayment date) will be made upon 

 

  

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surrender of this Security at the office or agency referred to in the preceding paragraph.

 

If so indicated on the face hereof, the Holder of this Security, if denominated in a Specified Currency other than U.S. dollars, may elect to receive all or a portion of payments on this Security in U.S. dollars by transmitting a written request to the Paying Agent, on or prior to the fifth Business Day after such Record Date or at least ten Business Days prior to the Maturity Date or any redemption or repayment date, as the case may be. Such election shall remain in effect unless such request is revoked by written notice to the Paying Agent as to all or a portion of payments on this Security at least five Business Days prior to such Record Date, for coupon payments, or at least ten calendar days prior to the Maturity Date or any redemption or repayment date, for payments of the principal, as the case may be.

 

If the Holder elects to receive all or a portion of payments of the principal of, premium, if any, and coupons on this Security, if denominated in a Specified Currency other than U.S. dollars, in U.S. dollars, the Exchange Rate Agent (as defined on the reverse hereof) will convert such payments into U.S. dollars. In the event of such an election, payment in respect of this Security will be based upon the exchange rate as determined by the Exchange Rate Agent based on the highest bid quotation in the City of New York received by such Exchange Rate Agent at approximately 11:00 a.m., New York City time, on the second Business Day preceding the applicable payment date from three recognized foreign exchange dealers (one of which may be the Exchange Rate Agent unless such Exchange Rate Agent is an affiliate of the Issuer) for the purchase by the quoting dealer of the Specified Currency for U.S. dollars for settlement on such payment date in the amount of the Specified Currency payable in the absence of such an election to such Holder and at which the applicable dealer commits to execute a contract. If such bid quotations are not available, such payment will be made in the Specified Currency. All currency exchange costs will be borne by the Holder of this Security by deductions from such payments.

 

Other Provisions 

	
Stated Principal Amount:

	 	
$20.00 per Security on the Inception Date.

 

At any time, the aggregate outstanding Stated Principal Amount of this Security shall be the last amount set forth on Schedule I hereto under the heading “Current Outstanding Face Amount”.

 

Securities represented by this Security may be issued after the date hereof upon 

 

  

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	 	 	notice by the Issuer to the Trustee, without the consent of the beneficial owners of the Securities then outstanding, and will have the same rights and privileges as Securities issued on the date hereof. 

 

Upon receipt of an Issuer Order (as defined in the Senior Indenture) instructing the Trustee to issue more Securities represented by this Security and delivery of such Securities through the Depository Trust Company (“DTC”) book-entry system, the Trustee shall make notations on Schedule I to evidence such issuance and the new aggregate Stated Principal Amount of Securities represented by this Security, provided, however, that in no event may the Current Outstanding Face Amount represented by this Security exceed $80,000,000.

 

The Issuer may also instruct the Trustee to cancel Securities held by the Issuer represented by this Security.  Upon delivery of the Securities to be cancelled through the DTC book-entry system, the Trustee shall make notations on Schedule I to evidence such cancellation and the new aggregate Stated Principal Amount of Securities represented by this Security.

 

The Trustee may, as necessary, add additional pages of the same format to Schedule I, to evidence additional issuances, cancellations and the Current Outstanding Face Amount of Securities represented by this Security, which additional pages shall constitute part of this Security to the same extent as if they had been part of this Security at the initial issuance and authentication hereof.

	 	 	 
	
Sub-Indices:

	 	
DB 3-Month T-Bill Index (the “TBill 

 

  

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	 	 	Index”) 

 

DB USD BTP Futures Index (the “BTP Futures Index”).

	 	 	 
	
Payment at Maturity:

	 	
If the Security has not previously been repurchased by the Issuer, a Holder of a Security will receive, for each Security held on the Final Payment Record Date, a payment at maturity per Security in U.S. dollars, calculated by the Calculation Agent equal to:

 

the Current Principal Amount of the Security times the Index Factor on the Final Valuation Date times the Fee Factor on the Final Valuation Date

 

where,

 

“Current Principal Amount” means, for the period from the Inception Date to March 31, 2011 (such period, the “Initial Calendar Month”), $20.00 for each Security; and

 

for each subsequent calendar month, the Current Principal Amount will be reset as follows on the Monthly Reset Date:

 

new Current Principal Amount = previous Current Principal Amount × Index Factor on the applicable Monthly Valuation Date × Fee Factor on the applicable Monthly Valuation Date.

 

“Index Factor” means 1 + TBill Index Return + BTP Futures Index Return.

 

“Fee Factor” means 1 – (Investor Fee × Day Count Fraction).

 

“Investor Fee” means 0.50% per annum, calculated daily and applied monthly to 

 

  

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	 	 	the Current Principal Amount. 

 

“Day Count Fraction” means, for each calendar month, a fraction, the numerator of which is the number of days elapsed from and including the Monthly Reset Date (or the Inception Date in the case of the Initial Calendar Month) to and including the immediately following Monthly Valuation Date (or the Trading Day, Valuation Date or Final Valuation Date, as applicable) and the denominator of which is 365.

	 	 	 
	
BTP Futures Index Return:

	 	
(BTP Futures Index Closing Level minus BTP Futures Index Monthly Initial Level)

 

divided by

 

BTP Futures Index Monthly Initial Level

	 	 	 
	
TBill Index Return:

	 	
(TBill Index Closing Level minus TBill Index Monthly Initial Level)

 

divided by

 

TBill Index Monthly Initial Level

	 	 	 
	
Repurchase at the Holder’s Option:

	 	
A Holder of Securities may irrevocably offer a minimum of 50,000 Securities or an integral multiple of 50,000 Securities in excess thereof to the Issuer for repurchase for an amount in U.S. dollars per Security equal to the Repurchase Value on the applicable Valuation Date. If a Holder complies with the Repurchase Procedures set forth below, the Issuer will repurchase the offered Securities and pay to the Holder the applicable Repurchase Value for the offered Securities on the Repurchase Date.

	 	 	 
	
Repurchase at the Issuer’s Option:

	 	
The Issuer may redeem the Securities in whole but not in part on any Trading Day occurring on or after the Inception Date for an amount in cash equal to the 

 

  

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	 	 	Repurchase Value on the applicable Valuation Date. If the Issuer elects to redeem the Securities, the Issuer will give the Holder notice (the “Call Notice”) not less than five Business Days prior to the Call Date (the “Call Notice Date”). The last day on which the Issuer may deliver a Call Notice is March 24, 2021.
	 	 	 
	
Repurchase Value:

	 	
On each Trading Day, an amount in U.S. dollars for each Security, equal to:

 

the Current Principal Amount times the Index Factor on such Trading Day times the Fee Factor on such Trading Day.

	 	 	 
	
Repurchase Date:

	 	
In connection with a Repurchase at the Holder’s Option, the third Business Day following the applicable Valuation Date, subject to postponement as described under “Market Disruption Events”.

 

In connection with a Repurchase at the Issuer’s Option, the Call Date.

	 	 	 
	
Call Date:

	 	
The day the Issuer redeems the Securities as specified in the Call Notice, subject to postponement as described under “Market Disruption Events”.

	 	 	 
	
Valuation Date:

	 	
In connection with a Repurchase at the Holder’s Option, the Trading Day immediately following the Trading Day on which effective notice is given to the Issuer of an offer of the Securities for repurchase.

 

In connection with a Repurchase at the Issuer’s Option, the Call Notice Date.

	 	 	 
	
Acceleration upon Zero Repurchase Value:

	 	
If the Repurchase Value on any Trading Day equals zero, the Maturity Date for the Securities will be automatically accelerated to that day and the Holder of a Security will not receive any payment in 

 

  

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	 	 	respect of the Security.
	 	 	 
	
BTP Futures Index Monthly Initial Level:

	 	
For the Initial Calendar Month, 100.4152. For each subsequent calendar month, the BTP Futures Index Closing Level on the Monthly Valuation Date of the immediately preceding calendar month.

	 	 	 
	
BTP Futures Index Closing Level:

	 	
The closing level of the BTP Futures Index as reported on Bloomberg page “DBBNBTPL <Index>”, subject to the occurrence of a Market Disruption Event; provided that on any calendar day which is not a day on which the closing level of the BTP Futures Index is scheduled to be published, the BTP Futures Index Closing Level will equal such level on the immediately preceding Trading Day.

	 	 	 
	
TBill Index Monthly Initial Level:

	 	
For the Initial Calendar Month, 236.8584. For each subsequent calendar month, the TBill Index Closing Level on the Monthly Valuation Date of the immediately preceding calendar month.

	 	 	 
	
TBill Index Closing Level:

	 	
The closing level of the TBill Index as reported on Bloomberg page “DBTRBL3M<INDEX>”, subject to the occurrence of a Market Disruption Event; provided that on any calendar day which is not a day on which the closing level of the TBill Index is scheduled to be published, the TBill Index Closing Level will equal such level on the immediately preceding Trading Day.

	 	 	 
	
Monthly Reset Date:

	 	
For each calendar month, the first calendar day of that month beginning on April 1, 2011 and ending on March 1, 2021.

	 	 	 
	
Monthly Valuation Date:

	 	
For each Monthly Reset Date, the last calendar day of the previous calendar 

 

  

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	 	 	month beginning on March 31, 2011 and ending on February 28, 2021.
	 	 	 
	
Trading Day:

	 	
Any day on which (i) the values of the Sub-Indices are published by Deutsche Bank AG, London Branch, (ii) trading is generally conducted on NYSE Arca and (iii) trading is generally conducted on the markets on which the futures contracts underlying the BTP Futures Index are traded, in each case as determined by the Calculation Agent, in its sole discretion.

	 	 	 
	
Business Day:

	 	
A Monday, Tuesday, Wednesday, Thursday or Friday on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in New York City.

	 	 	 
	
Index Sponsor:

	 	
Deutsche Bank AG, London Branch

	 	 	 
	
Calculation Agent:

	 	
Deutsche Bank AG, London Branch

	 	 	 
	
Form:

	 	
Book-Entry.

	 	 	 
	
Final Payment Record Date:

	 	
The Final Valuation Date, whether or not that day is a business day.

 

The Issuer will irrevocably deposit with DTC no later than the opening of business on each Interest Payment Date, if applicable, each Repurchase Date, if applicable, and on the Maturity Date funds sufficient to make payments of the amount payable with respect to the Securities on such date.  The Issuer will give DTC irrevocable instructions and authority to pay such amount to the Holders entitled thereto.

 

Subject to the foregoing and to applicable law (including, without limitation, United States federal laws), the Issuer or its affiliates may, at any time and from time to time, purchase outstanding Securities by tender, in open market or by private agreement.

 

Role of Calculation Agent 

Deutsche Bank AG, London Branch will serve as the Calculation Agent. The Calculation Agent will, in its sole discretion, make all determinations 

 

  

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regarding the value of the Securities, including at maturity or upon repurchase by the Issuer, Market Disruption Events, Business Days, Trading Days, the Current Principal Amount, the Fee Factor, the Index Factor, the Default Amount, the closing levels of the Sub-Indices on any Valuation Date, the Maturity Date, Repurchase Dates, the amount payable in respect of the Securities at maturity or upon repurchase by the Issuer and any other calculations or determinations to be made by the Calculation Agent as specified herein. The Calculation Agent will rely upon the published Repurchase Value and levels of the Sub-Indices. Absent manifest error, all determinations of the Calculation Agent will be final and binding on the Holders and the Issuer, without any liability on the part of the Calculation Agent. Holders will not be entitled to any compensation from the Issuer for any loss suffered as a result of any of the above determinations by the Calculation Agent.

 

Repurchase Procedures 

To effect a repurchase, a Holder of the Securities must irrevocably offer at least 50,000 Securities (or an integral multiple of 50,000 Securities in excess thereof) to Deutsche Bank Securities Inc. (“DBSI”) on the Trading Day immediately prior to the Holder’s desired Valuation Date no later than 4:00 p.m., New York City time. The Valuation Date may be any Trading Day from and including the Trading Day immediately following the Original Issue Date to and including the Final Valuation Date, subject to postponement in the event of a Market Disruption Event.

 

A Holder wishing to offer Securities to the Issuer for repurchase must follow the following procedures:

 

 

	 	
·  

	
Cause its broker to deliver an irrevocable Offer for Repurchase, a form of which is attached as Annex A to this Security, to DBSI on the Trading Day immediately prior to the desired Valuation Date by 4:00 p.m., New York City time.  A Holder must offer at least 50,000 Securities or an integral multiple of 50,000 Securities in excess thereof for repurchase by the Issuer on any Repurchase Date. DBSI must acknowledge receipt from such broker in order for the Holder’s offer to be effective;

 

	 	
·  

	
Cause its broker to book a delivery vs. payment trade with respect to the Holder’s Securities on the applicable Valuation Date at a price equal to the applicable Repurchase Value, facing DBSI; and

 

	 	
·  

	
Cause its DTC custodian to deliver the trade as booked for settlement via DTC at or prior to 3:00 p.m., New York City time, on the applicable Repurchase Date.

 

Any repurchase instructions received in accordance with the procedures described above will be irrevocable.

 

  

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An additional fee of up to $0.03 shall be charged, at the option of DBSI, for each Security that is repurchased.

 

Market Disruption Events 

A “Disrupted Day” is any Trading Day on which a Market Disruption Event occurs or is continuing.

 

If any Monthly Valuation Date, Valuation Date or the Final Valuation Date (each a “Reference Date”) is a Disrupted Day with respect to a Sub-Index, the closing level of such Sub-Index on the next succeeding Trading Day that is not a Disrupted Day will be deemed to be the closing level of such Sub-Index for such Reference Date; provided that if the five successive Trading Days immediately following such Reference Date are all disrupted days, the calculation agent will determine, in its sole discretion, the closing level of such Sub-Index for such Reference Date on the fifth Trading Day immediately following such Reference Date, notwithstanding that such fifth Trading Day is a Disrupted Day. If any Valuation Date or the Final Valuation Date is a Disrupted Day with respect to any Sub-Index and the date as of which the Calculation Agent determines the closing levels of the Sub-Indices falls less than three Business Days prior to the scheduled Repurchase Date corresponding to such Valuation Date or the Maturity Date, as applicable, such scheduled Repurchase Date or the Maturity Date, as applicable, will be postponed to the third Business Day following the date as of which the Calculation Agent has determined the closing levels of the Sub-Indices for such Valuation Date or the Final Valuation Date, as applicable.

 

For the avoidance of doubt, no adjustment will be made to a Monthly Reset Date whether or not the immediately preceding scheduled Monthly Valuation Date is a Disrupted Day with respect to any Sub-Index. If any Reference Date is a Disrupted Day with respect to a Sub-Index, no adjustment will be made to the closing level for any other Sub-Index determined as of such Reference Date.

 

Any of the following will be a Market Disruption Event:

 

	 	
·  

	
a termination or suspension of, or material limitation or disruption in the trading of the Euro-BTP Futures contract (including, but not limited to, the occurrence or announcement of a limitation on, or suspension of, the trading of the Euro-BTP Futures contract imposed by Eurex Exchange (“Eurex”) or other relevant exchange on which the Euro-BTP Futures contract is traded by reason of movements exceeding “limit up” or “limit down” levels permitted by such exchange); or

	 	
·  

	
the settlement price of the Euro-BTP Futures contract has increased or decreased from the previous day’s settlement price by the maximum 

 

  

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amount permitted under the rules of Eurex or any other relevant exchange; or

	 	
·  

	
failure by Eurex or any other relevant exchange to announce or publish the settlement price of the Euro-BTP Futures contract; or

	 	
·  

	
failure by the Index Sponsor to publish the closing level of the BTP Futures Index; or

	 	
·  

	
any other event, if the Calculation Agent determines in its sole discretion that the event materially interferes with the Issuer’s ability or the ability of the Issuer’s affiliates to unwind all or a material portion of a hedge with respect to the Securities that the Issuer or its affiliates have effected or may effect.

 

The following events will not be Market Disruption Events:

 

	 	
·  

	
a limitation on the hours or number of days of trading on a trading facility on which the Euro-BTP Futures contract is traded, but only if the limitation results from an announced change in the regular business hours of the relevant market; or

	 	
·  

	
a decision by a trading facility to permanently discontinue trading in the Euro-BTP Futures contract.

Discontinuance or Modification of the Sub-Indices 

If the Index Sponsor discontinues compilation or publication of a Sub-Index and the Index Sponsor or any other person or entity (including the Issuer) calculates and publishes an index that the Calculation Agent determines is comparable to such discontinued Sub-Index and approves as a successor index, then the Calculation Agent will determine the level of the Sub-Index on any relevant date and the amount payable at maturity or upon repurchase by the Issuer by reference to such successor Sub-Index for the period following the discontinuation of the Sub-Index.

 

If the Calculation Agent determines that the publication of a Sub-Index is discontinued and that there is no applicable successor index, or that the closing level of the Sub-Index is not available for any reason other than a Market Disruption Event, on the date on which the level of the Sub-Index is required to be determined, or if for any other reason (excluding a Market Disruption Event) the Sub-Index is not available to the Issuer or the Calculation Agent on the relevant date, the Calculation Agent will determine the amount payable by a computation methodology that the Calculation Agent determines will as closely as reasonably possible replicate such Sub-Index.

 

If the Calculation Agent determines that either or both Sub-Indices, the components underlying either or both Sub-Indices (the “Index Components”) or the method of calculating either or both Sub-Indices has been changed at any time 

 

  

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in any respect – including any addition, deletion or substitution and any reweighting or rebalancing of Index Components, and whether the change is made by the Index Sponsor under its existing policies or following a modification of those policies, is due to the publication of a successor index, is due to events affecting one or more of the Index Components, or is due to any other reason – then the Calculation Agent will be permitted (but not required) to make such adjustments to such Sub-Index or method of calculating such Sub-Index as it believes are appropriate to ensure that the level of such Sub-Index used to determine the amount payable on the Maturity Date or upon repurchase by the Issuer is equitable.

 

All determinations and adjustments to be made by the Calculation Agent with respect to the level of the Sub-Indices and the amount payable at maturity or upon repurchase by the Issuer or otherwise relating to the level of the Sub-Indices may be made in the Calculation Agent’s sole discretion.

 

Payment Upon an Event of Default 

If an Event of Default (as defined in the Senior Indenture) occurs and the maturity of the Securities is accelerated, the Issuer will pay the Default Amount in respect of each Security.

 

For the purpose of determining whether the Holders of the Issuer’s Series A Global Notes, of which the Securities are a part, are entitled to take any action under the Senior Indenture, the Issuer will treat the Stated Principal Amount of each Security outstanding as the principal amount of that Security. Although the terms of the Securities may differ from those of the other Series A Global Notes, Holders of specified percentages in principal amount of all Series A Global Notes, together in some cases with other series of the Issuer’s debt securities, will be able to take action affecting all the Series A Global Notes, including the Securities. This action may involve changing some of the terms that apply to the Series A Global Notes, accelerating the maturity of the Series A Global Notes after a default or waiving some of the Issuer’s obligations under the Senior Indenture.

 

If an Event of Default occurs under the Senior Indenture and the maturity of the Securities is accelerated, the amount payable upon acceleration will be the Repurchase Value determined by the Calculation Agent on the next Trading Day (the “Default Amount”).

 

If the maturity of this Security is accelerated because of an Event of Default, the Issuer shall, or shall cause the Calculation Agent to, provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, and to DTC of the cash amount due with respect to the Security as promptly as possible and in no event later than two Business Days after the date of acceleration.

 

  

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Defeasance 

This Security will not be subject to the defeasance provisions contained in Article 10 of the Senior Indenture.

 

REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

 

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Senior Indenture, as defined on the reverse hereof, or be valid or obligatory for any purpose.

 

  

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IN WITNESS WHEREOF, the Issuer has caused this Security to be duly executed.

 

	
Dated: March 25, 2011

	  	
DEUTSCHE BANK AG, LONDON BRANCH

	 
	 	 	 	 
	 	 	 	 
	  	  	  	
By:

	 /s/ Joseph J. Rice	 
	  	  	  	  	
Name:

	Joseph J. Rice	 
	  	  	  	  	
Title:

	Director	 
	  	  	  	  	  	  	 
	  	  	  	
By:

	 /s/ Anjali Thadani	 
	  	  	  	  	
Name:

	Anjali Thadani	 
	  	  	  	  	
Title:

	Vice President	 

	
TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

 

This is one of the Securities referred

to in the within-mentioned

Senior Indenture.

 

 

LAW DEBENTURE TRUST COMPANY

OF NEW YORK, as Trustee

	 	 	 
	 	 	 
	
By:

	  	  
	  	
Authorized Officer

 

  

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REVERSE OF SECURITY

 

This Security is one of a duly authorized issue of Global Notes, Series A of the Issuer.  The Securities are issuable under a Senior Indenture, dated as of November 22, 2006, among the Issuer, Law Debenture Trust Company of New York, as trustee (the “Trustee,” which term includes any successor trustee under the Senior Indenture), and Deutsche Bank Trust Company Americas (“DBTCA”), as issuing agent, paying agent and registrar (as may be amended or supplemented from time to time, the “Senior Indenture”), to which Senior Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities of the Issuer, the Trustee and Holders of the Securities and the terms upon which the Securities are, and are to be, authenticated and delivered.  The Issuer has appointed DBTCA acting through its principal corporate trust office in the Borough of Manhattan, the City of New York, as its paying agent (the “Paying Agent”, which term includes any additional or successor Paying Agent appointed by the Issuer) with respect to the Securities.  The terms of individual Securities may vary with respect to coupon rates, coupon rate formulas, issue dates, maturity dates, or otherwise, all as provided in the Senior Indenture.  To the extent not inconsistent herewith, the terms of the Senior Indenture are hereby incorporated by reference herein.

 

Unless otherwise indicated on the face hereof, this Security will not be subject to any sinking fund and, unless otherwise indicated on the face hereof in accordance with the provisions of the following two paragraphs and except as set forth below, will not be redeemable or subject to repayment at the option of the Holder prior to maturity.

 

If so indicated on the face hereof, this Security may be redeemed in whole or in part at the option of the Issuer on or after the Initial Redemption Date specified on the face hereof or on the Redemption Dates specified on the face hereof on the terms set forth on the face hereof, together with any coupons accrued and unpaid hereon to the date of redemption (except as indicated below).  If this Security is subject to “Annual Redemption Percentage Reduction,” the Initial Redemption Percentage indicated on the face hereof will be reduced on each anniversary of the Initial Redemption Date by the Annual Redemption Percentage Reduction specified on the face hereof until the redemption price of this Security is 100% of the principal amount hereof, together with any coupons accrued and unpaid hereon to the date of redemption (except as provided below).  Notice of redemption shall be mailed to the registered Holders of the Securities designated for redemption at their addresses as the same shall appear on the Security register not less than 30 nor more than 60 calendar days prior to the date fixed for redemption or within the Redemption Notice Period specified on the face hereof, subject to all the conditions and provisions of the Senior Indenture.  In the event of redemption of this Security in part only, a new Security or Securities for the amount of the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof.

 

  

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If so indicated on the face hereof, this Security will be subject to repayment at the option of the Holder on the Optional Repayment Date or Dates specified on the face hereof on the terms set forth herein. On any Optional Repayment Date, this Security will be repayable in whole or in part in increments of the Face Amount (provided that any remaining principal amount hereof shall not be less than the minimum authorized denomination hereof) at the option of the Holder hereof at a price equal to 100% of the principal amount to be repaid, together with any coupons accrued and unpaid hereon to the date of repayment (except as provided below); provided, that if this Security is issued with original issue discount, this Security will be repayable on the applicable Optional Repayment Date or Dates at the price(s) specified on the face hereof.  For this Security to be repaid at the option of the Holder hereof, the Paying Agent must receive at its corporate trust office in the Borough of Manhattan, the City of New York, at least 15 but not more than 30 calendar days prior to the date of repayment, (i) this Security with the form entitled “Option to Elect Repayment” below duly completed or (ii) a telegram, telex, facsimile transmission or a letter from a member of a national securities exchange or the National Association of Securities Dealers, Inc. or a commercial bank or a trust company in the United States setting forth the name of the Holder of this Security, the principal amount hereof, the certificate number of this Security or a description of this Security’s tenor and terms, the principal amount hereof to be repaid, a statement that the option to elect repayment is being exercised thereby and a guarantee that this Security, together with the form entitled “Option to Elect Repayment” duly completed, will be received by the Paying Agent not later than the fifth Business Day after the date of such telegram, telex, facsimile transmission or letter; provided, that such telegram, telex, facsimile transmission or letter shall only be effective if this Security and form duly completed are received by the Paying Agent by such fifth Business Day.  Unless otherwise indicated on the face of this Security, exercise of such repayment option by the Holder hereof shall be irrevocable. In the event of repayment of this Security in part only, a new Security or Securities for the amount of the unpaid portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof.

 

Coupon payments on this Security, if applicable, will include coupons accrued to but excluding the Coupon Payment Dates or the Maturity Date (or any earlier redemption or repayment date), as the case may be.  Unless indicated otherwise on the face hereof, any coupon payments for this Security will be computed and paid on the basis of a 360-day year of twelve 30-day months.

 

In the case where the calendar date indicated on the face hereof as the Maturity Date does not fall on a Business Day or where the Maturity Date is otherwise postponed according to the terms and procedures specified on the face hereof, payment of premium, if any, or principal otherwise payable on such calendar date need not be made on such date, but may be made on the Maturity Date as postponed with the same force and effect as if made on the indicated 

 

  

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calendar date, and no coupons on such payment shall accrue for the period from and after the indicated calendar date to the Maturity Date as postponed.

 

This Security and all the obligations of the Issuer hereunder are direct, unsecured obligations of the Issuer and rank without preference or priority among themselves and pari passu with all other existing and future unsecured and unsubordinated indebtedness of the Issuer, subject to certain statutory exceptions in the event of liquidation upon insolvency.

 

This Security, and any Security or Securities issued upon transfer or exchange hereof, is issuable only in fully registered form, without coupons, and is issuable only in the minimum denominations set forth on the face hereof or any amount in excess thereof which is an integral multiple thereof.

 

DBTCA has been appointed registrar for the Securities, and DBTCA will maintain at its office in the City of New York, a register for the registration and transfer of Securities.  This Security may be transferred at either the aforesaid New York office of DBTCA by surrendering this Security for cancellation, accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Trustee and duly executed by the registered Holder hereof in person or by the Holder’s attorney duly authorized in writing, and thereupon the Trustee shall issue in the name of the transferee or transferees, in exchange herefor, a new Security or Securities having identical terms and provisions and having a like aggregate principal amount in authorized denominations, subject to the terms and conditions set forth herein; provided, however, that the Trustee will not be required (i) to register the transfer of or exchange any Security that has been called for redemption in whole or in part, except the unredeemed portion of Securities being redeemed in part, (ii) to register the transfer of or exchange any Security if the Holder thereof has exercised his right, if any, to require the Issuer to repurchase such Security in whole or in part, except the portion of such Security not required to be repurchased, or (iii) to register the transfer of or exchange Securities to the extent and during the period so provided in the Senior Indenture with respect to the redemption of Securities.  Securities are exchangeable at said offices for other Securities of other authorized denominations of equal aggregate principal amount having identical terms and provisions.  All such registrations, exchanges and transfers of Securities will be free of service charge, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge in connection therewith.  All Securities surrendered for exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Trustee and executed by the registered Holder in person or by the Holder’s attorney duly authorized in writing.  The date of registration of any Security delivered upon any exchange or transfer of Securities shall be such that no gain or loss of coupon results from such exchange or transfer.

 

In case this Security shall at any time become mutilated, defaced or be destroyed, lost or stolen, and this Security or evidence of the loss, theft or 

 

  

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destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required in the premises) shall be delivered to the Trustee, the Issuer in its discretion may execute a new Security of like tenor in exchange for this Security, but, in the case of any destroyed or lost or stolen Security, only upon receipt of evidence satisfactory to the Trustee and the Issuer that this Security was destroyed or lost or stolen and, if required, upon receipt also of indemnity satisfactory to each of them.  All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authentication and delivery of a new Security shall be borne by the owner of the Security mutilated, defaced, destroyed, lost or stolen.

 

If the face hereof indicates that this Security is subject to “Tax Redemption,” this Security may be redeemed, as a whole, at the option of the Issuer at any time prior to maturity, upon the giving of a Notice of redemption as described below, at a redemption price equal to 100% of the principal amount hereof, together with accrued coupons to the date fixed for redemption (except that if this Security is subject to “Modified Payment upon Acceleration or Redemption,” such redemption price would be limited to the aggregate principal amount hereof multiplied by the sum of the Issue Price specified on the face hereof (expressed as a percentage of the aggregate principal amount) plus the original issue discount amortized from the Coupon Accrual Date to the date of redemption, which amortization shall be calculated using the “coupon method” (computed in accordance with generally accepted accounting principles in effect on the date of redemption)), if the Issuer determines that, as a result of any change in or amendment to the laws, or any regulations or rulings promulgated thereunder, of the Federal Republic of Germany, the jurisdiction of incorporation of any successor to the Issuer, or the jurisdiction of any issuing branch, or of any political subdivision or taxing authority thereof or therein affecting taxation, or any change in official position regarding the application or interpretation of such laws, regulations or rulings, which change or amendment becomes effective on or after the Original Issue Date hereof, the Issuer has or will become obligated to pay Additional Tax Amounts, as defined below, with respect to this Security as described below. Prior to the giving of any Notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Trustee (i) a certificate stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer to so redeem have occurred, and (ii) an opinion of independent legal counsel satisfactory to the Trustee to such effect based on such statement of facts; provided, that no such Notice of redemption shall be given earlier than 60 calendar days prior to the earliest date on which the Issuer would be obligated to pay such Additional Tax Amounts if a payment in respect of this Security were then due.

 

Notice of redemption will be given not less than 30 nor more than 60 calendar days prior to the date fixed for redemption or within the Redemption Notice Period specified on the face hereof, which date and the applicable redemption price will be specified in the Notice.

 

  

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Every net payment of the principal of and coupon on the Security and any other amounts payable on the Security will be made without any withholding or deduction for or on account of any present or future taxes, duties or governmental charges of any nature whatsoever imposed, levied or collected by or on behalf of the Federal Republic of Germany, the jurisdiction of incorporation of any successor to the Issuer or the jurisdiction of any issuing branch, or by or on behalf of any political subdivision or authority therein or thereof having the power to tax (“withholding taxes”) unless such deduction or withholding is required by law. In such event and if specified on the face hereof, the Issuer will, subject to certain exceptions and limitations set forth below, pay such additional tax amounts (the “Additional Tax Amounts”) to the Holder of this Security as may be necessary in order that every net payment of the principal of and coupon on this Security and any other amounts payable on this Security, after withholding or deduction for or on account of any present or future tax, assessment or governmental charge imposed upon or as a result of such payment by the Federal Republic of Germany, the jurisdiction of incorporation of any successor to the Issuer, or the jurisdiction of any issuing branch, or any political subdivision or taxing authority thereof or therein, will not be less than the amount provided for in this Security to be then due and payable. The Issuer will not, however, make any payment of Additional Tax Amounts to any such Holder for or on account of:

 

(a)           any present or future tax, assessment or other governmental charge that would not have been so imposed but for (i) any withholding taxes that are payable by reason of a Holder or beneficial owner of the Securities having some connection with the Federal Republic of Germany, the jurisdiction of incorporation of any successor to the Issuer, or the jurisdiction of any issuing branch other than by reason only of the mere holding or beneficial ownership of the Securities; or (ii) the presentation by or on behalf of the Holder of this Security for payment on a date more than 15 calendar days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later;

 

(b)           any estate, inheritance, gift, sales, transfer, excise or personal property tax or any similar tax, assessment or governmental charge;

 

(c)           any tax, assessment or other governmental charge that is payable otherwise than by withholding or deduction from payments on or in respect of this Security;

 

(d)           any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment of principal of, or coupon on, this Security, if such payment can be made without such withholding by at least one other Paying Agent;

 

  

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(e)           any tax, assessment or other governmental charge that would not have been imposed but for the failure to comply with certification, information or other reporting requirements concerning the nationality, residence or identity of the Holder or beneficial owner of this Security, if such compliance is required by statute or by regulation of the United States or of any political subdivision or taxing authority thereof or therein as a precondition to relief or exemption from such tax, assessment or other governmental charge;

 

(f)           any combination of items listed above.

 

In addition, the Issuer shall not be required to make any payment of Additional Tax Amounts (i) with respect to any withholding taxes which are deducted or withheld pursuant to (A) European Council Directive 2003/48/EC or any other European Union Directive or Regulation implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings income, or (B) any international treaty or understanding entered into for the purpose of facilitating cooperation in the reporting and collection of savings income and to which (x) the United States, and (y) the European Union or Germany is a party, or (C) any provision of law implementing, or complying with, or introduced to conform with, such Directive, Regulation, treaty or understanding; (ii) to the extent such deduction or withholding can be avoided or reduced if the Holder or beneficial owner of the Security makes a declaration of non-residence or other similar claim for exemption to the relevant tax authority or complies with any reasonable certification, documentation, information or other reporting requirement imposed by the relevant tax authority; provided, however, that the exclusion in this clause will not apply if the certification, information, documentation or other reporting requirement would be materially more onerous (in form, procedure or substance of information required to be disclosed) to the Holder or beneficial owner of the Security than comparable information or other reporting requirements imposed under U.S. tax law, regulation and administrative practice (such as IRS Forms W-8 and W-9); or (iii) by or on behalf of a Holder who would have been able to avoid such withholding or deduction by presenting this Security or the relevant coupon to another Paying Agent in a member state of the European Union. Nor shall the Issuer pay Additional Tax Amounts with respect to any payment on this Security to a Holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent such payment would be required by the laws of the United States (or any political subdivision thereof) to be included in the income, for tax purposes, of a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to the Additional Tax Amounts had such beneficiary, settlor, member or beneficial owner been the Holder of this Security.

 

  

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The Senior Indenture provides that (a) if an Event of Default (as defined in the Senior Indenture) due to the default in payment of principal, premium, if any, or coupon on, any series of debt securities issued under the Senior Indenture, including the series of Senior Global Notes of which this Security forms a part, or due to the default in the performance or breach of any other covenant or warranty of the Issuer applicable to the debt securities of such series but not applicable to all outstanding debt securities issued under the Senior Indenture, shall have occurred and be continuing, either the Trustee or the Holders of not less than 331⁄3% in aggregate principal amount of the outstanding debt securities of each affected series voting as one class, by notice in writing to the Issuer and to the Trustee, if given by the securityholders, may then declare the principal of all debt securities of all such series and coupons accrued thereon to be due and payable immediately and (b) if an Event of Default due to a default in the performance of any other of the covenants or agreements in the Senior Indenture applicable to all outstanding debt securities issued thereunder, including this Security, or due to certain events of bankruptcy, insolvency or reorganization of the Issuer, shall have occurred and be continuing, either the Trustee or the Holders of not less than 331⁄3% in aggregate principal amount of all outstanding debt securities issued under the Senior Indenture voting as one class, by notice in writing to the Issuer and to the Trustee, if given by the securityholders, may declare the principal of all such debt securities and coupons accrued thereon to be due and payable immediately, but upon certain conditions such declarations may be annulled and past defaults may be waived (except a continuing default in payment of principal, premium, if any, or coupons on such debt securities) by the Holders of a majority in aggregate principal amount of the debt securities of all affected series then outstanding.

 

If the face hereof indicates that this Security is subject to “Modified Payment upon Acceleration or Redemption,” then (a) if the principal hereof is declared to be due and payable as described in the preceding paragraph, the amount of principal due and payable with respect to this Security shall be limited to the aggregate principal amount hereof multiplied by the sum of the Issue Price specified on the face hereof (expressed as a percentage of the aggregate principal amount) plus the original issue discount amortized from the Coupon Accrual Date to the date of declaration, which amortization shall be calculated using the “coupon method” (computed in accordance with generally accepted accounting principles in effect on the date of declaration), (b) for the purpose of any vote of securityholders taken pursuant to the Senior Indenture prior to the acceleration of payment of this Security, the principal amount hereof shall equal the amount that would be due and payable hereon, calculated as set forth in clause (a) above, if this Security were declared to be due and payable on the date of any such vote and (c) for the purpose of any vote of securityholders taken pursuant to the Senior Indenture following the acceleration of payment of this Security, the principal amount hereof shall equal the amount of principal due and payable with respect to this Security, calculated as set forth in clause (a) above.

 

  

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The Senior Indenture permits the Issuer and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the debt securities of all series issued under the Senior Indenture then outstanding and affected (voting as one class), to execute supplemental indentures adding any provisions to or changing in any manner the rights of the Holders of each series so affected; provided, that the Issuer and the Trustee may not, without the consent of the Holder of each outstanding debt security affected thereby, (a) extend the final maturity of any such debt security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of coupons thereon, or reduce any amount payable on redemption thereof, or change the currency of payment thereof, or modify or amend the provisions for conversion of any currency into any other currency, or modify or amend the provisions for conversion or exchange of the debt security for securities of the Issuer or other entities or for other property or the cash value of the property (other than as provided in the antidilution provisions or other similar adjustment provisions of the debt securities or otherwise in accordance with the terms thereof), or impair or affect the rights of any Holder to institute suit for the payment thereof or (b) reduce the aforesaid percentage in principal amount of debt securities the consent of the Holders of which is required for any such supplemental indenture.

 

Except as set forth below, if the principal of, premium, if any, or coupon on this Security is payable in a Specified Currency other than U.S. dollars and such Specified Currency is not available to the Issuer for making payments hereon due to the imposition of exchange controls or other circumstances beyond the control of the Issuer or is no longer used by the government of the country issuing such currency or for the settlement of transactions by public institutions within the international banking community, then the Issuer will be entitled to satisfy its obligations to the Holder of this Security by making such payments in U.S. dollars on the basis of the Market Exchange Rate (as defined below) on the date of such payment or, if the Market Exchange Rate is not available on such date, as of the most recent practicable date; provided, however, that if the euro has been substituted for such Specified Currency, the Issuer may at its option (or shall, if so required by applicable law) without the consent of the Holder of this Security effect the payment of principal of, premium, if any, or coupon on any Security denominated in such Specified Currency in euro in lieu of such Specified Currency in conformity with legally applicable measures taken pursuant to, or by virtue of, the Treaty establishing the European Community, as amended.  Any payment made under such circumstances in U.S. dollars or euro where the required payment is in an unavailable Specified Currency will not constitute an Event of Default.  If such Market Exchange Rate is not then available to the Issuer or is not published for a particular Specified Currency, the Market Exchange Rate will be based on the highest bid quotation in the City of New York received by the Exchange Rate Agent (as defined below) at approximately 11:00 a.m., New York City time, on the second Business Day preceding the date of such payment from three recognized foreign exchange dealers (the “Exchange Dealers”) for the 

 

  

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purchase by the quoting Exchange Dealer of the Specified Currency for U.S. dollars for settlement on the payment date, in the aggregate amount of the Specified Currency payable to those Holders or beneficial owners of Securities and at which the applicable Exchange Dealer commits to execute a contract.  One of the Exchange Dealers providing quotations may be the Exchange Rate Agent unless the Exchange Rate Agent is an affiliate of the Issuer.  If those bid quotations are not available, the Exchange Rate Agent shall determine the market exchange rate at its sole discretion.

 

The “Exchange Rate Agent” shall be Deutsche Bank AG, London Branch, unless otherwise indicated on the face hereof.

 

All determinations referred to above made by, or on behalf of, the Issuer or by, or on behalf of, the Exchange Rate Agent shall be at such entity’s sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and binding on Holders of Securities and coupons.

 

So long as this Security shall be outstanding, the Issuer will cause to be maintained an office or agency for the payment of the principal of and premium, if any, and coupon on this Security as herein provided in the Borough of Manhattan, the City of New York, and an office or agency in said Borough of Manhattan for the registration, transfer and exchange as aforesaid of the Securities.  If this Security is listed on the London Stock Exchange plc and such exchange so requires, the Issuer shall maintain a Paying Agent in London.  If any European Union Directive on the taxation of savings comes into force, the Issuer will, to the extent possible as a matter of law, maintain a Paying Agent in a member state of the European Union that will not be obligated to withhold or deduct tax pursuant to any such Directive or any law implementing or complying with, or introduced in order to conform to, such Directive.  The Issuer may designate other agencies for the payment of said principal, premium and coupon at such place or places outside the United States (subject to applicable laws and regulations) as the Issuer may decide.  So long as there shall be such an agency, the Issuer shall keep the Trustee advised of the names and locations of such agencies, if any are so designated.

 

With respect to moneys paid by the Issuer and held by the Trustee or any Paying Agent for payment of the principal of or coupon or premium, if any, on any Securities that remain unclaimed at the end of two years after such principal, coupon or premium shall have become due and payable (whether at maturity or upon call for redemption or otherwise), (i) the Trustee or such Paying Agent shall notify the Holders of such Securities that such moneys shall be repaid to the Issuer and any person claiming such moneys shall thereafter look only to the Issuer for payment thereof and (ii) such moneys shall be so repaid to the Issuer.  Upon such repayment all liability of the Trustee or such Paying Agent with respect to such moneys shall thereupon cease, without, however, limiting in any way any obligation that the Issuer may have to pay the principal of or coupon or premium, if any, on this Security as the same shall become due.

 

  

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No provision of this Security or of the Senior Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of, premium, if any, and coupon on this Security at the time, place, and rate, and in the coin or currency, herein prescribed unless otherwise agreed between the Issuer and the registered Holder of this Security.

 

Prior to due presentment of this Security for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Holder in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and none of the Issuer, the Trustee or any such agent shall be affected by notice to the contrary.

 

No recourse shall be had for the payment of the principal of, premium, if any, or the coupon on this Security, for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Senior Indenture or any indenture supplemental thereto, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Issuer or of any successor corporation, either directly or through the Issuer or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.

 

This Security shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York.

 

As used herein:

 

(a)           the term “Business Day” means any day other than a day that (i) is a Saturday or Sunday, (ii) is a day on which banking institutions generally, in New York City or London, England, are authorized or obligated by law, regulation or executive order to close; or (iii) is a day on which transactions in dollars are not conducted in New York City or London, England; and, in addition, (x) for Securities having a specified currency other than U.S. dollars only, other than Securities denominated in euros, any day that in the principal financial center (as defined below) of the country of the specified currency is not a day on which banking institutions generally are authorized or obligated by law to close; and (y) for Securities denominated in euros, a day on which TARGET is operating (a “TARGET Settlement Day”);

 

(b)           the term “Market Exchange Rate” means the noon U.S. dollar buying rate in the City of New York for cable transfers of the Specified Currency indicated on the face hereof published by the Federal Reserve Bank of New York;

 

(c)           the term “Notices” refers to notices to the Holders of the Securities at each Holder’s address as that address appears in the register for the Securities by first class mail, postage prepaid, and to be given by 

 

  

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publication in an authorized newspaper in the English language and of general circulation in the Borough of Manhattan, the City of New York, and London or, if publication in London is not practical, in an English language newspaper with general circulation in Western Europe; provided, that notice may be made, at the option of the Issuer, through the customary notice provisions of the clearing system or systems through which beneficial interests in this Security are owned.  Such Notices will be deemed to have been given on the date of such publication (or other transmission, as applicable), or if published in such newspapers on different dates, on the date of the first such publication;

 

(d)          the term “principal financial center” means the capital city of the country issuing the specified currency. However, for Australian dollars, Canadian dollars and Swiss francs, the principal financial center will be Sydney, Toronto and Zurich, respectively;

 

(e)           the term “TARGET” means the Trans-European Automated Real-time Gross Settlement Express Transfer System; and

 

(f)           the term “United States” means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.

 

All other terms used in this Security which are defined in the Senior Indenture and not otherwise defined herein shall have the meanings assigned to them in the Senior Indenture.

 

  

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 Exhibit 4.2

 

[FORM OF NOTE]

 

ABBREVIATIONS

 

The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations:

 

 

	TEN COM	--	 as tenants in common
	TEN ENT	--	 as tenants by the entireties
	JT TEN	--	 as joint tenants with right of survivorship and not as tenants in common

 

UNIF GIFT MIN ACT --   ____________________________  Custodian  _________________________________ 

(Minor)                                                                                  (Cust)

Under Uniform Gifts to Minors Act _______________________________________________________________

(State)

Additional abbreviations may also be used though not in the above list.

 

_________________________

 

 

  

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FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

 

 

_______________________________________

[PLEASE INSERT SOCIAL SECURITY OR OTHER

   IDENTIFYING NUMBER OF ASSIGNEE]

 

 

 

 

 

[PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]

 

the within Security and all rights thereunder, hereby irrevocably constituting and appointing such person attorney to transfer such Security on the books of the Issuer, with full power of substitution in the premises.

 

Dated:  _____________________                                           

 

	
NOTICE:

	
The signature to this assignment must correspond with the name as written upon the face of the within Security in every particular without alteration or enlargement or any change whatsoever.

 

  

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OPTION TO ELECT REPAYMENT

 

The undersigned hereby irrevocably requests and instructs the Issuer to repay the within Security (or portion thereof specified below) pursuant to its terms at a price equal to the principal amount thereof, together with coupons to the Optional Repayment Date, to the undersigned at

 

 

 

 

 

(Please print or typewrite name and address of the undersigned)

 

If less than the entire principal amount of the within Security is to be repaid, specify the portion thereof which the Holder elects to have repaid:                              ; and specify the denomination or denominations (which shall not be less than the minimum authorized denomination) of the Securities to be issued to the Holder for the portion of the within Security not being repaid (in the absence of any such specification, one such Security will be issued for the portion not being repaid):                              

 

 

	
Dates:

	  	  	  
	  	  	
NOTICE:  The signature on this Option to Elect Repayment must correspond with the name as written upon the face of the within instrument in every particular without alteration or enlargement.

 

  

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SCHEDULE I

The Current Outstanding Face Amount indicated

below shall not exceed $80,000,000.

	
Date

	
Number of Securities

	
Face Amount of Securities Issued

	
Face Amount of Securities Cancelled

	
Current Outstanding Face Amount

	
Initials of Trustee Officer

	  	  	
$

	
--

	
$

	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  

 

  

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 Exhibit 4.2

 

[FORM OF NOTE]

 

ANNEX A

 

FORM OF OFFER FOR REPURCHASE

 

[PART A: TO BE COMPLETED BY THE BENEFICIAL OWNER]

 

Dated: [The trading day immediately prior to the desired valuation date]

Deutsche Bank Securities Inc., as Repurchase Agent (“DBSI”)

Fax: 917-338-3849

 

Re: PowerShares DB 3x Italian Treasury Bond Futures ETNs or PowerShares DB Italian Treasury Bond Futures ETNs, issued by Deutsche Bank AG (the “ETNs”)

 

	
  

	
□

	
PowerShares DB 3x Italian Treasury Bond Futures Exchange Traded Notes (CUSIP Number: 25154W 605)

 

	
  

	
□

	
PowerShares DB Italian Treasury Bond Futures Exchange Traded Notes (CUSIP Number: 25154W 704)

 

(Please check only one offering of ETNs)

 

The undersigned beneficial owner hereby irrevocably offers to Deutsche Bank AG (“Deutsche Bank”) the right to repurchase the ETNs in the amounts and on the date set forth below.

 

Name of beneficial holder:

 

Stated principal amount of ETNs offered for repurchase (you must offer at least 50,000 ETNs or an integral multiple of 50,000 ETNs in excess thereof for repurchase at one time for your offer to be valid.):

 

Applicable valuation date:             , 20         (which is the trading day immediately following the date of this notice)

 

Applicable repurchase date:             , 20         (which is the third business day following the valuation date)

 

  

33

  

 

Contact Name:

 

Telephone #:

 

My ETNs are held in the following DTC Participant’s Account (the following information is available from the broker through which you hold your ETNs):

 

Name:

DTC Account Number (and any relevant sub-account):

Contact Name:

Telephone Number:

 

Acknowledgement: In addition to any other requirements specified in the Pricing Supplement being satisfied, I acknowledge that the ETNs specified above will not be repurchased unless (i) this offer, as completed and signed by the DTC Participant through which my ETNs are held (the “DTC Participant”), is delivered to DBSI on the trading day immediately prior to the desired valuation date by 4:00 p.m., (ii) the DTC Participant has booked a “delivery vs. payment” (“DVP”) trade on the applicable valuation date facing DBSI, and (iii) the DTC Participant instructs DTC to deliver the DVP trade to DBSI as booked for settlement via DTC at or prior to 3:00 p.m. on the applicable repurchase date.

 

The undersigned acknowledges that Deutsche Bank and DBSI will not be responsible for any failure by the DTC Participant through which such undersigned’s ETNs are held to fulfill the requirements for repurchase set forth above.

 

	  
	  
	  
	
[Beneficial Holder]

 

PART B OF THIS NOTICE IS TO BE COMPLETED BY THE DTC PARTICIPANT IN WHOSE ACCOUNT THE ETNS ARE HELD AND DELIVERED TO DBSI ON THE TRADING DAY IMMEDIATELY PRIOR TO THE DESIRED VALUATION DATE BY 4:00 PM

 

  

34

  

 

BROKER’S CONFIRMATION OF REPURCHASE

 

[PART B: TO BE COMPLETED BY BROKER]

 

Dated: [The trading day immediately prior to the desired valuation date]

 

Deutsche Bank Securities Inc., as Repurchase Agent

 

Re: PowerShares DB 3x Italian Treasury Bond Futures ETNs or PowerShares DB Italian Treasury Bond Futures ETNs, issued by Deutsche Bank AG (the “ETNs”)

 

	
  

	
□

	
PowerShares DB 3x Italian Treasury Bond Futures Exchange Traded Notes (CUSIP Number: 25154W 605)

 

	
  

	
□

	
PowerShares DB Italian Treasury Bond Futures Exchange Traded Notes (CUSIP Number: 25154W 704)

 

(Please check only one offering of ETNs)

 

Dear Sirs:

 

The undersigned Holder of the ETNs checked above hereby irrevocably offers to Deutsche Bank AG the right to repurchase, on the repurchase date of              (which is the third business day following the valuation date), with respect to the stated principal amount of ETNs indicated below as described in the pricing supplement relating to the ETNs (the “Pricing Supplement”). Terms not defined herein have the meanings given to such terms in the Pricing Supplement.

 

The undersigned certifies to you that it will (i) book a delivery vs. payment trade on the valuation date with respect to the stated principal amount of ETNs specified below at a price per ETN equal to the repurchase value, facing Deutsche Bank Securities Inc., DTC #0573 and (ii) deliver the trade as booked for settlement via DTC at or prior to 3:00 p.m., New York City time, on the repurchase date.

 

Very truly yours,

[NAME OF DTC PARTICIPANT HOLDER]

 

 

 

Contact Name:

Title:

Telephone:

Fax:

E-mail:

 

Stated principal amount of ETNs offered for repurchase (you must offer at least 50,000 ETNs or an integral multiple of 50,000 ETNs in excess thereof for repurchase at one time for your offer to be valid):

 

 

DTC # (and any relevant sub-account):exv10w1

EXHIBIT 10.1

EXECUTION VERSION

VALEANT PHARMACEUTICALS INTERNATIONAL, INC.

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

J. MICHAEL PEARSON

          THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is hereby entered
into as of March 21, 2011 (the “Effective Date”) by and between Valeant Pharmaceuticals
International, Inc., a Canadian corporation, formerly Biovail Corporation (the “Company”),
and J. Michael Pearson, an individual (the “Executive”) (hereinafter collectively referred
to as “the parties”).

RECITALS

          WHEREAS, on September 28, 2010, the Company completed the acquisition of Valeant
Pharmaceuticals International, a Delaware corporation (“Valeant”) through a wholly-owned
subsidiary, pursuant to an Agreement and Plan of Merger, dated as of June 20, 2010 (the “Merger
Agreement”), with Valeant surviving as a wholly-owned subsidiary of the Company (the
“Merger”);

          WHEREAS, in connection with the transactions contemplated in the Merger Agreement, Executive
entered into an employment agreement with the Company, dated as of June 20, 2010 (the “Existing
Agreement”), under which he is currently serving as Chief Executive Officer of the Company; and

          WHEREAS, the parties wish to amend and restate the Existing Agreement to reflect, among other
things, Executive serving as Chairman of the Board of Directors of the Company (the
“Board”).

          Now, THEREFORE, in consideration of the respective agreements of the parties contained herein,
it is agreed as follows:

	1.	 	Effective Date; Term; Effect on Other Agreements.

	 	(a)	 	The employment term (the “Employment Term”) of Executive’s employment
under this Agreement shall be for the period commencing on the Effective Date and
ending on February 1, 2017. Thereafter, the Employment Term shall extend automatically
for consecutive periods of one year unless either party provides notice of non-renewal
not less than ninety (90) days prior to the end of the Employment Term as then in
effect. For the avoidance of doubt, Executive shall not be entitled to payments
pursuant to Section 9 of this Agreement for Good Reason (defined below) by reason of
the Company giving notice not to renew the Agreement.

	 	(b)	 	As of the Effective Date, the Existing Agreement shall be superseded in its
entirety by this Agreement, and the Existing Agreement shall thereupon have no further
force and effect, except as otherwise provided herein.

	2.	 	Employment. During the Employment Term:

 

 

	 	(a)	 	Employment by the Company. Executive shall be employed as Chief
Executive Officer of the Company and, so long as permitted by applicable law and stock
exchange rules and as deemed appropriate by the Board, shall serve as Chairman of the
Board (“Chairman”). At, or any time after, the time of his termination of
employment with the Company for any reason, Executive shall resign from the Board if
requested to do so by the Company. This provision shall survive any termination of the
Employment Term.

	 	(b)	 	Executive shall report directly to the Board in his capacities as Chairman and
Chief Executive Officer of the Company. Executive shall perform the duties, undertake
the responsibilities and exercise the authority customarily performed, undertaken and
exercised by persons situated in similar executive capacities.

	 	(c)	 	Excluding periods of vacation and sick leave to which Executive is entitled,
Executive shall devote reasonable attention and time to the business and affairs of the
Company to the extent necessary to discharge the responsibilities of Executive
hereunder. Prior to joining or agreeing to serve on corporate, civil or charitable
boards or committees, Executive shall obtain approval of the Board. Executive may
manage personal and family investments, participate in industry organizations and
deliver lectures at educational institutions, so long as such activities do not
interfere with the performance of Executive’s responsibilities hereunder.

	 	(d)	 	Executive shall be subject to and shall abide by each of the personnel policies
applicable and communicated in writing to senior executives, including but not limited
to any policy the Company adopts restricting hedging investments in Company equity by
Company executives.

	3.	 	Annual Compensation.

	 	(a)	 	Base Salary. The Company agrees to pay or cause to be paid to Executive
during the Employment Term a base salary at the initial rate of $1,600,000 (the base
salary as in effect from time to time is hereinafter referred to as the “Base
Salary”). Such Base Salary shall be payable in accordance with the Company’s
customary practices applicable to Company executives. Such Base Salary shall be
reviewed at least annually by the Board or by the Compensation Committee of the Board
(the “Committee”), including a review to ensure its competitiveness relative to
the Company’s peer group, and may be increased or decreased following such review.

	 	(b)	 	Performance Bonus.

	 	(1)	 	Subject to the provisions hereof and of sub-paragraph 2, below,
for each fiscal year of the Company ending during the Employment Term,
Executive shall be eligible to receive a target annual cash bonus of 100% of
the Base Salary (such target bonus, as may hereafter be increased, the
“Target Bonus”) with the opportunity to receive a maximum annual cash
bonus of 200% of the Base Salary, payable in accordance with the Company’s
customary practices applicable to bonuses paid to Company executives.
Notwithstanding the foregoing, the annual bonuses shall be subject to
shareholder approval of the Company’s 2011 incentive plan (the “2011 Incentive
Plan”).

	 	(2)	 	Any annual cash bonus shall be subject to performance by
Executive and the Company based on performance metrics determined annually by
the Committee, which may include measurable goals such as talent, succession,
and/or Board process. Notwithstanding the foregoing, the annual bonus may be
reduced (including to zero), in the sole discretion of the Committee, based on
its assessment of Executive’s performance as Chairman.

2

 

	4.	 	Outstanding Equity Awards.

	 	(a)	 	Except to the extent modified by this Agreement, each of the equity awards
relating the Company’s common shares (“Shares”) granted to Executive and
outstanding immediately prior to the Effective Date (“Outstanding Equity
Awards”) shall, from and after the Effective Date, otherwise remain subject to the
same terms and conditions as were in effect with respect to such award immediately
prior to the Effective Date, as set forth in the Existing Agreement and/or the
agreements evidencing such awards.

	 	(b)	 	Executive shall be subject to the following provisions with respect to the net
number of Shares acquired or otherwise held by Executive, in respect of his Outstanding
Equity Awards after subtracting any such Shares sold through a broker-assisted cashless
exercise or withheld in payment of tax withholding obligations applicable to the
exercise or settlement of such awards (“Net Shares”):

	 	(1)	 	Option and 2009 Option. Executive shall not be
permitted to surrender Shares to the Company as payment for the exercise price
of the Option or the 2009 Option (each as defined below). Executive may satisfy
any tax withholding obligation with respect to the Option and the 2009 Option
by having Shares withheld by the Company that would otherwise be issued upon
exercise of the Option and 2009 Option. Executive shall not be permitted to
sell, assign, transfer, or otherwise dispose of the Net Shares acquired upon
exercise of the Option or the 2009 Option until February 1, 2017, or, if
sooner: (A) upon a Change in Control (unless immediately following such Change
in Control Executive serves as Chief Executive Officer of the ultimate parent
entity resulting from such Change in Control); (B) upon termination of
employment by reason of death or Disability; or (C) upon Executive’s
termination of employment without Cause or for Good Reason;

	 	(2)	 	Performance Share Units. Executive may satisfy any tax
withholding obligation with respect to the Performance Share Units (as defined
below) by having Shares withheld by the Company that would otherwise be
distributed upon settlement of the Performance Share Units or having such
Shares sold through a broker-assisted cashless exercise provision. Executive
shall not be permitted to sell, assign, transfer, or otherwise dispose of any
Net Shares acquired upon settlement of the Performance Share Units until
February 1, 2017, or, if sooner: (A) upon a Change in Control (unless
immediately following such Change in Control Executive serves as Chief
Executive Officer of the ultimate parent entity resulting from such Change in
Control); (B) upon termination of employment by reason of death or Disability;
or (C) upon Executive’s termination of employment without Cause or for Good
Reason;

	 	(3)	 	Matching Share Units, Annual Bonus Share Units and 2008 RSU
Grant. Executive may satisfy any tax withholding obligation with respect to
the Matching Units, Annual Bonus Share Units and 2008 RSU Grant (each as
defined below) by having Shares withheld by the Company that would otherwise be
distributed upon settlement of such awards or having such Shares sold through a
broker-assisted cashless exercise provision. Executive shall not be permitted
to sell, assign, transfer, or otherwise dispose of any Net Shares acquired upon
settlement of the Matching Share Units, Annual Bonus Share Units and 2008 RSU
Grant until February 1, 2017, or, if sooner: (A) upon a Change in Control
(unless immediately following such Change in Control Executive serves as Chief
Executive Officer of the ultimate parent entity resulting from such Change in
Control); (B) upon termination of employment by reason of death or Disability;
or (C) upon Executive’s termination of employment without Cause or for Good
Reason;

	 	(4)	 	Long-Term Performance Units. Executive may satisfy any
tax withholding obligation with respect to the Long-Term Performance Units (as
defined below) by having Shares withheld by the Company that would otherwise be
distributed upon settlement of the Long-Term Performance Units or having such
Shares sold through a broker-assisted cashless exercise provision. Executive
shall not be permitted to sell, assign, transfer, or otherwise dispose of any
Net Shares acquired upon settlement of the Long-Term Performance Units until
February 1, 2017, or, if sooner: (A) upon a Change in Control (unless
immediately following such

3

 

	 	 	 	Change in Control Executive serves as Chief Executive Officer of the
ultimate parent entity resulting from such Change in Control); (B) upon
termination of employment by reason of death or Disability; or (C) upon
Executive’s termination of employment without Cause or for Good Reason;

	 	(5)	 	Additional Matching Units. Executive may satisfy any
tax withholding obligation with respect to the Additional Matching Units (as
defined below) by having Shares withheld by the Company that would otherwise be
distributed upon settlement of the Additional Matching Units or having such
Shares sold through a broker-assisted cashless exercise provision. Executive
shall not be permitted to sell, assign, transfer, or otherwise dispose of any
Net Shares acquired upon settlement of the Additional Matching Units until
February 1, 2017, or, if sooner: (A) upon a Change in Control (unless
immediately following such Change in Control Executive serves as Chief
Executive Officer of the ultimate parent entity resulting from such Change in
Control); (B) upon termination of employment by reason of death or Disability;
or (C) upon Executive’s termination of employment without Cause or for Good
Reason;

	 	(6)	 	2010 Long-Term Performance Units. Executive may satisfy
any tax withholding obligation with respect to the 2010 Long-Term Performance
Units (as defined below) by having Shares withheld by the Company that would
otherwise be distributed upon settlement of the 2010 Long-Term Performance
Units or having such Shares sold through a broker-assisted cashless exercise
provision. Executive shall not be permitted to sell, assign, transfer, or
otherwise dispose of any Net Shares acquired upon settlement of the 2010
Long-Term Performance Units until February 1, 2017 or, if sooner: (A) upon a
Change in Control (unless immediately following such Change in Control
Executive serves as Chief Executive Officer of the ultimate parent entity
resulting from such Change in Control); (B) upon termination of employment by
reason of death or Disability; or (C) upon Executive’s termination of
employment without Cause or for Good Reason; and

	 	(7)	 	Permitted Transfers of Shares and Net Shares.
Notwithstanding the foregoing restrictions that do not permit Executive to
surrender, sell, assign, transfer or otherwise dispose of Shares and Net Shares
in respect of Outstanding Equity Awards, Executive is permitted to transfer
Shares in respect of Outstanding Equity Awards without penalty under the
following circumstances: Executive may contribute Shares and Net Shares to a
limited partnership where all partners are members of Executive’s family
(“Family Limited Partnership”) or Grantor Retained Annuity Trust
(“GRAT”) or like-vehicle, provided that the Family Limited Partnership,
GRAT or like-vehicle (x) does not allow the Shares and Net Shares to be
surrendered, sold, assigned, transferred or otherwise disposed of during the
applicable restricted period with respect to such Shares or Net Shares, and (y)
in the case of a GRAT, Executive shall at all times remain the trustee of the
GRAT, and (z) in the case of a Family Limited Partnership or such like vehicle
Executive retains “beneficial ownership” (within the meaning of Rule 13d-3
promulgated under the 1934 Act (as defined below)) of such Shares or Net
Shares. In addition, Executive shall be permitted to sell such number of Shares
that he owns outright as will permit him to transfer or fund a trust fund or
similar account for the benefit of his children having an aggregate after-tax
initial principal amount of $20,000,000. Prior to the commencement of any such
sale, transfer or the establishment of such trust or other account, Executive
and the Company shall mutually agree upon the timing and method of the sale,
transfer and the trust establishment. In the event that there shall occur any
recapitalization, merger, reorganization, stock split, stock dividend or
similar transaction affecting the Company’s capital stock, the term Net Shares
(or any similar term used in this Agreement) shall include any shares of stock
of the Company, any successor in interest to the Company or any direct or
indirect parent of the Company into which the Shares are otherwise converted in
connection with such transaction.

	 	(c)	 	Outstanding Equity Award Definitions. For purposes of this Agreement:

4

 

	 	(1)	 	Option shall mean the ten-year time-vested
non-qualified stock option granted to Executive on February 1, 2008 to acquire
1,024,591 shares of Valeant stock at an exercise price of $12.19 per share.

	 	(2)	 	Performance Share Units shall mean the 407,498
performance-based restricted share units in respect of Valeant stock, granted
to Executive on February 1, 2008.

	 	(3)	 	Matching Share Units shall mean the 300,359 restricted
share units in respect of Valeant stock, granted to Executive on February 1,
2008.

	 	(4)	 	Annual Bonus Share Units shall mean the 81,500
restricted share units in respect of Valeant stock, granted to Executive on
February 1, 2008.

	 	(5)	 	2008 RSU Grant shall mean the 163,000 restricted share
units in respect of Valeant stock, granted to Executive on February 1, 2008.

	 	(6)	 	2009 Option shall mean the time-vested non-qualified
stock option granted to Executive on December 1, 2009 to acquire 500,000 shares
of Valeant stock at an exercise price of $37.41 per share.

	 	(7)	 	Long-Term Performance Units shall mean the 173,750
performance-based restricted share units in respect of Valeant stock, granted
to Executive on December 1, 2009.

	 	(8)	 	Additional Matching Units shall mean the 200,581
restricted share units in respect of Valeant stock, granted to Executive on
December 1, 2009.

	 	(9)	 	2010 Long-Term Performance Units shall mean the 486,114
performance-based restricted share units in respect of the Company’s shares,
granted to Executive on October 4, 2010.

	 	 	 	References to any of the foregoing Outstanding Equity Awards which were granted
prior to the Merger shall refer to such awards as adjusted pursuant to the Merger
Agreement, including the conversion of any such award into an award relating to
Shares following the Merger. For purposes hereof, references to any Outstanding
Equity Awards shall also reflect any equitable adjustments made to such awards
following the Merger.

	5.	 	New Equity Awards.

	 	(a)	 	2011 Long-Term Performance Units. As soon as practicable after the
Effective Date and subject to shareholder approval of the 2011 Incentive Plan, the
Board or Committee will take such action as to grant to Executive 120,000
performance-based restricted share units (the “2011 Long-Term Performance
Units”) under the 2011 Incentive Plan (the date on which such grant is made is
hereinafter referred to as “Equity Grant Date”). The 2011 Long-Term
Performance Units shall vest as follows, provided that, except as otherwise
specifically set forth in Section 9 of this Agreement, Executive is employed by the
Company on such vesting date:

	 	(1)	 	Single Vesting Share Price.

	 	 	 	If on the date that is three months prior to the Measurement Date (defined
below), the Adjusted Share Price (as defined below) equals the Single
Vesting Share Price (as defined below), Executive shall vest in 25% of the
Shares subject to the 2011 Long-Term Performance Units.

	 	 	 	If on the Measurement Date, the Adjusted Share Price equals the Single
Vesting Share Price, Executive shall vest in an additional 50% of the Shares
subject to the 2011 Long-Term Performance Units.

5

 

	 	 	 	If on the date that is three months following the Measurement Date, the
Adjusted Share Price equals the Single Vesting Share Price, Executive shall
vest in an additional 25% of the Shares subject to the 2011 Long-Term
Performance Units.

	 	(2)	 	Double Share Vesting Price.

	 	 	 	If on the date that is three months prior to the Measurement Date, the
Adjusted Share Price equals the Double Vesting Share Price (as defined
below), Executive shall vest in 50% of the Shares subject to the 2011
Long-Term Performance Units.

	 	 	 	If on the Measurement Date, the Adjusted Share Price equals the Double
Vesting Share Price, Executive shall vest in an additional 100% of the
Shares subject to the 2011 Long-Term Performance Units.

	 	 	 	If on the date that is three months following the Measurement Date, the
Adjusted Share Price equals the Double Vesting Share Price, Executive shall
vest in an additional 50% of the Shares subject to the 2011 Long-Term
Performance Units.

	 	(3)	 	Triple Vesting Share Price.

	 	 	 	If on the date that is three months prior to the Measurement Date, the
Adjusted Share Price equals the Triple Vesting Share Price (as defined
below), Executive shall vest in 75% of the Shares subject to the 2011
Long-Term Performance Units.

	 	 	 	If on the Measurement Date, the Adjusted Share Price equals the Triple
Vesting Share Price, Executive shall vest in an additional 150% of the
Shares subject to the 2011 Long-Term Performance Units.

	 	 	 	If on the date that is three months following the Measurement Date, the
Adjusted Share Price equals the Triple Vesting Share Price, Executive shall
vest in an additional 75% of the Shares subject to the 2011 Long-Term
Performance Units.

	 	(4)	 	Quadruple Vesting Share Price.

	 	 	 	If on the date that is three months prior to the Measurement Date, the
Adjusted Share Price equals the Quadruple Vesting Share Price (as defined
below), Executive shall vest in 100% of the Shares subject to the 2011
Long-Term Performance Units.

	 	 	 	If on the Measurement Date, the Adjusted Share Price equals the Quadruple
Vesting Share Price, Executive shall vest in an additional 200% of the
Shares subject to the 2011 Long-Term Performance Units.

	 	 	 	If on the date that is three months following the Measurement Date, the
Adjusted Share Price equals the Quadruple Vesting Share Price, Executive
shall vest in an additional 100% of the Shares subject to the 2011 Long-Term
Performance Units.

	 	(5)	 	Additional Vesting. Any Shares that could have been
vested under any of clauses (1), (2), (3) or (4) above that do not become
vested on the date that is three months prior to the Measurement Date, on the
Measurement Date or on the date that is three months following the Measurement
Date, may become vested on the one-year anniversary of the date that is three
months prior to the Measurement Date, the Measurement Date or the date that is
three months after the Measurement Date, respectively, based upon the Adjusted
Share Price on the applicable measurement date, provided that Executive remains
employed by the Company through the applicable vesting date.

	 	(6)	 	Accelerated Vesting

6

 

	 	 	 	Notwithstanding the foregoing vesting provisions, if on any date
between the Equity Grant Date and the Measurement Date, the Per Share Price
on such date:

	 	(A)	 	exceeds $120.31, then Executive will become vested in 120,000 of
the Shares that could have been earned under clause (1) above, to the extent
not previously vested;

	 	(B)	 	exceeds $166.94, then Executive will become vested in the
additional 120,000 of the Share that could have been earned under clause (2)
above, to the extent not previously vested;

	 	(C)	 	exceeds $224.30, then Executive will become vested in the
additional 120,000 Shares that could have been earned under clause (3)
above, to the extent not previously vested;

	 	(D)	 	exceeds $293.48, then Executive will become vested in the additional
120,000 Shares that could have been earned under clause (4) above, to the
extent not previously vest

	 	 	 	provided, that the vesting that takes place pursuant to this clause (6) if
the Per Share Price target is achieved shall only take place the first time
such Price Per Share target is achieved on such vesting date, there is no
interpolation of vesting pursuant to this clause (6), and to vest in any of
the Units pursuant to this clause (6) the Executive must remain employed by
the Company on the applicable vesting date.

	 	(7)	 	Interpolation. If the Adjusted Share Price on a
measurement date set forth in clauses (1), (2), (3) and (4) is between the
Single Vesting Share Price and the Double Vesting Share Price, the Double
Vesting Share Price and the Triple Vesting Share Price or the Triple Vesting
Share Price and the Quadruple Vesting Share Price, Participant shall vest in a
number of Units that is the mathematical linear interpolation between the
number of Units which would vest at defined ends of the applicable spectrum.

	 	(8)	 	Forfeiture. Any 2011 Long-Term Performance Units that
are not vested on the one-year anniversary of the date that is three months
following the Measurement Date shall be immediately forfeited.

	 	(9)	 	Subject to clause (10) below, the Company will deliver to
Executive a number of Shares equal to the number of 2011 Long-Term Performance
Units that become vested pursuant to this Section 5(a) on the date that is the
earlier of February 1, 2019 and Executive’s termination of employment (or, if
required by Section 11 of this Agreement, the date that is six months and one
day following Executive’s termination of employment).

	 	(10)	 	Executive may satisfy any tax withholding obligation with
respect to the 2011 Long-Term Performance Units by having Shares withheld by
the Company that would otherwise be distributed upon settlement of the 2011
Long-Term Performance Units or having such Shares sold through a
broker-assisted cashless exercise provision. Executive shall not be permitted
to sell, assign, transfer, or otherwise dispose of any 2011 Net Shares (as
defined below) acquired upon settlement of the 2011 Long-Term Performance Units
until February 1, 2017 or, if sooner: (A) upon a Change in Control (unless
immediately following such Change in Control Executive serves as Chief
Executive Officer of the ultimate parent entity resulting from such Change in
Control); (B) upon termination of employment by reason of death or Disability;
or (C) upon Executive’s termination of employment without Cause or for Good
Reason. For purposes of this Section 5(a), “2011 Net Shares” shall mean
the net number of Shares acquired by Executive upon settlement of the 2011
Long-Term Performance Units after subtracting any such Shares sold or withheld
by the Company in payment of tax withholding obligations applicable to such
settlement. Notwithstanding the foregoing restrictions that do not permit
Executive to surrender, sell, assign, transfer or otherwise dispose of Shares
and Net Shares, Executive is permitted to transfer Shares and 2011 Net Shares
without penalty under the circumstances described in Section 4(b)(7) hereof.

	 	(11)	 	“Adjusted Share Price” means the sum of (x) the average
of the closing prices of the Shares during the 20 consecutive trading days
ending on the specified measurement date (or if such

7

 

	 	 	 	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 Shares (including fractions thereof) that
would have been purchased had an amount equal to each dividend paid on a
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 closing price of the Shares on such dividend payment date. The Adjusted
Share Price and the Average Share Price shall be subject to equitable
adjustment to reflect stock splits, stock dividends and other capital
adjustments.

	 	(12)	 	“Single Vesting Share Price,” “Double Vesting Share
Price” “Triple Vesting Share Price” and “Quadruple Vesting
Share Price” mean the Adjusted Share Prices equal to a compound annual
share price appreciation (the “Annual Compound TSR”) of 15%, 30%, 45%
and 60%, respectively, as measured from a base price of $54.76 over a
measurement period from the Commencement Date to the last trading day of the
period used to calculate the Adjusted Share Price. Such base price shall be
subject to equitable adjustment to reflect stock splits, stock dividends and
other capital adjustments.

	 	(13)	 	“Per Share Price” as of any date, means the average of
the closing prices of the Shares during 20 consecutive trading days, ending on
such date.

	 	(14)	 	“Commencement Date” means the date that is the earlier
of (i) the common shares of the Company reaching a value of $54.76 (based on
the Per Share Price) or (ii) February 1, 2014.

	 	(15)	 	“Measurement Date” means the date that is three years
from the Commencement Date.

	 	(16)	 	The Company shall enter into a restricted share unit award
agreement with Executive for the above grant of 2011 Long-Term Performance
Units, incorporating the terms set forth in this Agreement and otherwise on the
terms and conditions set forth in the Company’s standard form of
performance-based restricted share unit award agreement for executives.

	 	(b)	 	2011 Option.

	 	(1)	 	As soon as practicable following the Effective Date (consistent
with Company policy regarding the timing of option grants), and subject to
shareholder approval of the 2011 Incentive Plan, the Board or Committee will
take such action as to grant Executive an option to acquire 500,000 Shares with
an exercise price equal to the greater of (i) $54.76 and (ii) the fair market
value of the Company’s common stock on the date of grant, such fair market
value to be determined in accordance with the 2011 Incentive Plan (the
“2011 Option”). The 2011 Option shall have a term as prescribed by the
Board or Committee and consistent with the terms of the 2011 Incentive Plan,
and shall otherwise be subject to terms and conditions consistent with the
terms and conditions applicable to the 2009 Option currently held by Executive;
provided, however that, except as contemplated by Section 10(c)(i) herein, the
2011 Option shall not vest solely by reason of an occurrence of a Change in
Control.

	 	(2)	 	Executive shall not be permitted to surrender Shares to the
Company as payment for the exercise price of the 2011 Option. Executive may
satisfy any tax withholding obligation with respect to the 2011 Option by
having Shares withheld by the Company that would otherwise be issued upon
exercise of the 2011 Option or having such Shares sold through a
broker-assisted cashless exercise provision. Executive shall not be permitted
to sell, assign, transfer, or otherwise dispose of the Option Net Shares (as
defined below) acquired upon exercise of the 2011 Option until February 1,
2017, or, if sooner: (A) upon a Change in Control (unless immediately following
such Change in Control Executive serves as Chief Executive Officer of the
ultimate parent entity resulting from such Change in Control); (B) upon
termination of employment by reason of death or Disability; or (C) upon
Executive’s termination of employment without Cause or for Good Reason. For
purposes of this section 5(b), “Option Net Shares” shall mean the net
number of Shares acquired by Executive upon exercise of the 2011 Option after
subtracting any such Shares sold or withheld by the Company in payment

8

 

	 		 	of tax withholding obligations applicable to such exercise. Notwithstanding
the foregoing restrictions that do not permit Executive to surrender, sell,
assign, transfer or otherwise dispose of Shares and Option Net Shares,
Executive is permitted to transfer Shares and Option Net Shares without
penalty under the circumstances described in Section 4(b)(7) hereof.

	 	(3)	 	The Company shall enter into an option award agreement with
Executive for the above grant of the 2011 Option, incorporating the terms set
forth in this Agreement and otherwise on the terms and conditions set forth in
the Company’s standard form of option award agreement for executives.

	 	(c)	 	Ongoing Grants. Executive shall be eligible to receive, solely in the
discretion of the Board or the Committee, additional annual equity grants during the
Employment Term.

	6.	 	Other Benefits.

	 	(a)	 	Employee Benefits. Executive shall be entitled to participate in all
employee benefit plans, practices and programs maintained by the Company, and made
available to employees generally, including, without limitation, all pension,
retirement, profit sharing, savings, medical, hospitalization, disability, dental, life
or travel accident insurance benefit plans in accordance with the terms of the plans.
Executive’s participation in such plans, practices and programs shall be on the same
basis and terms as are applicable to employees of the Company generally.

	 	(b)	 	Executive Benefits. Executive shall be entitled to participate in all
executive benefit or incentive compensation plans now maintained or hereafter
established by the Company for the purpose of providing compensation and/or benefits to
comparable executive employees of the Company including, but not limited to, the
Company’s deferred compensation plans and any supplemental retirement, deferred
compensation, supplemental medical or life insurance or other bonus or incentive
compensation plans in accordance with the terms of the plans. Unless otherwise provided
herein, Executive’s participation in such plans shall be on the same basis and terms,
as other senior executives of the Company. No additional compensation provided under
any of such plans shall be deemed to modify or otherwise affect the terms of this
Agreement or any of Executive’s entitlements hereunder.

	 	(c)	 	Fringe Benefits and Perquisites. Executive shall be entitled to all
fringe benefits and perquisites generally made available by the Company to its senior
executives. In addition, during the Employment Term, the Company shall provide
Executive with (or reimburse Executive for the cost of) life insurance in the face
amount of $10,000,000, subject to Executive’s insurability and Executive taking steps
reasonably requested by the Company to obtain such insurance, if required.

	 	(d)	 	Business Expenses. Upon submission of proper invoices in accordance
with the Company’s normal procedures, Executive shall be entitled to receive prompt
reimbursement of all reasonable out-of-pocket business, entertainment and travel
expenses (including travel in first-class) incurred by him in connection with the
performance of his duties hereunder. Such reimbursement shall in no event occur later
than March 15 of the year following the year in which the expenses were incurred.

	 	(e)	 	Office and Facilities. Executive shall be provided with an appropriate
permanent office and with such permanent secretarial and other support facilities as
are commensurate with Executive’s status with the Company, which facilities shall be
adequate for the performance of his duties hereunder.

9

 

	 	(f)	 	Vacation and Sick Leave. Executive shall be entitled, without loss of
pay, to absent himself voluntarily from the performance of his employment under this
Agreement, pursuant to the following:

	 	(1)	 	Executive shall be entitled to annual vacation in accordance
with the policies as periodically established by the Board for senior
executives of the Company, which shall in no event be less than four weeks per
year;

	 	(2)	 	in addition to the aforesaid paid vacations, Executive shall be
entitled, without loss of pay, to absent himself voluntarily from the
performance of his employment for such additional periods of time and for such
valid and legitimate reasons as the Board in its discretion may determine.
Further, the Board shall be entitled to grant to Executive a leave or leaves of
absence with or without pay at such time or times and upon such terms and
conditions as it may in its discretion determine; and

	 	(3)	 	Executive shall be entitled to sick leave (without loss of pay)
in accordance with the Company’s policies as in effect from time to time.

	 	(g)	 	Travel Expenses. In the event that Executive shall travel for business
purposes on a Company provided aircraft, Executive’s immediate family members may
travel with him (to the extent space is available). When, for the Company’s
convenience, Executive is required to be away from his principal location of
employment, the Company shall permit reasonable and limited use of the Company aircraft
by such family members to travel to join Executive. In either such case, such travel
shall be provided at no expense to Executive, and the Company shall reimburse Executive
for any taxes incurred in respect of such family travel and any payment made to
compensate for such taxes. Subject to availability, Executive shall also be able to
use the Company aircraft for personal travels at his own expense.

	7.	 	Termination. Executive’s employment with the Company hereunder may be terminated
under the circumstances set forth below; provided, however, that notwithstanding anything
contained herein to the contrary, Executive shall not be considered to have terminated
employment with the Company for purposes of this Agreement until he would be considered to
have incurred a “separation from service” from the Company within the meaning of Section 409A
of the Internal Revenue Code.

	 	(a)	 	Death. Executive’s employment shall be terminated as of the date of
Executive’s death and Executive’s beneficiaries shall be entitled to the benefits
provided in Section 9(b) hereof.

	 	(b)	 	Disability. The Company may terminate Executive’s employment, on
written notice to Executive after having established Executive’s Disability and while
Executive remains Disabled, subject to the payment by the Company to Executive of the
benefits provided in Section 9(b) hereof. For purposes of this Agreement, “Disability”
shall mean Executive’s inability to substantially perform his duties and
responsibilities hereunder by reason of any physical or mental incapacity for two or
more periods of ninety (90) consecutive days each in any three hundred and sixty (360)
day period, as determined by a physician with no history of prior dealings with the
Company or Executive, as reasonably agreed upon by the Company and Executive. Executive
shall be entitled to the compensation and benefits provided for under this Agreement
for any period prior to Executive’s termination by reason of Disability during which
Executive is unable to work due to a physical or mental infirmity in accordance with
the Company’s policies for similarly-situated executives.

	 	(c)	 	Cause. The Company may terminate Executive’s employment for “Cause,”
effective as of the date of the Notice of Termination (as defined in Section 8 below)
and as evidenced by a resolution adopted in good faith by a majority of the independent
members of the Board (excluding Executive), subject to the payment by the Company to
Executive of the benefits provided in Section 9(a) hereof. “Cause” shall mean, for
purposes of this Agreement: (1) conviction of any felony (other than one related to a
vehicular offense) or other criminal act involving fraud; (2) willful misconduct that
results in a material

10

 

	 	 	 	economic detriment to the Company; (3) material violation of Company policies and
directives, which is not cured after written notice and an opportunity for cure; (4)
continued refusal by Executive to perform his duties after written notice
identifying the deficiencies and an opportunity for cure; and (5) a material
violation by Executive of any material covenants to the Company. No action or
inaction shall be deemed willful if not demonstrably willful and if taken or not
taken by Executive 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
paragraph 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. The Company may suspend, with pay,
Executive upon Executive’s indictment for the commission of a felony as described
under clause (1) above. Such suspension may remain effective until such time as the
indictment is either dismissed or a verdict of not guilty has been entered.

	 	(d)	 	Without Cause. The Company may terminate Executive’s employment without
Cause. The Company shall deliver to Executive a Notice of Termination (as defined in
Section 8 below) not less than thirty (30) days prior to the termination of Executive’s
employment without Cause and the Company shall have the option of terminating
Executive’s duties and responsibilities prior to the expiration of such thirty-day
notice period, subject to the payment by the Company of the benefits provided in either
Section 9(c) or Section 9(d) hereof, as may be applicable.

	 	(e)	 	Good Reason. Executive may terminate his employment for Good Reason (as
defined below) by delivering to the Company a Notice of Termination not less than
thirty (30) days prior to the termination of Executive’s employment for Good Reason.
The Company shall have the option of terminating Executive’s duties and
responsibilities prior to the expiration of such thirty-day notice period, subject to
the payment by the Company of the benefits provided in either Section 9(c) or 9(d)
hereof, as may be applicable. For purposes of this Agreement, Good Reason shall mean
the occurrence of any of the events or conditions described in Subsections (1) through
(3) hereof 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 Executive
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 Executive.

	 	(1)	 	Diminution of Responsibility. (A) Any material
reduction in his duties or responsibilities as Chief Executive Officer as in
effect immediately prior thereto, (B) removal of Executive from the position of
Chief Executive Officer of the Company, except in connection with the
termination of his employment for Disability, Cause, as a result of his death
or by Executive other than for Good Reason; or (C) removal of Executive from
the position of Chairman of the Board, except to the extent that Executive is
not permitted by applicable law or stock exchange rules to serve as such; or

	 	(2)	 	Compensation Reduction. Any reduction in Executive’s
Base Salary (other than a reduction permitted under Section 3(a)) or target
bonus opportunity; or

	 	(3)	 	Company Breach. Any other material breach by the
Company of any material provision of this Agreement.

	 	(f)	 	Without Good Reason. Executive may voluntarily terminate his employment
without Good Reason by delivering to the Company a Notice of Termination not less than
thirty (30) days prior to the termination of Executive’s employment and the Company
shall have the option of terminating Executive’s duties and responsibilities prior to
the expiration of such thirty-day notice period, subject to the payment by the Company
to Executive of the benefits provided in Section 9(a) hereof through the last day of
such notice period.

11

 

	8.	 	Notice of Termination. Any purported termination by the Company or by Executive shall
be communicated by written Notice of Termination to the other party hereto. For purposes of
this Agreement, a “Notice of Termination” shall mean a notice which indicates a
termination date, the specific termination provision in this Agreement relied upon and sets
forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so indicated. For purposes of this
Agreement, no such purported termination of Executive’s employment hereunder shall be
effective without such Notice of Termination (unless waived by the party entitled to receive
such notice).

	9.	 	Compensation Upon Termination. Upon termination of Executive’s employment during the
Employment Term, Executive shall be entitled to the following benefits:

	 	(a)	 	Termination by the Company for Cause or by Executive Without Good
Reason. If Executive’s employment is terminated by the Company for Cause or by
Executive without Good Reason, the Company shall pay Executive all amounts earned or
accrued hereunder through the termination date, including:

	 	(1)	 	any accrued and unpaid Base Salary;

	 	(2)	 	reimbursement for any and all monies advanced or expenses
incurred in connection with Executive’s employment for reasonable and necessary
expenses incurred by Executive on behalf of the Company for the period ending
on the termination date;

	 	(3)	 	any accrued and unpaid vacation pay;

	 	(4)	 	any previous compensation which Executive has previously
deferred (including any interest earned or credited thereon), in accordance
with the terms and conditions of the applicable deferred compensation plans or
arrangements then in effect;

	 	(5)	 	equity and incentive awards, to the extent previously vested,
shall be paid or delivered to Executive in accordance with the terms of such
awards; and

	 	(6)	 	any amount or benefit as provided under any benefit plan or
program (the foregoing items in Sections 9(a)(1) through 9(a)(5) being
collectively referred to as the “Accrued Compensation”).

	 	(b)	 	Termination by the Company for Disability or By Reason of Death. If
Executive’s employment is terminated by the Company for Disability or by reason of
Executive’s death, the Company shall pay Executive (or his beneficiaries, as
applicable) the Accrued Compensation, and, Executive shall be entitled to the following
benefits:

	 	(1)	 	The Company shall pay to Executive within sixty (60) days
following the termination date, any bonus earned but unpaid in respect of any
fiscal year preceding the termination date;

	 	(2)	 	The Company shall deliver to Executive, on the date that is six
months and one day following Executive’s termination date (or, if sooner,
Executive’s death), Shares in respect of the Annual Bonus Share Units and the
2008 RSU Grant;

	 	(3)	 	The Company shall deliver to Executive, as soon as practicable
(but in no event more than sixty (60) days) following Executive’s termination
date, Shares in respect of the Matching Share Units;

	 	(4)	 	The Option shall vest in full and remain exercisable for one
year following Executive’s termination date (but in no event beyond the
expiration of the Option term);

12

 

	 	(5)	 	The 2009 Option and 2011 Option shall vest in full and remain
exercisable for one year following Executive’s termination date (but in no
event beyond the expiration of the respective terms of such options);

	 	(6)	 	If not previously vested or forfeited in accordance with its
terms, the performance measures applicable to each of the Performance Share
Units, the Long-Term Performance Share Units, the 2010 Long-Term Performance
Units and the 2011 Long-Term Performance Units, will be applied as though the
termination date were the end of the measurement period (but in the case of the
Long-Term Performance Share Units and the 2011 Long-Term Performance Units, in
no event shall the measurement period be less than one year) and the units will
vest in a manner consistent with the respective vesting provisions applicable
to those awards (provided that no pro ration shall be applied to Performance
Share Units or Long-Term Performance Share Units). The Company shall deliver
Shares in respect of vested units in respect of each such award (including
previously vested units that have not been delivered), if any, and cash in
respect of Performance Share Units, as provided in the Merger Agreement, on
Executive’s termination of employment (subject to any delay required by Section
11 of this Agreement), and all other units in respect of such awards unvested
as of the termination date shall be forfeited; and

	 	(7)	 	The Company shall deliver Shares in respect of vested
Additional Matching Units that have not been delivered, if any, on the date
that is six months and one day following Executive’s termination of employment,
and all Additional Matching Units unvested as of the termination date shall be
forfeited.

	 	(c)	 	Termination by the Company Without Cause or by the Executive for Good
Reason Other Than in Connection with a Change in Control. If Executive’s employment
by the Company shall be terminated by the Company without Cause or by the Executive for
Good Reason, either prior to a Change in Control or more than twelve (12) months
following a Change in Control, then, subject to Section 15(f) of the Agreement,
Executive shall be entitled to the benefits provided in this Section 9(c).

	 	(1)	 	The Company shall pay to Executive any Accrued Compensation
through the end of the notice period provided for in Section 7(e) hereof;

	 	(2)	 	The Company shall pay to Executive any bonus earned but unpaid
in respect of any fiscal year preceding the termination date within sixty (60)
days following the termination date;

	 	(3)	 	The Company shall pay to Executive a bonus or incentive award
in respect of the fiscal year in which Executive’s termination date occurs, as
though he had continued in employment until the payment of bonuses by the
Company to its executives for such fiscal year, in an amount equal to the
product of (A) the bonus or incentive award that Executive would have been
entitled to receive (x) based on actual achievement against the stated
performance objectives through the date of termination or (y) assuming that the
applicable performance objectives for such year were achieved at “target”,
whichever is less, and (B) a fraction (x) the numerator of which is the number
of days in such fiscal year through termination date and (y) the denominator of
which is 365. Any bonus or incentive award payable to Executive under this
subsection (3) shall be paid in the calendar year commencing immediately
following the date of his termination of employment, but in no event later than
March 15 of such following year;

	 	(4)	 	The Company shall pay Executive as severance pay, in lieu of
any further compensation for the periods subsequent to the termination date, an
amount in cash, which amount shall be payable in a lump sum payment within
sixty (60) days following such termination (subject to Section 11), equal to
the sum of (A) two (2) times Executive’s Base Salary, as in effect immediately
prior to termination and without regard to any reduction thereto which
constitutes Good Reason and (B) $3.0 million;

	 	(5)	 	The Company shall provide Executive self-insured coverage under
any health, medical, dental or vision program or policy in which Executive was
eligible to participate as of the time of his

13

 

	 	 	 	employment termination for two (2) years following such termination on terms
no less favorable to Executive and his dependents (including with respect to
payment for the costs thereof) than those in effect immediately prior to
such termination;

	 	(6)	 	The Company shall deliver to Executive, on the date that is six
months and one day following Executive’s termination date, Shares in respect of
the Annual Bonus Share Units, the 2008 RSU Grant and, if applicable, any
Resulting RSUs issued pursuant to Section 10(e);

	 	(7)	 	The Option, the 2009 Option and the 2011 Option shall become
fully vested and Executive shall have three months following the termination
date to exercise vested the Option, 2009 Option and 2011 Option (but in no
event beyond the expiration of the respective terms of such options);

	 	(8)	 	If not previously vested or forfeited in accordance with its
terms, the performance measures applicable to each of the Performance Share
Units and the Long-Term Performance Share Units will be applied as though the
termination date were the end of the measurement period (but in the case of the
Long-Term Performance Share Units, in no event shall the measurement period be
less than one year) and the units will vest in a manner consistent with the
respective vesting provisions applicable to those awards (provided that no pro
ration shall be applied). The Company shall deliver Shares in respect of vested
units in respect of each such award (including previously vested units that
have not been delivered), if any, and cash in respect of Performance Share
Units, as provided in the Merger Agreement, on Executive’s termination of
employment (subject to any delay required by Section 11 of this Agreement), and
all other units in respect of such awards unvested as of the termination date
shall be forfeited;

	 	(9)	 	With respect to the 2010 Long-Term Performance Units and the
2011 Long-Term Performance Units, if not previously vested or forfeited in
accordance with its terms or previously converted into Resulting RSUs pursuant
to Section 10(e), the performance measures applicable to any unvested units
will be applied as though the termination date were the end of the measurement
period (but in no event shall the measurement period be less than one year) and
the units will vest in a manner consistent with the respective vesting
provisions applicable to those awards; provided, however, that in the event
Executive is entitled to benefits pursuant to this Section, only a pro rata
portion of such calculated units will vest upon termination based on either (i)
for the 2010 Long-Term Performance Units, the number of completed months
elapsed from February 1, 2011 to the date of termination divided by 36 months
or (ii) for the 2011 Long-Term Performance Units, the number of completed
months elapsed from the Equity Grant Date to the date of termination divided by
36 months. The Company shall deliver Shares in respect of vested units
(including previously vested units that have not been delivered), if any, on
Executive’s termination of employment (subject to any delay required by Section
11 of this Agreement), and all other units as of the termination date shall be
forfeited;

	 	(10)	 	The Company shall deliver Shares in respect of vested
Additional Matching Units that have not been delivered, if any, on the date
that is six months and one day following Executive’s termination of employment,
and all other Additional Matching Units as of the termination date shall be
forfeited; and

	 	(11)	 	The Company shall deliver shares in respect of vested Matching
Units that have not been delivered, if any, as soon as practicable following
the Executive’s termination date (subject to any delay required by Section 11)
any Matching Units scheduled to vest on such date shall vest on Executive’s
termination date, and all other Matching Units as of the termination date shall
be forfeited.

	 	(d)	 	Termination by the Company Without Cause or by Executive for Good Reason
Following a Change in Control. If Executive’s employment by the Company shall be
terminated by the Company without Cause or by Executive for Good Reason within twelve
(12) months following a Change in Control (as

14

 

	 	 	 	defined in Section 10 below), then in lieu of the amounts due under Section 9(c)
above and subject to the requirements of Section 15(f) of the Agreement, Executive
shall be entitled to the benefits provided in this Section 9(d).

	 	(1)	 	The Company shall pay Executive any Accrued Compensation
through the end of the notice period provided for in Section 7(e) hereof;

	 	(2)	 	The Company shall pay Executive any bonus earned but unpaid in
respect of any fiscal year preceding the termination date within sixty (60)
days following the termination date;

	 	(3)	 	The Company shall pay to Executive an amount equal to the bonus
or incentive award that Executive would have been entitled to receive in
respect of the fiscal year in which Executive’s termination date occurs, had he
continued in employment until the end of such fiscal year, which amount shall
be payable in a lump sum payment within sixty (60) days following such
termination (subject to Section 11), calculated as if all performance targets
and goals (if applicable) had been fully met at the “target” level by the
Company and by Executive, as applicable, for such fiscal year, multiplied by a
fraction (A) the numerator of which is the number of days in such fiscal year
through termination date and (B) the denominator of which is 365;

	 	(4)	 	The Company shall pay Executive as severance pay and in lieu of
any further Base Salary for periods subsequent to the termination date, an
amount in cash, which amount shall be payable in a lump sum payment within
sixty (60) days following such termination (subject to Section 11), equal to
three (3) times the sum of (A) Executive’s Base Salary as in effect immediately
prior to the Change in Control or immediately prior to the termination date,
whichever is greater, and (B) the Target Bonus;

	 	(5)	 	The Company shall provide Executive with self-insured coverage
under any health, medical, dental or vision program or policy in which
Executive was eligible to participate as of the time of his employment
termination for two (2) years following such termination on terms no less
favorable to Executive and his dependents (including with respect to payment
for the costs thereof) than those in effect immediately prior to such
termination;

	 	(6)	 	Annual Bonus Share Units and the 2008 RSU Grant shall be
payable, in the Company’s discretion, in either cash or in shares of the
acquiring entity, on the date that is six months and one day following
Executive’s termination date. Notwithstanding the above, the Annual Bonus Share
Units and the 2008 RSU Grant shall be payable in shares of the acquiring entity
only if the common stock of the acquiring entity is publicly traded on an
established securities market on the date on which such shares are payable;

	 	(7)	 	If the Option and the Matching Share Units are not cancelled in
connection with a Change in Control in exchange for a cash payment (as set
forth in Section 10), each outstanding Option and Matching Share Unit will
vest, the Option will remain exercisable for one year following the termination
date (but not beyond the Option term), and each Matching Share Unit will be
settled as soon as practicable (but in no event more than sixty (60) days)
following the termination date;

	 	(8)	 	The 2009 Option and the 2011 Option shall become fully vested
and, if not cancelled in connection with a Change in Control in exchange for a
cash payment (as set forth in Section 10), then the 2009 Option and the 2011
Option will remain exercisable for one year following the termination date (but
in no event beyond the term of the 2009 Option and the 2011 Option);

	 	(9)	 	The Company shall deliver Shares in respect of vested
Additional Matching Units that have not been delivered, if any, on the date
that is six months and one day following Executive’s termination of employment,
and all other Additional Matching Units as of the termination date shall be
forfeited;

15

 

	 	(10)	 	If not previously vested or forfeited in accordance with its terms, the
performance measures applicable to each of the Performance Share Units and the
Long-Term Performance Share Units will be applied as though the termination
date were the end of the measurement period (but in the case of the Long-Term
Performance Share Units, in no event shall the measurement period be less than
one year) and the units will vest in a manner consistent with the respective
vesting provisions applicable to those awards (provided that no pro ration
shall be applied). The Company shall deliver Shares in respect of vested units
in respect of each such award (including previously vested units that have not
been delivered), if any, and cash in respect of Performance Share Units, as
provided in the Merger Agreement, on Executive’s termination of employment
(subject to any delay required by Section 11 of this Agreement), and all other
units in respect of such awards unvested as of the termination date shall be
forfeited;
	 
	 	(11)	 	With respect to the 2010 Long-Term Performance Units, if not
previously vested or forfeited in accordance with its terms, the performance
measures applicable to any unvested units will be applied as though the
termination date were the end of the measurement period (but in no event shall
the measurement period be less than one year), and the units will vest in a
manner consistent with its vesting provisions; provided, however, that in the
event Executive is entitled to benefits pursuant to this Section, only a pro
rata portion of such calculated units will vest upon termination based on the
number of completed months elapsed from February 1, 2011 to the date of
termination divided by 36 months. The Company shall deliver Shares in respect
of vested units (including previously vested units that have not been
delivered), if any, on Executive’s termination of employment (subject to any
delay required by Section 11 of this Agreement), and all other 2010 Long-Term
Performance Units unvested as of the termination date shall be forfeited; and
	 
	 	(12)	 	The 2011 Long-Term Performance Units shall be treated in
accordance with the provisions of Section 10(e);
	 
	 	(13)	 	Executive shall not be required to mitigate the amount of any
payment provided for under this Section 9 by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to Executive in any subsequent employment.

	10.	 	Change in Control.

	 	(a)	 	For purposes of this Agreement, a “Change in Control” shall mean any of
the following events, but shall not include the Merger:

	 	(1)	 	the date any one person (as such term is defined in Section
13(c) or 14(d) of the Securities Exchange Act of 1934, as amended (the
“1934 Act”), or more than one person acting as a group (as determined
under Treas. Reg. Section 1.409A-3(i)(5)(v)(B)) acquires, or has acquired
during the twelve (12) month period ending on the date of the most recent
acquisition by such person or persons (other than from the Company), ownership
of stock of the Company possessing fifty percent (50%) or more of the combined
voting power of the Company’s then outstanding voting securities;
	 
	 	(2)	 	the date a majority of members of the Company’s Board is
replaced during any twelve (12) month period by directors whose appointment or
election is not endorsed by a majority of the members of the Company’s Board
before the date of the appointment or election;
	 
	 	(3)	 	the consummation of a merger or consolidation involving the
Company if the stockholders of the Company, immediately before such merger or
consolidation, do not, as a result of such merger or consolidation, own,
directly or indirectly, more than fifty percent (50%) of the combined voting
power of the then outstanding voting securities of the corporation resulting
from such merger or consolidation; or

16

 

	 	(4)	 	the consummation of the sale of all or substantially all of the
assets of the Company.

	 	 	Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to
Section 10, 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 stockholders of the Company in the same proportion as
their ownership of stock in the Company immediately prior to such acquisition. Also, a
Change in Control shall not be deemed to occur pursuant to this Section 10 if the Change in
Control does not constitute a change in the ownership or effective control of the Company,
or in the ownership of a substantial portion of the assets of the Company, within the
meaning of Section 409A(a)(2)(A)(v) of the Code and its corresponding regulations.

	 	(b)	 	Upon the occurrence of a Change in Control, at the election of the Company, the
Options and the Matching Share Units shall either be (i) cancelled in exchange for a
cash payment based in the case of any merger transaction on the price received by
shareholders in the transaction constituting the Change in Control or in the case of
any other event that constitutes a Change in Control, the closing price of a Share on
the date such Change in Control occurs (minus, in the case of Options, the applicable
exercise price per share) or, (ii) converted into options or units, as applicable, in
respect of the common stock of the acquiring entity (in a merger or otherwise) on the
basis of the relative values of such stock and the Shares at the time of the Change in
Control; provided that subclause (ii) shall only be applicable if the common stock of
the acquiring entity is publicly traded on an established securities market on the date
on which such Change in Control is effected.
	 
	 	(c)	 	Upon the occurrence of a Change in Control, all outstanding 2009 Options and
2011 Options shall either be (i) cancelled in exchange for a cash payment based in the
case of any merger transaction on the price received by shareholders in the transaction
constituting the Change in Control or in the case of any other event that constitutes a
Change in Control, the closing price of a Share on the date such Change in Control
occurs (minus the applicable exercise price per share) or, (ii) converted into options
in respect of the common stock of the acquiring entity (in a merger or otherwise) on
the basis of the relative values of such stock and the Shares at the time of the Change
in Control; provided that subclause (ii) shall only be applicable if the common stock
of the acquiring entity is publicly traded on an established securities market on the
date on which such Change in Control is effected.
	 
	 	(d)	 	Upon the occurrence of a Change in Control, any Additional Matching Units that
had vested, but had not been delivered, prior to the Change in Control shall, at the
election of the Company, either be (i) delivered as Shares, or (ii) cancelled in
exchange for a cash payment for the vested Additional Matching Units based in the case
of any merger transaction on the price received by shareholders in the transaction
constituting the Change in Control or in the case of any other event that constitutes a
Change in Control, the closing price of a Share on the date such Change in Control
occurs, or (iii) delivered as shares of the common stock of the acquiring entity (in a
merger or otherwise) on the basis of the relative values of such stock and the Shares
at the time of the Change in Control; provided that subclause (iii) shall only be
applicable if the common stock of the acquiring entity is publicly traded on an
established securities market on the date on which such Change in Control is effected.
	 
	 	(e)	 	Upon the occurrence of a Change in Control, the 2011 Long-Term Performance
Units will be converted into a number of time-based restricted stock units (the
“Resulting RSUs”) determined by applying the performance measures applicable to the
2011 Long-Term Performance Units as though the Adjusted Share Price equaled the sum of
(i) fair market value of the Company common shares on the date of the Change in Control
and (ii) the value that would be derived from the number of Shares (including fractions
thereof) that would have been purchased had an amount equal to each dividend paid on a
common share after the Commencement Date and on or prior to the applicable measurement
date been deemed invested on the dividend payment date, based on the closing price of
the common shares on such dividend payment date. The number of Resulting RSUs shall be
equal to the number of 2011

17

 

	 	 	 	Long-Term Performance Units that would have vested based on the Annual Compound TSR
determined through the Change in Control. Notwithstanding the immediately preceding
sentence, if a Change in Control occurs prior to one year after the Commencement
Date, the measurement date will still be the date of Change in 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 Measurement Date, subject to Executive’s
continued employment; provided that in the event of an involuntary termination of
Executive’s employment by the Company without Cause or by Executive with Good Reason
within the twelve (12) months following a Change in Control, the vesting and payment
of such Resulting RSUs will be accelerated to the date of termination. Any
Performance Share Units that did not become Resulting RSUs shall be forfeited on the
Change in Control. Any Resulting RSUs that did not become vested prior to
Executive’s termination of employment for a reason set forth in this clause (e) or
that do not become vested as a result of this clause (e) shall be forfeited
immediately following the date of Executive’s termination of employment.

	11.	 	Section 409A. The parties intend for the payments and benefits under this Agreement
to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Section
409A”) or, if not so exempt, to be paid or provided in a manner which complies with the
requirements of such section, and intend that this Agreement shall be construed and
administered in accordance with such intention. If any payments or benefits due to Executive
hereunder would cause the application of an accelerated or additional tax under Section 409A,
such payments or benefits shall be restructured in a manner which does not cause such an
accelerated or additional tax. For purposes of the limitations on nonqualified deferred
compensation under Section 409A of the Code, each payment of compensation under this Agreement
shall be treated as a separate payment of compensation. Without limiting the foregoing and
notwithstanding anything contained herein to the contrary, to the extent required in order to
avoid accelerated taxation and/or tax penalties under Section 409A amounts that would
otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement
during the six-month period immediately following Executive’s separation from service shall
instead be paid on the first business day after the date that is six months following
Executive’s termination date (or death, if earlier), with interest from the date such amounts
would otherwise have been paid at the short-term applicable federal rate, compounded
semi-annually, as determined under Section 1274 of the Internal Revenue Code of 1986, as
amended, for the month in which payment would have been made but for the delay in payment
required to avoid the imposition of an additional rate of tax on Executive under Section 409A.
Notwithstanding anything to the contrary in this Agreement, all (A) reimbursements and (B)
in-kind benefits provided under this Agreement shall be made or provided in accordance with
the requirements of Section 409A of the Code, including, where applicable, the requirement
that (x) the amount of expenses eligible for reimbursement, or in kind benefits provided,
during a calendar year may not affect the expenses eligible for reimbursement, or in kind
benefits to be provided, in any other calendar year; (y) the reimbursement of an eligible
expense will be made no later than the last day of the calendar year following the year in
which the expense is incurred; and (z) the right to reimbursement or in kind benefits is not
subject to liquidation or exchange for another benefit.
	 
	12.	 	Records and Confidential Data.

	 	(a)	 	Executive acknowledges that in connection with the performance of his duties
during the Employment Term, the Company will make available to Executive, or Executive
will have access to, certain Confidential Information (as defined below) of the Company
and its affiliates. Executive acknowledges and agrees that any and all Confidential
Information learned or obtained by Executive during the course of his employment by the
Company or otherwise, whether developed by Executive alone or in conjunction with
others or otherwise, shall be and is the property of the Company and its affiliates.
	 
	 	(b)	 	Except to the extent required to be disclosed at law or pursuant to judicial
process or administrative subpoena, the Confidential Information will be kept
confidential by Executive, will not be used in any manner which is detrimental to the
Company, will not be used other than in connection with Executive’s discharge of his
duties hereunder, and will be safeguarded by Executive from unauthorized disclosure.

18

 

	 	(c)	 	Following the termination of Executive’s employment hereunder, as soon as
possible after the Company’s written request, Executive will return to the Company all
written Confidential Information which has been provided to Executive and Executive
will destroy all copies of any analyses, compilations, studies or other documents
prepared by Executive or for Executive’s use containing or reflecting any Confidential
Information. Within five (5) business days of the receipt of such request by Executive,
he shall, upon written request of the Company, deliver to each of the Company a
document certifying that such written Confidential Information has been returned or
destroyed in accordance with this Section 12(c).
	 
	 	(d)	 	For the purposes of this Agreement, “Confidential Information” shall
mean all confidential and proprietary information of the Company and its affiliates,
including, without limitation, information derived from reports, investigations,
experiments, research, work in progress, drawing, designs, plans, proposals, codes,
marketing and sales programs, client lists, client mailing lists, supplier lists,
financial projections, cost summaries, pricing formula, marketing studies relating to
prospective business opportunities and all other concepts, ideas, materials, or
information prepared or performed for or by the Company or its affiliates. For purposes
of this Agreement, the Confidential Information shall not include and Executive’s
obligation’s shall not extend to (i) information which is generally available to the
public, (ii) information obtained by Executive other than pursuant to or in connection
with this employment and (iii) information which is required to be disclosed by law or
legal process.
	 
	 	(e)	 	Executive’s obligations under this Section 12 shall survive the termination of
the Employment Term.

	13.	 	Covenant Not to Solicit and Not to Compete.

	 	(a)	 	Covenant Not to Solicit. To protect the Confidential Information and
other trade secrets of the Company, Executive agrees, during the term of this Agreement
and for a period of twelve (12) months after Executive’s cessation of employment with
the Company, not to solicit or participate in or assist in any way in the solicitation
of any employees of the Company. For purposes of this covenant, “solicit” or
“solicitation” means directly or indirectly influencing or attempting to influence
employees of the Company to become employed with any other person, partnership, firm,
corporation or other entity. Executive agrees that the covenants contained in this
Section 13(a) are reasonable and desirable to protect the Confidential Information of
the Company and its affiliates, provided, that solicitation through general advertising
or the provision of references shall not constitute a breach of such obligations.
	 
	 	(b)	 	Covenant Not to Compete. To protect the Confidential Information and
other trade secrets of the Company and its affiliates, Executive agrees, during the
term of this Agreement and for a period of twelve (12) months after Executive’s
cessation of employment with the Company during the Employment Term pursuant to Section
7(c) or 7(f) hereof, not to engage in Prohibited Activities (as defined below). For the
purposes of this Agreement, the term “Prohibited Activities” means directly or
indirectly engaging as an owner, employee, consultant or agent of any entity that
develops, manufactures, markets and/or distributes (directly or indirectly)
prescription or non-prescription pharmaceuticals or medical devices for treatments in
the fields of neurology, dermatology, oncology or hepatology; provided, that Prohibited
Activities shall not mean Executive’s investment in securities of a publicly-traded
company equal to less than five (5%) percent of such company’s outstanding voting
securities. Executive agrees that the covenants contained in this Section 13(b) are
reasonable and desirable to protect the Confidential Information of the Company and its
affiliates.
	 
	 	(c)	 	It is the intent and desire of Executive and the Company that the restrictive
provisions of this Section 13 be enforced to the fullest extent permissible under the
laws and public policies as applied in each jurisdiction in which enforcement is
sought. If any particular provision of this Section 13 shall be determined to be
invalid or unenforceable, such covenant shall be amended, without any action on the

19

 

	 	 	 	part of either party hereto, to delete there from the portion so determined to be
invalid or unenforceable, such deletion to apply only with respect to the operation
of such covenant in the particular jurisdiction in which such adjudication is made.
	 
	 	(d)	 	Executive’s obligations under this Section 13 shall survive the termination of
the Employment Term.

	14.	 	Remedies for Breach of Obligations under Sections 12 or 13 hereof. Executive
acknowledges that the Company will suffer irreparable injury, not readily susceptible of
valuation in monetary damages, if Executive breaches his obligations under Sections 12 or 13
hereof. Accordingly, Executive agrees that the Company will be entitled, in addition to any
other available remedies, to obtain injunctive relief against any breach or prospective breach
by Executive of his obligations under Sections 12 or 13 hereof. Executive agrees that process
in any or all of those actions or proceedings may be served by registered mail, addressed to
the last address provided by Executive to the Company, or in any other manner authorized by
law.
	 
	15.	 	Miscellaneous.

	 	(a)	 	Successors and Assigns.

	 	(1)	 	This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and permitted assigns and the Company
shall require any successor or assign to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession or assignment had taken place. The
Company may not assign or delegate any rights or obligations hereunder except
to a successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the
Company, as applicable. The term “the Company” as used herein shall
mean a corporation or other entity acquiring all or substantially all the
assets and business of the Company, as the case may be, (including this
Agreement) whether by operation of law or otherwise.
	 
	 	(2)	 	Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by Executive, his beneficiaries or legal
representatives, except by will or by the, laws of descent and distribution.
	 
	 	 	 	This Agreement shall inure to the benefit of and be enforceable by
Executive’s legal personal representatives.

	 	(b)	 	Fees and Expenses. The Company shall pay all reasonable legal and
financial advisory fees and related expenses, up to a maximum amount of $50,000 in the
aggregate, incurred by Executive in connection with the negotiation of this Agreement
and related employment arrangements. Executive acknowledges that he has had the
opportunity to consult with legal counsel of his choice in connection with the
drafting, negotiation and execution of this Agreement and related employment
arrangements.
	 
	 	(c)	 	Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of Termination)
shall be in writing and shall be deemed to have been duly given when personally
delivered or sent by Certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses last given by each party to each other party;
provided that all notices to the Executive shall be directed to the Executive at his
primary home address with a copy sent by overnight delivery to Lawrence Cagney,
Debevoise & Plimpton, 919 3rd Avenue, New York, NY 10022; and provided that
all notices to the Company shall be directed to the attention of the General Counsel of
the Company with a copy to the Committee. All notices and communications shall

20

 

	 	 	 	be deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof, except that notice of change of address
shall be effective only upon receipt.
	 
	 	(d)	 	Indemnity Agreement. The Company agrees to indemnify and hold Executive
harmless to the fullest extent permitted by applicable law, as in effect at the time of
the subject act or omission. In connection therewith, Executive shall be entitled to
the protection of any insurance policies which the Company elects to maintain generally
for the benefit of the Company’s directors and officers, against all costs, charges and
expenses whatsoever incurred or sustained by Executive in connection with any action,
suit or proceeding to which he may be made a party by reason of his being or having
been a director, officer or employee of the Company. This provision shall survive any
termination of the Employment Term.
	 
	 	(e)	 	Withholding. The Company shall be entitled to withhold the amount, if
any, of all taxes of any applicable jurisdiction required to be withheld by an employer
with respect to any amount paid to Executive hereunder. The Company, in its sole and
absolute discretion, shall make all determinations as to whether it is obligated to
withhold any taxes hereunder and the amount hereof.
	 
	 	(f)	 	Release of Claims. The termination benefits described in Sections 9(c)
and 9(d) of this Agreement shall be conditioned on Executive delivering to the Company,
and failing to revoke, a signed release of claims in the form of Exhibit A hereto
within twenty-one days following Executive’s termination date; provided, however, that
Executive shall not be required to release any rights Executive may have to be
indemnified by the Company under Section 15(d) of this Agreement. Notwithstanding any
provision of this Agreement to the contrary, in no event shall the timing of
Executive’s execution of the release, directly or indirectly, result in Executive
designating the calendar year of payment, and if a payment that is subject to execution
of the release could be made in more than one taxable year, payment shall be made in
the later taxable year.
	 
	 	(g)	 	Modification. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing and
signed by Executive and the Company. No waiver by either party hereto at any time of
any breach by the other party hereto of, or compliance with, any condition or provision
of this Agreement to be performed by the such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by any party which
are not expressly set forth in this Agreement.
	 
	 	(h)	 	Arbitration. If any legally actionable dispute arises under this
Agreement or otherwise which cannot be resolved by mutual discussion between the
parties, then the Company and Executive each agree to resolve that dispute by binding
arbitration before an arbitrator experienced in employment law. Said arbitration will
be conducted in accordance with the rules applicable to employment disputes of the
Judicial Arbitration and Mediation Services (“JAMS”) and the law applicable to
the claim. The parties shall have 30 calendar days after notice of such arbitration has
been given to attempt to agree on the selection of an arbitrator from JAMS. In the
event the parties are unable to agree in such time, JAMS will provide a list of five
(5) available arbitrators and an arbitrator will be selected from such five member
panel provided by JAMS by the parties alternately striking out one name of a potential
arbitrator until only one name remains. The party entitled to strike an arbitrator
first shall be selected by a toss of a coin. The parties agree that this agreement to
arbitrate includes any such disputes that the Company may have against Executive, or
Executive may have against the Company and/or its related entities and/or employees,
arising out of or relating to this Agreement, or Executive’s employment or Executive’s
termination including, but not limited to, any claims of discrimination or harassment
in violation of applicable law and any other aspect of Executive’s compensation,
employment, or Executive’s termination. The parties further agree that arbitration as
provided for in this Section 15(h) is the exclusive and binding remedy for any such
dispute and will be used instead of any court action, which is hereby expressly waived,
except for any request by any party for temporary or preliminary injunctive relief
pending arbitration in accordance with applicable law or for breaches by Executive of

21

 

	 	 	 	Executive’s obligations under Sections 12 or 13 above or an administrative claim
with an administrative agency. The parties agree that the arbitration provided
herein shall be conducted in or around Morristown, New Jersey unless otherwise
mutually agreed. The Company shall pay the cost of any arbitration brought pursuant
to this paragraph, excluding, however, the cost of representation of Executive
unless such cost is awarded in accordance with law or otherwise awarded by the
arbitrators. Except as otherwise provided above, the arbitrator may award legal fees
to the prevailing party in his sole discretion, provided that the percentage of fees
so awarded shall not exceed 1% of the net worth of the paying party (i.e., the
Company or Executive).
	 
	 	(i)	 	Effect of Other Law. Anything herein to the contrary notwithstanding,
the terms of this Agreement shall be modified to the extent required to meet the
provisions of the Sarbanes-Oxley Act of 2002, Section 409A of the Code, or other
federal law applicable to the employment arrangements between the Executive and the
Company. Any delay in providing benefits or payments, any failure to provide a benefit
or payment, or any repayment of compensation that is required under the preceding
sentence shall not in and of itself constitute a breach of this Agreement, provided,
however, that the Company shall provide economically equivalent payments or benefits to
Executive to the extent permitted by law.
	 
	 	(j)	 	Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New Jersey applicable to contracts
executed in and to be performed entirely within such State, without giving effect to
the conflict of law principles thereof.
	 
	 	(k)	 	No Conflicts. Executive represents and warrants to the Company that he
is not a party to or otherwise bound by any agreement or arrangement (including,
without limitation, any license, covenant, or commitment of any nature), or subject to
any judgment, decree, or order of any court or administrative agency, that would
conflict with or will be in conflict with or in any way preclude, limit or inhibit
Executive’s ability to execute this Agreement or to carry out his duties and
responsibilities hereunder.
	 
	 	(l)	 	Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.

	16.	 	Entire Agreement. This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or
written, between the parties hereto with respect to the subject matter hereof, including
without limitation the Existing Agreement (except as provided herein).

[Remainder of page left intentionally blank]

22

 

          IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year
first above written, to be effective as of the Effective Date.

	 	 	 	 	 
	 	VALEANT PHARMACEUTICALS INTERNATIONAL, INC.

 	 
	 	By:  	/s/  Robert Power
 	 
	 	 	Title: Board Director 	 
	 	 	 	  Chair Compensation Committee 	 
	 
	 	By:  	     /s/ Robert Chai-Onn
 	 
	 	 	Title: Corporate Secretary 	 
	 	 	 	 
	 
	 	EXECUTIVE

 	 
	 	By:  	/s/  J. Michael Pearson
 	 
	 	 	Name: J. MICHAEL PEARSON 	 
	 	 	 	 

 

 

	 	 	 	 	 

EXHIBIT A

FORM OF RELEASE AGREEMENT

          THIS RELEASE AGREEMENT (the “Release”) is made as of this [ ] day of , [ ], 201_, by and
between J. Michael Pearson (“Executive”) and Valeant Pharmaceuticals International, Inc. (the
“Company”).

          FOR AND IN CONSIDERATION of the payments and benefits provided in the Employment Agreement
between Executive and the Company entered into on [DATE], 2011, (the “Employment Agreement”),
Executive, for himself, his successors and assigns, executors and administrators, now and forever
hereby releases and discharges the Company, together with all of its past and present parents,
subsidiaries, and affiliates, together with each of their officers, directors, stockholders,
partners, employees, agents, representatives and attorneys, and each of their subsidiaries,
affiliates, estates, predecessors, successors, and assigns (hereinafter collectively referred to as
the “Releasees”) from any and all rights, claims, charges, actions, causes of action, complaints,
sums of money, suits, debts, covenants, contracts, agreements, promises, obligations, damages,
demands or liabilities of every kind whatsoever, in law or in equity, whether known or unknown,
suspected or unsuspected, which Executive or Executive’s executors, administrators, successors or
assigns ever had, now has or may hereafter claim to have by reason of any matter, cause or thing
whatsoever; arising from the beginning of time up to the date of the Release: (i) relating in any
way to Executive’s employment relationship with the Company or any of the Releasees, or the
termination of Executive’s employment relationship with the Company or any of the Releasees; (ii)
arising under or relating to the Employment Agreement; (iii) arising under any federal, local or
state statute or regulation, including, without limitation, the Age Discrimination in Employment
Act of 1967, as amended by the Older Workers Benefit Protection Act, Title VII of the Civil Rights
Act of 1964, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security
Act of 1974, and/or the New Jersey Law against Discrimination, each as amended; (iv) relating to
wrongful employment termination or breach of contract; or (v) arising under or relating to any
policy, agreement, understanding or promise, written or oral, formal or informal, between the
Company and any of the Releasees and Executive; provided, however, that notwithstanding the
foregoing, nothing contained in the Release shall in any way diminish or impair: (a) any rights
Executive may have, from and after the date the Release is executed, under the Section [9(c)][
9(d)] of the Employment Agreement, (b) any rights to indemnification that may exist from time to
time under the Company’s certificate of incorporation or bylaws, or pursuant to the Employment
Agreement; (c) any rights Executive may have to vested benefits under employee benefit plans or
incentive compensation plans of the Company; (d) Executive’s ability to bring appropriate
proceedings to enforce the Release, or (e) any rights or claims Executive may have that cannot be
waived under applicable law (collectively, the “Excluded Claims”). Executive further acknowledges
and agrees that, except with respect to Excluded Claims, the Company and the Releasees have fully
satisfied any and all obligations whatsoever owed to Executive arising out of his employment with
the Company or any of the Releasees, and that no further payments or benefits are owed to Executive
by the Company or any of the Releasees.

          Executive understands and agrees that, except for the Excluded Claims, he has knowingly
relinquished, waived and forever released any and all rights to any personal recovery in any action
or proceeding that may be commenced on Executive’s behalf arising out of the aforesaid employment
relationship or the termination thereof, including, without limitation, claims for backpay, front
pay, liquidated damages, compensatory damages, general damages, special damages, punitive damages,
exemplary damages, costs, expenses and attorneys’ fees. Executive acknowledges and agrees that
Executive has been advised to consult with an attorney of Executive’s choosing prior to signing the
Release. Executive understands and agrees that Executive has the right and has been given the
opportunity to review the Release with an attorney of Executive’s choice should Executive so
desire. Executive also agrees that Executive has entered into the Release freely and voluntarily.
Executive further acknowledges and agrees that Executive has had at least twenty-one (21) calendar
days to consider the Release, although Executive may sign it sooner if Executive wishes. In
addition, once Executive has signed the Release, Executive shall have seven (7) additional days
from the date of execution to revoke Executive’s consent and may do so by writing to:
_____________________. The Release shall not be effective, and no payments shall be due hereunder,
until the eighth (8th) day after Executive shall have executed the Release and returned it to the
Company, assuming that Executive had not revoked Executive’s consent to the Release prior to such
date.

          Executive agrees never to seek reemployment or future employment with the Company or any of
the other Releasees.

 

 

          It is understood and agreed by Executive that the payment made to him is not to be construed
as an admission of any liability whatsoever on the part of the Company or any of the other
Releasees, by whom liability is expressly denied. The Release is executed by Executive voluntarily
and is not based upon any representations or statements of any kind made by the Company or any of
the other Releasees as to the merits, legal liabilities or value of his claims. Executive further
acknowledges that he has had a full and reasonable opportunity to consider the Release and that he
has not been pressured or in any way coerced into executing the Release. The exclusive venue for
any disputes arising hereunder shall be the state or federal courts located in the State of New
Jersey, and each of the parties hereto irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum. Each of the parties hereto also agrees that any final and
unappealable judgment against a party hereto in connection with any action, suit or other
proceeding may be enforced in any court of competent jurisdiction, either within or outside of the
United States. A certified or exemplified copy of such award or judgment shall be conclusive
evidence of the fact and amount of such award or judgment. The Release and the rights and
obligations of the parties hereto shall be governed and construed in accordance with the laws of
the State of New Jersey. If any provision hereof is unenforceable or is held to be unenforceable,
such provision shall be fully severable, and this document and its terms shall be construed and
enforced as if such unenforceable provision had never comprised a part hereof, the remaining
provisions hereof shall remain in full force and effect, and the court construing the provisions
shall add as a part hereof a provision as similar in terms and effect to such unenforceable
provision as may be enforceable, in lieu of the unenforceable provision.

          The Release shall inure to the benefit of and be binding upon the Company and its respective
successors and assigns.

          IN WITNESS WHEREOF, Executive AND the Company have executed the Release as of the date and
year first written above.

	 	 	 
	 

	 	 
	 
	[EXECUTIVE]

	 	VALEANT PHARMACEUTICALS INTERNATIONAL, INC.

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