Document:

exv10w1

Exhibit 10.1

VALEANT PHARMACEUTICALS INTERNATIONAL

EMPLOYMENT AGREEMENT

(J. Michael Pearson)

                    THIS EMPLOYMENT AGREEMENT (the “Agreement”) is hereby entered into as of March 23,
2010 by and between Valeant Pharmaceuticals International (the “Company”) and J. Michael
Pearson, an individual (the “Executive”) (hereinafter collectively referred to as “the
parties”).

                    The Company and the Executive previously entered into an Executive Employment Agreement, dated
February 1, 2008 (the “Effective Date”), as amended November 30, 2009, which the Company
and Executive desire to amend and restate as set forth herein (as so amended and restated, the
“Employment Agreement”).

                    In consideration of the respective agreements of the parties contained herein, it is agreed as
follows:

	1.	 	Term. The initial term of this Agreement shall be for the period commencing on the
Effective Date and ending on February 1, 2014 (the “Employment Term”). Not later than
120 days prior to the expiration of the Employment Term, the parties to this Agreement shall
either commence negotiations in good faith regarding the terms of a new employment agreement
to take effect at the expiration of the Employment Term, or, if either party does not intend
to enter into a new agreement to be effective following the Employment Term, notify the other
party of such intent. For the avoidance of doubt, Executive shall not be entitled to payments
pursuant to Section 8 of this Agreement by reason of the Company electing to not enter into a
new agreement with Executive following the Employment Term.
	 
	2.	 	Employment. During the Employment Term:

	 	(a)	 	Executive shall be employed as Chief Executive Officer of the Company. In
addition, effective as of the Effective Date, Executive shall be elected by the Board
of Directors of the Company (the “Board”) as a director of the Company and as
Chairman of the Board. For as long as the Executive is employed by the Company as the
Chief Executive Officer, the Company shall nominate the Executive for re-election to
the Board. At the time of his termination of employment with the Company for any
reason, the Executive shall resign from the Board if requested to do so by the Company.
Executive shall not receive any compensation in addition to the compensation described
in Sections 3 and 4 of this Agreement for serving as a director of the Company and
Chairman of the Board.

 

 

	 	(b)	 	Executive shall report directly to the Board. Executive shall perform the
duties, undertake the responsibilities and exercise the authority customarily
performed, undertaken and exercised by persons situated in a similar executive
capacity.
	 
	 	(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 Company’s
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 rate of $1,000,000 until December 31,
2009, and $1,500,000 commencing January 1, 2010 (hereinafter referred to as the
“Base Salary”). Such Base Salary shall be payable in accordance with the
Company’s customary practices applicable to its executives. Such Base Salary shall be
reviewed at least annually by the Board or by the Compensation Committee of the Board
(the “Committee”), and may be increased at the discretion of the Committee, but
not decreased.
	 
	 	(b)	 	Performance Bonus.

	 	(i)	 	For each fiscal year of the Company ending during the
Employment Term, beginning with the 2009 fiscal year, 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 its executives.
	 
	 	(ii)	 	Executive’s annual bonus for services performed during the 2008
fiscal year shall be delivered to Executive on the Effective Date in the form
of restricted share units under the Company’s 2006 Equity Incentive Plan (the
“2006 Plan”) with a value equal to the quotient obtained by dividing
$1,000,000 by the Per Share Price (as defined below) on the Effective Date (the
“Annual Bonus Share Units”). For purposes of this Agreement, Per Share
Price shall mean the average of the closing prices of Shares

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	 	 	 	during the 20 consecutive trading days ending on the day prior to the
specified valuation date. Except as otherwise specifically provided in
Section 8 of this Agreement, the Annual Bonus Share Units (i) shall be
forfeited if Executive is not employed by the Company on the date that 2008
bonuses are paid to other executive officers of the Company (or March 15,
2009, if earlier) and (ii) unless forfeited in accordance with subclause
(i), shall be deliverable in shares of Company common stock
(“Shares”) on the fifth anniversary of the Effective Date. In
addition to the Annual Bonus Share Units, Executive shall be eligible for a
cash bonus for services performed during the 2008 fiscal year up to a
maximum of 100% of Base Salary. The Company shall enter into an award
agreement with the Executive for the above grant of restricted share 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 restricted
share unit award agreement.

	 	(iii)	 	Any annual cash bonus will be based on performance by
Executive and the Company based on performance targets to be established by the
Board or the Committee on or before March 31 of the applicable calendar year,
except that any cash bonus payable for 2008 shall be paid at the sole
discretion of the Board or the Committee.
	 
	 	(iv)	 	In connection with the amendment of the Agreement to extend the
Employment Term through February 1, 2014 and to extend past such date the
ability of Executive to sell Shares that Executive receives under options and
restricted stock units net of withholding taxes, the Company shall pay to
Executive a $1 million cash bonus, which shall be paid to Executive no later
than December 31, 2009.

	4.	 	Long-Term Compensation

	 	(a)	 	2008 RSU Grant. In connection with the execution of this Agreement, on
the Effective Date, Executive shall be granted that whole number of restricted share
units under the 2006 Plan with a value equal to the quotient obtained by dividing
$2,000,000 by the Per Share Price on the Effective Date. (the “2008 RSU
Grant”). The 2008 Stock Grant shall vest on the first anniversary of the Effective
Date, provided that, except as specifically set forth in Section 8 of this Agreement,
Executive is employed by the Company on such vesting date. Except as specifically set
forth in Section 8 of this Agreement, the vested portion of the 2008 Stock Grant shall
be paid to Executive in Shares on the fifth anniversary of the Effective Date. The
Company shall enter into an award agreement with the Executive for the above grant of
restricted share 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
restricted share unit award agreement.

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	 	(b)	 	Time-Based Stock Option.

	 	(i)	 	In connection with the execution of this Agreement, on the
Effective Date, Executive shall be granted a ten-year time-vested non-qualified
stock option (the “Option”) to acquire a whole number of Shares with a
Black-Scholes value equal to $5,000,000 as of the Effective Date. For purposes
of the preceding sentence, the Black-Scholes value shall be established by the
Company in accordance with its prior practices with respect to the valuation of
stock option grants for granting purposes; provided that the value of the stock
shall be determined for this purpose based on the Per Share Price on the
Effective Date.
	 
	 	(ii)	 	The Option shall become vested and exercisable with respect to
twenty-five percent (25%) of the total number of Shares underlying the Option
on each of the first four anniversaries of the Effective Date, provided that,
except as specifically set forth in Section 8 of this Agreement, the Executive
remains employed by the Company through the applicable vesting dates.
	 
	 	(iii)	 	Executive shall not be permitted to surrender Shares to the
Company as payment for the exercise price of the Option. Executive may satisfy
any tax withholding obligation with respect to the Option by having Shares
withheld by the Company that would otherwise be issued upon exercise of the
Option. Executive shall not be permitted to sell, assign, transfer, or
otherwise dispose of the Net Shares (as defined below) acquired upon exercise
of the Option until February 1, 2014, or, if sooner: (A) upon a Change in
Control (as defined below); (B) upon a termination of employment under Section
6(a) or 6(b); or (C) one year after a termination of employment under Section
6(e) or 6(f). For purposes of this Section, “Net Shares” shall mean
the net number of Shares acquired by Executive after subtracting any such
Shares withheld in payment of tax withholding obligations applicable to the
exercise of the Option.
	 
	 	(iv)	 	The Company shall enter into an award agreement with the
Executive for the above grant of Options, incorporating the terms set forth in
this Agreement and otherwise on the terms and conditions set forth in the
Company’s standard form of non-qualified stock option award agreement.

	 	(c)	 	Performance Share Units. In connection with the execution of this
Agreement, on the Effective Date, the Executive shall be granted that whole number of
performance-based restricted share units (the “Performance Share Units”) under
the 2006 Plan with a value equal to the quotient obtained by dividing $5,000,000 by the
Per Share Price on the Effective Date. The Performance Share Units shall be subject to
the following terms and conditions:

	 	(i)	 	If the Per Share Price of a Share as of the third anniversary
of the Effective Date ( the “Third Anniversary Average Price”) equals
or exceeds a value which produces a Compound Annual TSR (as defined below) of
15%, Executive shall vest in and the Company shall deliver to Executive

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	 	 	 	as soon as practicable (but in any event no later than 45 days) following
the third anniversary of the Effective Date a number of Shares equal to the
number of Performance Share Units granted pursuant to this Section 4(c),
provided that, except as otherwise specifically set forth in Section 8 of
this Agreement, Executive is employed by the Company on such anniversary
date. “Compound Annual TSR” shall mean the compound annual Share
price appreciation from the Effective Date to such third anniversary, plus
the value derived from the reinvestment of any dividends paid on the
Company’s common stock during such period, with reinvestment determined
based on the closing price of the common stock on the dividend payment date,
using the Per Share Price as of the Effective Date as the base value.

	 	(ii)	 	If the Third Anniversary Average Price equals or exceeds a
value which produces a Compound Annual TSR of 30%, Executive shall vest in and
the Company shall deliver to Executive as soon as practicable (but in any event
no later than 45 days) following the third anniversary of the Effective Date, a
number of Shares equal to two times the number of Performance Share Units
granted pursuant to this Section 4(c); provided that, except as otherwise
specifically set forth in Section 8 of this Agreement, Executive is employed by
the Company on such anniversary date.
	 
	 	(iii)	 	If the Third Anniversary Average Price equals or exceeds a
value which produces a Compound Annual TSR of 45%, Executive shall vest in and
the Company shall deliver to Executive as soon as practicable (but in any event
no later than 45 days) following the third anniversary of the Effective Date, a
number of Shares equal to three times the number of Performance Share Units
granted pursuant to this Section 4(c); provided that, except as otherwise
specifically set forth in Section 8 of this Agreement, Executive is employed by
the Company on such anniversary date.
	 
	 	(iv)	 	If the Third Anniversary Average Price produces a Compound
Annual TSR between 15% and 30%, or between 30% and 45%, Executive shall vest in
and the Company shall deliver a number of Performance Share Units that is the
mathematical interpolation between the number of shares which would vest at
such two percentages; provided that, except as otherwise specifically set forth
in Section 8 of this Agreement, Executive is employed by the Company on such
anniversary date.
	 
	 	(v)	 	Performance Share Units that could have been earned under any
of subclauses (i), (ii), (iii) or (iv) that are not earned on the third
anniversary of the Effective Date may be earned on the fourth anniversary of
the Effective Date based on the Compound Annual TSR from the Effective Date
through the fourth anniversary of the Effective Date using the same performance
targets described in subsections (i) through (iv) above (net of

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	 	 	 	any Performance Share Units that were earned on the third anniversary of the
Effective Date based on performance to such date); provided that, except as
otherwise specifically set forth in Section 8 of this Agreement, Executive
is employed by the Company on the fourth anniversary date.

	 	(vi)	 	Any Performance Share Units that vest as of the third
anniversary of the Commencement Date will not be affected if the Compound
Annual TSR on the fourth anniversary is less than that generated by the Third
Anniversary Average Price. Any Performance Share Units that are not vested as
of the fourth anniversary of the Effective Date shall be immediately forfeited.
	 
	 	(vii)	 	Executive may satisfy any tax withholding obligation with
respect to the Performance Share Units by having Shares withheld by the Company
that would otherwise be distributed upon settlement of the Performance Share
Units. Executive shall not be permitted to sell, assign, transfer, or
otherwise dispose any Net Shares (as defined below) acquired upon settlement of
the Performance Share Units until February 1, 2014, or, if sooner: (A) upon a
Change in Control; (B) upon a termination of employment under Section 6(a) or
6(b); or (C) one year after a termination of employment under Section 6(e) or
6(f). For purposes of this Section, “Net Shares” shall mean the net
number of Shares acquired by Executive upon settlement of the Performance Share
Units after subtracting any such Shares withheld by the Company in payment of
tax withholding obligations applicable to such settlement.
	 
	 	(viii)	 	The Company shall enter into a restricted share unit award agreement with the
Executive for the above grant of Performance- Share 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.
	 
	 	(ix)	 	Notwithstanding the foregoing vesting provisions of the
Performance Share Units, if on any date between December 1, 2009 and February
1, 2011, the Per Share Price on such date exceeds $26.96, then Executive shall
vest in the 407,498 Performance Share Units that could have been earned under
subsection (i) above; provided that Executive is employed by the Company on
such vesting date; and provided further that vesting under this subsection (ix)
shall reduce by 407,498 the number of Performance Share Units that Executive
could vest in under subsections (ii), (iii) and (iv), and eliminate the
Performance Share Units that Executive could vest in under subsection (i)
above. The Company shall distribute to Executive a number of shares of its
common stock equal to the number of Performance Share Units that become vested
under this subsection as soon as practicable (but in any event no later than 45
days) following the vesting date of such Performance Share Units.

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	 	(x)	 	Notwithstanding the foregoing vesting provisions of the
Performance Share Units, if the financial performance-based goal approved by
the Committee prior to April 1, 2010 for the service and performance period
beginning on or after April 1, 2010 (the “Second Tranche Performance
Goal”) is achieved as certified by the Committee following the end of the
performance period for such goal, then Executive shall vest in the second
tranche of 407,498 Performance Share Units that could have been earned under
subsection (ii) above; provided that Executive is employed by the Company on
such vesting date; and provided further that vesting under this subsection (x)
shall reduce by 407,498 the number of Performance Share Units that Executive
could vest in under subsections (iii) and (iv), and eliminate the second
tranche of 407,498 Performance Share Units that Executive could vest in under
subsection (ii) above; and provided further that any vesting under this
subsection (x) shall be conditioned on issuance by the Internal Revenue Service
on or before March 5, 2011 of a favorable private letter ruling that such
vesting upon the achievement of the Second Tranche Performance Goal will meet
the requirements for the Performance Share Units to qualify as other
performance-based compensation exempt from the limitations applicable under
Section 162(m) of the Internal Revenue Code (the “Second Tranche Private
Letter Ruling”). The Company will submit a request for such Second Tranche
Private Letter Ruling not later than April 15, 2010 (or such later date as the
Executive may agree). The Company shall distribute to Executive a number of shares of its common stock equal to the number of Performance Share Units that
become vested under this subsection within 10 days of the later to occur of (A)
the vesting date of such Performance Share Units and (B) receipt of such Second
Tranche Private Letter Ruling, but in no event later than March 15, 2011.
Notwithstanding anything else in this subsection (x), if the Internal Revenue
Service does not issue the Second Tranche Private Letter Ruling on or before
March 5, 2011, this subsection (x) shall be rendered void and without effect,
and no vesting of the related Performance Share Units shall be deemed to have
occurred due to achievement of the Second Tranche Performance Goal.

	 	(d)	 	Share Purchase Requirement and Matching Share Units.

	 	(i)	 	Prior to the first anniversary of the Effective Date, Executive
shall purchase, on the market and during periods of open trading in accordance
with applicable law, Shares with an aggregate purchase price of not less than
$3,000,000 (the “Purchased Shares”); provided, however, if Executive is
precluded from completing such purchases in the marketplace due to being
subject to blackout periods or other restrictions on his ability to purchase
such shares due to his possession of material inside information, the Company
shall either extend the period of time to complete such market purchases such
that Executive shall have a reasonable opportunity to complete the purchase of
the Purchased Shares,

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	 	 	 	or sell such shares directly to Executive on or prior to such first
anniversary of the Effective Date.

	 	(ii)	 	Executive shall not be permitted to sell the Purchased Shares
for one year following the Final Purchase Date (as defined below). In
addition, as long as Executive remains employed by the Company, Executive shall
retain ownership of at least seventy-five percent (75%) of the Purchased Shares
until the second anniversary of the Effective Date, fifty percent (50%) of the
Purchase Shares until the third anniversary of the Effective Date, and
twenty-five percent (25%) of the Purchased Shares until the fourth anniversary
of the Effective Date (the “Purchase Obligations”). The “Final
Purchase Date” shall mean the date on which Executive purchases Shares
that, together with other Shares purchased by Executive on or after the
Effective Date, have an aggregate purchase price of $3,000,000.
	 
	 	(iii)	 	As soon as practicable after the end of any month during which
Executive makes a purchase of all or any portion of the Purchased Shares, the
Company shall grant to the Executive a number of restricted share units equal
to the number of Purchased Shares so purchased in such month (up to a maximum
aggregate number of restricted share units equal to the number of Purchased
Shares with an aggregate purchase price of $5,000,000) (the “Matching Share
Units”).
	 
	 	(iv)	 	The Matching Restricted Share Units shall vest and be settled
in Shares on the following schedule: Twenty-five percent (25%) of the Matching
Share Units shall vest and be settled on the first anniversary of the Final
Purchase Date and an additional 25% of the Matching Share Units shall vest and
be settled each of the second, third, and fourth anniversaries of the Effective
Date, provided Executive is employed on the relevant vesting date and Executive
has not violated the Purchase Obligations prior to such vesting date.
	 
	 	(v)	 	Executive shall not be permitted to sell, assign, transfer, or
otherwise dispose of more than fifty percent (50%) of the Net Shares (as
defined below) acquired upon settlement of the Matching Share Units until the
expiration of the two-year period following such settlement, or, if sooner,
until a Change in Control (as defined below) or until Executive experiences a
termination of employment. For purposes of this Section, Net Shares shall mean
the net number of Shares acquired by Executive upon settlement of the Matching
Share Units after subtracting any such Shares withheld by the Company in
payment of withholding obligations applicable to such settlement.

	 	(e)	 	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. For the avoidance of doubt, the Committee does not

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	 	 	 	contemplate that Executive shall receive equity grants other than the grants
outlined in this Section 4 of the Agreement during the Employment Term.
	 
	 	(f)	 	2009 Option. On December 1, 2009, the Company shall grant to Executive
a time-vested non-qualified stock option (the “2009 Option”) under the 2006
Plan to acquire 500,000 Shares at an exercise price of $37.41 per share with a term
ending on February 1, 2017.

	 	(i)	 	The 2009 Option shall become vested and exercisable with
respect to twenty-five percent (25%) of the total number of Shares underlying
the 2009 Option on each of the following dates: February 1, 2012, February 1,
2013, February 1, 2014 and February 1, 2015; provided that, except as
specifically set forth in Section 8 of this Agreement, the Executive remains
employed by the Company through the applicable vesting dates.
	 
	 	(ii)	 	Executive shall not be permitted to surrender Shares to the
Company as payment for the exercise price of the 2009 Option. Executive may
satisfy any tax withholding obligation with respect to the 2009 Option by
having Shares withheld by the Company that would otherwise be issued upon
exercise of the 2009 Option. Executive shall not be permitted to sell, assign,
transfer, or otherwise dispose of the Net Shares (as defined below) acquired
upon exercise of the 2009 Option until February 1, 2015, or, if sooner, until a
Change in Control (as defined below) or until Executive experiences a
termination of employment. For purposes of this Section 4(f), “Net
Shares” shall mean the net number of Shares acquired by Executive after
subtracting any such Shares withheld in payment of tax withholding obligations
applicable to the exercise of the 2009 Option.
	 
	 	(iii)	 	The Company shall enter into an award agreement with the
Executive for the above grant of the 2009 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 non-qualified stock option award agreement.

	 	(g)	 	Long-Term Performance Units. On December 1, 2009, the Company shall
grant to Executive 173,750 performance-based restricted share units (the “Long-Term
Performance Units”) under the 2006 Plan, which shall vest as follows, provided
that, except as otherwise specifically set forth in Section 8 of this Agreement,
Executive is employed by the Company on such vesting date:

	 	(i)	 	Single Vesting Share Price.

	 	(a)	 	If at November 1, 2013, the Adjusted Share
Price (as defined below) equals the Single Vesting Share Price (as
defined below), Executive shall vest in 25% of the Long-Term
Performance Units.
	 
	 	(b)	 	If at February 1, 2014, the Adjusted Share
Price equals the Single Vesting Share Price Executive shall vest in 50%
of the Long-Term Performance Units.

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	 	(c)	 	If at May 1, 2014, the Adjusted Share Price (as
defined below) equals the Single Vesting Share Price (as defined
below), Executive shall vest in 25% of the Long-Term Performance Units.

	 	(ii)	 	Double Vesting Share Price.

	 	(a)	 	If at November 1, 2013, the Adjusted Share
Price equals the Double Vesting Share Price (as defined below),
Executive shall vest in 50% of the Long-Term Performance Units.
	 
	 	(b)	 	If at February 1, 2014, the Adjusted Share
Price equals the Double Vesting Share Price, Executive shall vest in
100% of the Long-Term Performance Units.
	 
	 	(c)	 	If at May 1, 2014, the Adjusted Share Price
equals the Double Vesting Share Price, Executive shall vest in 50% of
the Long-Term Performance Units.

	 	(iii)	 	Triple Vesting Share Price.

	 	(a)	 	If at November 1, 2013, the Adjusted Share
Price equals the Triple Vesting Share Price (as defined below),
Executive shall vest in 75% of the Long-Term Performance Units.
	 
	 	(b)	 	If at February 1, 2014, the Adjusted Share
Price equals the Triple Vesting Share Price, Executive shall vest in
150% of the Long-Term Performance Units.
	 
	 	(c)	 	If at May 1, 2014, the Adjusted Share Price
equals the Triple Vesting Share Price, Executive shall vest in 75% of
the Long-Term Performance Units.

	 	(iv)	 	If the Adjusted Share Price on a measurement date is between
the Single Vesting Share Price and the Double Vesting Share Price or is between
the Double Vesting Share Price and the Triple Vesting Share Price, Executive
shall vest in a number of Long-Term Performance Units that is the mathematical
interpolation between the number of Long-Term Performance Units which would
vest at defined ends of the spectrum.
	 
	 	(v)	 	Long-Term Performance Units that could have been vested under
any of subsections (i), (ii), or (iii) that do not become vested on November 1,
2013, February 1, 2014 or May 1, 2014, may become vested on November 1, 2014,
February 1, 2015 or May 1, 2015, respectively, based upon the Adjusted Share
Price on the applicable measurement date, provided that, except as otherwise
specifically set forth in Section 8 of this Agreement, Executive is employed by
the Company on such applicable vesting date. Any Long-Term Performance Units
that are not vested as of May 1, 2015 shall be immediately forfeited.

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	 	(vi)	 	The Company will deliver to Executive a number of Shares equal
to the number of Long-Term Performance Units that become vested pursuant to
this Section 4(g) on the date that is the earliest of February 1, 2019, a
Change in Control and six months and one day following Executive’s termination
of employment.
	 
	 	(vii)	 	Executive may satisfy any tax withholding obligation with
respect to the Long-Term Performance Units by having Shares withheld by the
Company that would otherwise be distributed upon settlement of the Long-Term
Performance Units. Executive shall not be permitted to sell, assign, transfer,
or otherwise dispose of fifty percent (50%) of the Net Shares (as defined
below) acquired upon settlement of the Long-Term Performance Units to Shares
until the expiration of the two year period following receipt of such Shares,
or, if sooner upon a Change in Control or Executive’s termination of
employment. For purposes of this Section 4(g), “Net Shares” shall mean
the net number of Shares acquired by Executive upon settlement of the Long-Term
Performance Units after subtracting any such Shares withheld by the Company in
payment of tax withholding obligations applicable to such settlement.
	 
	 	(viii)	 	“Adjusted Share Price” means the sum of (i) the average of the
closing prices of Shares during the 20 consecutive trading days ending on the
day prior to the specified measurement date (“Average Share Price”);
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 share of common stock after the 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 common stock on such dividend payment
date.
	 
	 	(ix)	 	“Single Vesting Share Price,” “Double Vesting Share
Price,” and “Triple Vesting Share Price” mean the Adjusted Share
Prices equal to a compound annual share price appreciation (the “Annual
Compound TSR”) of 15%, 30% and 45%, respectively, as measured from a base
price of $37.41 over a measurement period from February 1, 2011 to the
applicable measurement date.
	 
	 	(x)	 	Notwithstanding the foregoing vesting provisions of the
Long-Term Performance Units, if on any date between December 1, 2009 and
February 1, 2014, the Per Share Price on such date: (A) exceeds $82.19, then
Executive shall vest in the 173,750 Long-Term Performance Units that could have
been earned under subsection (i) above; (B) exceeds $114.05, then Executive
shall vest in the 347,500 Long-Term Performance Units (net of any previous
vesting under (A) above) that could have been earned under subsection (ii)
above; and (C) exceeds $153.23, then Executive shall vest in the 521,251
Long-Term Performance Units (net of any previous vesting under (A) and (B)
above) that could have been

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	 	 	 	earned under subsection (iii) above; provided, however, that vesting under
this subsection (x) that occurs upon a particular Price Per Share target
shall only take place the first time such Price Per Share target is
achieved; and provided further that Executive is employed by the Company on
such vesting dates.
	 
	 	(xi)	 	The Company shall enter into a restricted share unit award
agreement with Executive for the above grant of 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.

	 	(h)	 	Additional Matching Units. On December 1, 2009, the Company shall
grant to the Executive 200,581 restricted share units (the “Additional Matching
Units”) as matching awards in consideration for the restrictions hereunder on the
Executive’s ability to surrender, sell, assign, transfer or otherwise dispose of Shares
and Net Shares.

	 	(i)	 	The Additional Matching Units shall vest and be settled in
Shares on the following schedule: one thirty-sixth (1/36th) of the Additional
Matching Units shall vest on the first day of each month beginning March 1,
2011 through February 1, 2014; provided that Executive is employed on the
applicable vesting date.
	 
	 	(ii)	 	The Company will deliver to Executive a number of Shares equal
to the number of Additional Matching Units that become vested pursuant to this
Section 4(h) on the earliest of February 1, 2019, a Change in Control and six
months and one day following Executive’s termination of employment.
	 
	 	(iii)	 	Executive may satisfy any tax withholding obligation with
respect to the Additional Matching Units by having Shares withheld by the
Company that would otherwise be distributed upon settlement of the Additional
Matching Units. Executive shall not be permitted to sell, assign, transfer, or
otherwise dispose of fifty percent (50%) of the Net Shares (as defined below)
acquired upon settlement of the Additional Matching Units to Shares until the
expiration of the two year period following receipt of such Shares, or, if
sooner upon a Change in Control or until Executive experiences a termination of
employment. For purposes of this Section 4(g), “Net Shares” shall mean
the net number of Shares acquired by Executive upon settlement of the
Additional Matching Units after subtracting any such Shares withheld by the
Company in payment of tax withholding obligations applicable to such
settlement.
	 
	 	(iv)	 	The Company shall enter into a restricted share unit award
agreement with Executive for the above grant of Additional Matching Units,
incorporating the terms set forth in this Agreement and otherwise on the terms
and

12

 

	 	 	 	conditions set forth in the Company’s standard form of matching restricted
share unit award agreement.

	 	(i)	 	Permitted Transfers of Net Shares. Notwithstanding the foregoing
restrictions that do not permit the Executive to surrender, sell, assign, transfer or
otherwise dispose of Shares and Net Shares, the Executive is permitted to transfer
Shares and Net Shares without penalty under either of the following circumstances: (1)
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; and (2) Executive may pledge Shares
and Net Shares as collateral for loans, provided that (A) the Executive represents to
the Company that he will not default or otherwise cause such collateral to be
liquidated, transferred or sold during his employment with the Company, (B) there is an
independent reasonable basis to conclude that none of the Shares and Net Shares used as
collateral are likely to be sold to satisfy a debt during the applicable restricted
period with respect to such Shares or Net Shares, and (C) Executive agrees to
substitute other collateral for such Shares and Net Shares in the event that such
collateral would have to be liquidated, transferred or sold during the applicable
restricted period with respect to such Shares or Net Shares.

	5.	 	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. 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. 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

13

 

	 	 	 	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 15th of the year following the year in which the expenses were
incurred.
	 
	 	(e)	 	Office and Facilities. Executive shall be provided with an appropriate
office at the Company’s headquarters, with such 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.
	 
	 	(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:

	 	(i)	 	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;
	 
	 	(ii)	 	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 the Board in its discretion may determine; and
	 
	 	(iii)	 	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. Executive shall be entitled to be reimbursed for
travel expenses for Executive’s spouse to accompany Executive on one business trip per
year.

	6.	 	Termination. Executive’s employment 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

14

 

	 	 	employment with the Company for purposes of this Agreement unless 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 8(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 8(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 7 below)
and as evidenced by a resolution adopted in good faith by a majority of the independent
members of the Board, subject to the payment by the Company to Executive of the
benefits provided in Section 8(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 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 the 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, the Executive upon Executive’s indictment
for the commission of a felony as described under clause (A) above. Such suspension may
remain effective until such time as the indictment is either dismissed or a verdict of
not guilty has been entered.

15

 

	 	(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 7 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 8(e) or Section 8(f) 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 (as defined in
Section 7 below) 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 8(c) or 8(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 (i) through (iii) 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.

	 	(i)	 	Diminution of Responsibility. (A) any material
reduction in his duties or responsibilities as in effect immediately prior
thereto, or (B) removal of Executive from the position of Chief Executive
Officer or Chairman of the Board, 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;
	 
	 	(ii)	 	Compensation Reduction. Any reduction in Executive’s
base salary or target bonus opportunity; or
	 
	 	(iii)	 	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 8(a) hereof through the last day of
such notice period.

	7.	 	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

16

 

	 	 	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).
	 
	8.	 	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:

	 	(i)	 	any accrued and unpaid Base Salary;
	 
	 	(ii)	 	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;
	 
	 	(iii)	 	any accrued and unpaid vacation pay;
	 
	 	(iv)	 	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, including the arrangements provided for in
Sections 3(b)(ii) and 4(a) of this Agreement to the extent vested as of
Executive’s termination date; and
	 
	 	(v)	 	any amount or benefit as provided under any benefit plan or
program (the foregoing items in Sections 8(a)(i) through 8(a)(v) 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:

	 	(i)	 	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;
	 
	 	(ii)	 	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

17

 

	 	 	 	death), Shares in respect of the Annual Bonus Share Units and the 2008 RSU
Grant;
	 
	 	(iii)	 	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;
	 
	 	(iv)	 	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);
	 
	 	(v)	 	The performance measures applicable to the Performance Share
Units will be applied as though the termination date were the end of the
measurement period and the units so earned will vest and be payable in a manner
consistent with the vesting schedule described in Section 4(c) of this
Agreement (e.g., 100% at a Compound Annual TSR of 15%, 200% at a
Compound Annual TSR of 30%), but based on the Compound Annual TSR determined
through the termination date. The Company shall deliver Shares in respect of
such vested Performance Share Units, if any, as soon as practicable (but not
later than sixty (60) days) following Executive’s termination date and all
other Performance Share Units will be forfeited;
	 
	 	(vi)	 	If Executive’s termination date is after February 1, 2011, then
the 2009 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 2009 Option term);
	 
	 	(vii)	 	If Executive’s termination date is after February 1, 2011,
then the performance measures applicable to the Long-Term Performance Units
will be applied as though the termination date were the end of the measurement
period and the units will vest in a manner consistent with the vesting schedule
described in Section 4(g) of this Agreement. The Company shall deliver Shares
in respect of vested Long-Term Performance Units (including previously vested
Long-Term Performance 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 Long-Term Performance Units as of the termination date shall be
forfeited; and
	 
	 	(viii)	 	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.

	 	(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

18

 

	 	 	 	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 14(f) of the
Agreement, Executive shall be entitled to the benefits provided in this Section
8(c).

	 	(i)	 	The Company shall pay to Executive any Accrued Compensation
through the end of the notice period provided for in Section 6(e) hereof;
	 
	 	(ii)	 	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;
	 
	 	(iii)	 	In the event that Executive’s termination of employment occurs
after the end of the Company’s 2008 fiscal year, 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 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 (iii) 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;
	 
	 	(iv)	 	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 10), equal to
the sum of (A) two (2) times Executive’s Base Salary and (B) $3.0 million;
	 
	 	(v)	 	The Company shall provide Executive continued 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;
	 
	 	(vi)	 	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 and the 2008 RSU Grant, and Executive shall

19

 

	 	 	 	have three months following the termination date to exercise vested Options
(but in no event beyond the expiration of the Option Term. Any unvested
portion of the Option), any unvested Performance Share Units, and any
unvested Matching Share Units shall be forfeited;
	 
	 	(vii)	 	The performance measures applicable to the Performance Share
will be applied as though the termination date were the end of the measurement
period, with the number of units calculated in a manner consistent with the
vesting schedule described in Section 4(c) of this Agreement (e.g., 100% at a
Compound Annual TSR of 15%, 200% at a Compound Annual TSR of 30%), but based on
the Compound Annual TSR determined through the termination date; 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 the date of
grant to the date of termination divided by 36 months). The Company shall
deliver Shares in respect of Performance Share Units that vest under this
subsection (vii), if any, as soon as practicable (but not later than sixty (60)
days) following Executive’s termination date and all other Performance Share
Units will be forfeited;
	 
	 	(viii)	 	Executive shall have three months following the termination date to exercise
vested 2009 Options (but in no event beyond the expiration of the 2009 Option
term). Any unvested portion of the 2009 Option as of the termination date
shall be forfeited;
	 
	 	(ix)	 	If Executive’s termination date is after February 1, 2011, then
the performance measures applicable to any unvested Long-Term Performance Units
will be applied as though the termination date were the end of the measurement
period, with the number of units calculated in a manner consistent with the
vesting schedule described in Section 4(g) of this Agreement; 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 Long-Term Performance Units (including
previously vested Long-Term Performance 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 Long-Term Performance Units as of the
termination date shall be forfeited; and
	 
	 	(x)	 	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.

20

 

	 	(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 defined in Section 9 below), then in lieu
of the amounts due under Section 8(c) above and subject to the requirements of Section
14(f) of the Agreement, Executive shall be entitled to the benefits provided in this
Section 8(d).

	 	(i)	 	The Company shall pay Executive any Accrued Compensation
through the end of the notice period provided for in Section 6(e) hereof;
	 
	 	(ii)	 	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;
	 
	 	(iii)	 	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 10), 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;
	 
	 	(iv)	 	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 10), equal to
three (3) times the sum of (A) Executive’s Base Salary and (B) the Target
Bonus;
	 
	 	(v)	 	The Company shall provide Executive with continued 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;
	 
	 	(vi)	 	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

21

 

	 	 	 	on an established securities market on the date on which such shares are
payable;
	 
	 	(vii)	 	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 9), 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; and
	 
	 	(viii)	 	If the 2009 Option is not cancelled in connection with a Change in Control in
exchange for a cash payment (as set forth in Section 9), then each outstanding
2009 Option will vest, and the 2009 Option will remain exercisable for one year
following the termination date (but not beyond the 2009 Option term).

	 	 	 	Executive shall not be required to mitigate the amount of any payment provided for under
this Section 8 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.

	9.	 	Change in Control.

	 	(a)	 	For purposes of this Agreement, a “Change in Control” shall mean any of
the following events:

	 	(i)	 	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;
	 
	 	(ii)	 	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;
	 
	 	(iii)	 	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

22

 

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

	 	(b)	 	Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
pursuant to Section 9, 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 9 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. 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, the performance measures applicable
with respect to the Performance Share Units will be applied as though the Change in
Control were the end of the measurement period and the units so earned will vest and be
payable in a manner consistent with the vesting schedule described in Section 4(c)
(e.g., 100% at a Compound Annual TSR of 15%, 200% at a Compound Annual TSR of 30%, 300%
at a Compound Annual TSR of 45%), but based on the Compound Annual TSR determined
through the date that the Change in Control occurs. Any Performance Shares Units
deemed earned in accordance with the immediately preceding sentence shall be payable,
in the Company’s discretion, in either cash or in shares of the acquiring entity as
soon as practicable (but not later than sixty (60) days) following the occurrence of a
Change of Control. Notwithstanding the above, the Performance Share Units 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.
	 
	 	(d)	 	Upon the occurrence of a Change in Control all unvested 2009 Options shall
become fully vested and, at the election of the Company, all outstanding 2009

23

 

	 	 	 	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.
	 
	 	(e)	 	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.
	 
	 	(f)	 	Upon the occurrence of a Change in Control, the performance measures applicable
with respect to unvested Long-Term Performance Units will be applied as though the end
of the measurement period was the later of February 1, 2012 and the Change in Control
date, and the units so earned will vest in a manner consistent with the vesting
schedule described in Section 4(g); except that, in addition to such vesting schedule,
if the Adjusted Share Price on a measurement date is between $37.41 and the Single
Vesting Share Price, then Executive shall vest in a number of Long-Term Performance
Units that is the mathematical interpolation between the number of shares which would
vest at defined ends of the spectrum. Any Long-Term Performance Units deemed vested in
accordance with the immediately preceding sentence shall be payable, in the Company’s
discretion, in either cash or in shares of the acquiring entity as soon as practicable
(but not later than sixty (60) days) following the occurrence of a Change in Control.
Any Long-Term Performance Units that had vested, but had not been delivered, prior to
the Change in Control, shall be payable, in the Company’s discretion, in either Shares,
cash or in shares of the acquiring entity on the Change in Control date.
Notwithstanding the above, the Long-Term Performance Units 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.

24

 

	10.	 	Section 409A. If any payments or benefits due to Executive hereunder would cause the
application of an accelerated or additional tax under Section 409A of the Internal Revenue
Code of 1986, as amended (“Section 409A”), such payments or benefits shall be
restructured in a manner which does not cause such an accelerated or additional tax. 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.
	 
	11.	 	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.
	 
	 	(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 the Company a document
certifying that such written Confidential Information has been returned or destroyed in
accordance with this Section 11(c).
	 
	 	(d)	 	For the purposes of this Agreement, “Confidential Information” shall
mean all confidential and proprietary information of the Company and its affiliates,

25

 

	 	 	 	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 11 shall survive the termination of
the Employment Term.

	12.	 	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 12(a) are reasonable and desirable to protect the Confidential Information of
the Company, 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, 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 6(c) or 6(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 12(b) are reasonable and
desirable to protect the Confidential Information of the Company.

26

 

	 	(c)	 	It is the intent and desire of Executive and the Company that the restrictive
provisions of this Section 12 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 12 shall be determined to be
invalid or unenforceable, such covenant shall be amended, without any action on the
part of either party hereto, to delete therefrom 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 12 shall survive the termination of
the Employment Term.

	13.	 	Remedies for Breach of Obligations under Sections 11 or 12 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 11 or 12
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 11 or 12 hereof in any Federal or state court
sitting in the State of New Jersey, or, at the Company’s election, in any other state in which
Executive maintains his principal residence or his principal place of business as provided for
in Section 14(h) below. Executive hereby submits to the non-exclusive jurisdiction of all
those courts for the purposes of any actions or proceedings instituted by the Company to
obtain that injunctive relief, and 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.
	 
	14.	 	Miscellaneous.

	 	(a)	 	Successors and Assigns.

	 	(i)	 	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. 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 (including this Agreement) whether by operation of law or
otherwise.
	 
	 	(ii)	 	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.

27

 

	 	 	 	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 $40,000,
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 the other; 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 Steven G. Eckhaus, Katten Muchin
Rosenman LLP, 575 Madison Avenue, New York, NY 10022-2585; 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 Chairman of the Compensation Committee of the Board, and a
copy sent by overnight delivery to James W. McKenzie, Jr., Morgan, Lewis & Bockius LLP,
1701 Market Street, Philadelphia PA 19103-2921. All notices and communications shall 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. Executive shall be indemnified by the Company as
provided in Company’s by-laws and Certificate of Incorporation. The obligations under
this paragraph 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 8(c)
and 8(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 14(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

28

 

	 	 	 	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 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 either 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 14(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 either party for temporary or preliminary injunctive relief
pending arbitration in accordance with applicable law or for breaches by Executive of
Executive’s obligations under Sections 11 or 12 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 or
unless Executive’s primary place of employment is a different location. 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,

29

 

	 	 	 	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.

	15.	 	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 Executive Employment Agreement, dated February 1, 2008, between the
parties, and the Amendment thereto dated November 30, 2009. Any award agreements with respect
to the awards referenced in Section 4 and made prior to the date hereof shall not be
superseded, but, to the extent that the terms thereof are inconsistent with this Agreement,
any such award agreements shall be deemed amended to read in a manner consistent with the
terms of this Agreement.

30

 

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

	 	 	 	 	 
	 	VALEANT PHARMACEUTICALS INTERNATIONAL

 	 
	 	By:  	 /s/
Steve T. Min	 
	 	 	Title: Executive Vice President
and General Counsel	 
	 	 	 	 
	 
	 	EXECUTIVE

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

31

 

	 	 	 	 	 

EXHIBIT A

FORM OF RELEASE AGREEMENT

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

FOR AND IN CONSIDERATION of the payments and benefits provided in the Employment Agreement between
the Executive and the Company dated                      (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 or relating to his status as a holder of the Capital Interest; (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 8(c)[Section
8(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 Delaware law; (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.

32

 

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

33

 

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 successors and
assigns.

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

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	 

	 	 
	 

	 	 	 	VALEANT PHARMACEUTICALS INTERNATIONAL	 	 

34exv10w26

Exhibit 10.26

2009 PRG-Schultz

Performance Bonus Plan

Please note that information contained in this document is proprietary and confidential, as
defined in your employment agreement and/or the PRG-Schultz Employee Handbook. Employees are
reminded that confidential, sensitive or proprietary information concerning PRG-Schultz must not be
used in any manner that is unauthorized or detrimental to the best interests of PRG-Schultz. No
unauthorized distribution is permitted.

 

 

PRG-Schultz Performance Bonus Plan

	 	 	 	 	 
	I. Plan Overview
	 	 	3	 
	A. Philosophy
	 	 	3	 
	B. Plan Objectives
	 	 	3	 
	C. Effective Period
	 	 	3	 
	D. Eligibility
	 	 	3	 
	II. Plan Description
	 	 	3	 
	A. Target Bonus and Maximum Bonus
	 	 	3	 
	B. Actual Bonus to be Paid: The Concept
	 	 	4	 
	C. Calculation of Total Bonus Pool
	 	 	5	 
	D. Calculation of Initial Bonus Amounts
	 	 	6	 
	E. Allocation of Total Bonus Pool to Bonus Eligible Employees
	 	 	13	 
	F. Qualification for and Payment of Bonuses
	 	 	13	 
	III. Plan Interpretation and Administration
	 	 	14	 
	IV. Plan Acknowledgement Form
	 	 	15	 

Confidential

2

 

PRG-Schultz Performance Bonus Plan

	I.	 	Plan Overview

	 	A.	 	Philosophy
	 
	 	 	 	PRG-Schultz, as an organization of professionals, believes that its senior leaders
should have common objectives and should share together in the profits created by their
combined efforts as a team. In addition, the company wants to encourage its leadership
to achieve desired results and to strive for excellence through exemplary behaviors,
creativity, innovation and teamwork.
	 
	 	B.	 	Plan Objectives
	 
	 	 	 	The PRG-Schultz 2009 Performance Bonus Plan (the Plan) promotes the following:

	 	•	 	Achievement of PRG-Schultz business and financial objectives
	 
	 	•	 	Collaboration throughout the organization
	 
	 	•	 	Customer/client relations
	 
	 	•	 	Development of PRG-Schultz leaders

	 	C.	 	Effective Period
	 
	 	 	 	The Plan is effective from January 1, 2009 through December 31, 2009.
	 
	 	D.	 	Eligibility
	 
	 	 	 	Full-time, salaried PRG-Schultz employees whose positions are assigned a Level 14E or
higher in the PRG-Schultz U.S. salary grade structure and employees that hold positions
of a comparable level in PRG-Schultz’s non-U.S. operations are eligible to participate
in the Plan (Bonus Eligible Employees). The term “Bonus Eligible
Positions” refers to the positions described in this paragraph.

	II.	 	Plan Description
	 
	 	 	The Plan provides for a bonus payment in 2010 (payable in a lump sum, net of tax
withholdings, on or before March 15, 2010) to Bonus Eligible Employees upon the achievement
by the company and, in certain cases, the business unit of the Bonus Eligible Employees of
certain 2009 financial objectives, subject also to the achievement of certain
management-based objectives (MBOs) for the CEO and certain of the CEO’s direct
reports.

	 	A.	 	Target Bonus and Maximum Bonus
	 
	 	 	 	Each Bonus Eligible Position has associated with it a specific target bonus (Target
Bonus) and a maximum bonus (Maximum Bonus).

Confidential

3

 

PRG-Schultz Performance Bonus Plan

	 	 	 	The sum of the Target Bonuses for all Bonus Eligible Positions is the “Target Bonus
Pool” for the company as a whole. The sum of the Maximum Bonuses for all Bonus
Eligible Positions is the “Maximum Bonus Pool” for the company as a whole.
	 
	 	B.	 	Actual Bonus to be Paid: The Concept
	 
	 	 	 	The actual bonus to be paid to any Bonus Eligible Employee will be a function of the
following factors:

	 	•	 	The Total Bonus Pool (based on the adjusted EBITDA for 2009 of the company as
described below) earned by the company for payment to Bonus Eligible Employees as
a group. The sum of all bonuses paid to all Bonus Eligible Employees under the
Plan cannot, under any circumstances, exceed the Total Bonus Pool. The Total
Bonus Pool cannot, under any circumstances, exceed the Maximum Bonus Pool.
	 
	 	•	 	The Business Unit to which the Bonus Eligible Employee is assigned and whether
or not the Bonus Eligible Employee has been assigned MBOs. For purposes of this
Plan, there are four Business Units (with Recovery Audit further subdivided by
geographic region — United States, Canada, Latin America, Europe and Asia-Pacific
 — or some combination of such listed geographic regions):

	 	•	 	Corporate/Functional
	 
	 	•	 	Recovery Audit (by geographic region)
	 
	 	•	 	New Services/Consulting
	 
	 	•	 	Healthcare

	 	•	 	For Bonus Eligible Employees without MBOs in the Recovery Audit (by geographic
region) and Healthcare Business Units, the adjusted EBITDA for 2009 of the
Business Unit to which the Bonus Eligible Employee is assigned compared to the
budgeted adjusted EBITDA for 2009 of the Business Unit.
	 
	 	•	 	For Bonus Eligible Employees without MBOs in the New Services/Consulting
Business Unit, the adjusted EBITDA and revenues for 2009 of the Business Unit
compared to the budgeted adjusted EBITDA and revenues for 2009 of the Business
Unit.
	 
	 	•	 	For Bonus Eligible Employees with MBOs in the Recovery Audit (by geographic
region) and Healthcare Business Units, the adjusted EBITDA for 2009 of the
Business Unit to which the Bonus Eligible Employee is assigned compared to the
budgeted adjusted EBITDA

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PRG-Schultz Performance Bonus Plan

	 	 	 	for 2009 of the Business Unit and the achievement of the MBOs assigned to the Bonus
Eligible Employee.
	 
	 	•	 	For Bonus Eligible Employees with MBOs in the New Services/Consulting Business
Unit, the adjusted EBITDA and revenues for 2009 of the Business Unit compared to
the budgeted adjusted EBITDA and revenues for 2009 of the Business Unit and the
achievement of the MBOs assigned to the Bonus Eligible Employee.
	 
	 	•	 	For Bonus Eligible Employees with MBOs in the Corporate/Functional Business
Unit, the achievement of the MBOs assigned to the Bonus Eligible Employee.
	 
	 	•	 	The portion of the Total Bonus Pool then allocated to each Bonus Eligible
Employee.

	 	C.	 	Calculation of Total Bonus Pool
	 
	 	 	 	For purposes of this Plan the term “adjusted EBITDA” means earnings before (1)
interest, taxes, depreciation and amortization and (2) unusual and other significant
items that management views as distorting operating results, such as severance
expenses, expenses associated with dark leases, and stock-based compensation expenses.
	 
	 	 	 	The Total Bonus Pool is a function of the company’s total adjusted EBITDA for 2009 as
compared to the total adjusted EBITDA for 2009 included in the company’s 2009 budget
approved by the company’s board of directors ($30,483,000).
	 
	 	 	 	If actual 2009 adjusted EBITDA is less than 85% of the budgeted adjusted EBITDA
for 2009 ($25,911,000), the Total Bonus Pool available for payment of bonuses
under this Plan will be zero.
	 
	 	 	 	If actual 2009 adjusted EBITDA is equal to 85% of the budgeted adjusted EBITDA
for 2009 ($25,911,000), the Total Bonus Pool available for payment of bonuses
under this Plan will be equal to 50% of the Target Bonus Pool.
	 
	 	 	 	If actual 2009 adjusted EBITDA is equal to 100% of the budgeted adjusted EBITDA
for 2009 ($30,483,000), the Total Bonus Pool available for payment of bonuses
under this Plan will be equal to the Target Bonus Pool.
	 
	 	 	 	If actual 2009 adjusted EBITDA is equal to or greater than 115% of the budgeted
adjusted EBITDA for 2009 ($35,055,000), the Total Bonus Pool available for
payment of bonuses under this Plan will be equal to the Maximum Bonus Pool.

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PRG-Schultz Performance Bonus Plan

	 	 	 	If actual 2009 adjusted EBITDA is between 85% and 100% or between 100% and
115% of the budgeted adjusted EBITDA for 2009, the Total Bonus Pool available for
payment of bonuses under this Plan will be calculated on a pro rata basis consistent
with the foregoing determinations of the Total Bonus Pool. Notwithstanding anything to
the contrary in this Plan, under no circumstances will the Total Bonus Pool exceed the
Maximum Bonus Pool.
	 
	 	D.	 	Calculation of Initial Bonus Amounts
	 
	 	 	 	Step 1 — All Business Units.
	 
	 	 	 	The Total Bonus Pool determined in II.C. above shall be allocated preliminarily among
all Bonus Eligible Employees, pro rata, based on the respective Target or Maximum
Bonus, or portion thereof, of each Bonus Eligible Employee that comprises the Total
Bonus Pool. The preliminary bonus allocated to each Bonus Eligible Employee in this
Step 1 then will be adjusted as described in Steps 2 through 7 below to determine the
initial bonus amount for each Bonus Eligible Employee, which then will be used to
allocate a portion of the Total Bonus Pool to the Bonus Eligible Employee in II.E.
below.
	 
	 	 	 	Step 2 — Recovery Audit and Healthcare Business Units (Without MBOs).
	 
	 	 	 	The preliminary bonus amount for each Bonus Eligible Employee without MBOs in the
Recovery Audit (by geographic region) and Healthcare Business Units determined in Step
1 above then shall be adjusted to equal the sum of (i) 50% of the preliminary bonus
amount determined in Step 1 above and (ii) the 2.A. amount determined below based upon
the total adjusted EBITDA for 2009 of the Business Unit (by geographic region for
Recovery Audit) as compared to the total adjusted EBITDA for 2009 included in the
company’s 2009 budget for the Business Unit (by geographic region for Recovery Audit)
approved by the company’s board of directors, as follows:
	 
	 	 	 	The 2.A. amount based upon adjusted EBITDA shall equal —
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit (by geographic region for Recovery
Audit) is less than 85% of the budgeted adjusted EBITDA for 2009, the 2.A.
amount will be zero.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit (by geographic region for Recovery
Audit) is equal to 85% of the budgeted adjusted EBITDA for 2009, the 2.A.
amount will be 25% of the preliminary bonus amount determined in Step 1 above.

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PRG-Schultz Performance Bonus Plan

	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit (by geographic region for Recovery
Audit) is equal to 100% of the budgeted adjusted EBITDA for 2009, the 2.A.
amount will be 50% of the preliminary bonus amount determined in Step 1 above.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit (by geographic region for Recovery
Audit) is equal to or greater than 115% of the budgeted adjusted EBITDA for
2009, the 2.A. amount will be 100% of the preliminary bonus amount determined in Step 1
above.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit (by geographic region for Recovery
Audit) is between 85% and 100% or between 100% and 115% of the budgeted
adjusted EBITDA for 2009, the 2.A. amount will be calculated on a pro rata basis
consistent with the foregoing determinations of the amount.
	 
	 	 	 	Step 3 — New Services/Consulting Business Unit (Without MBOs).
	 
	 	 	 	The preliminary bonus amount for each Bonus Eligible Employee without MBOs in the New
Services/Consulting Business Unit determined in Step 1 above then shall be adjusted to
equal the sum of (i) 50% of the preliminary bonus amount determined in Step 1 above,
(ii) the 3.A. amount as determined below based upon the total adjusted EBITDA for 2009
of the Business Unit as compared to the total adjusted EBITDA for 2009 included in the
company’s 2009 budget for the Business Unit, and (iii) the 3.B. amount as determined
below based upon the total revenues for 2009 of the Business Unit as compared to the
total revenues for 2009 included in the company’s 2009 budget for the Business Unit, as
follows:
	 
	 	 	 	The 3.A. amount based upon adjusted EBITDA shall equal —
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit is less than 85% of the
budgeted adjusted EBITDA for 2009, the 3.A. amount will be zero.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit is equal to 85% of the
budgeted adjusted EBITDA for 2009, the 3.A. amount will be 12.5% of the preliminary
bonus amount determined in Step 1 above.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit is equal to 100% of the
budgeted adjusted EBITDA for 2009, the 3.A. amount will be 25% of the preliminary bonus
amount determined in Step 1 above.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit is equal to or greater than
115% of the budgeted adjusted EBITDA for 2009, the 3.A. amount will be 50% of the
preliminary bonus amount determined in Step 1 above.

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PRG-Schultz Performance Bonus Plan

	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit is between 85% and 100% or
between 100% and 115% of the budgeted adjusted EBITDA for 2009, the 3.A. amount
will be calculated on a pro rata basis consistent with the foregoing determinations of
the amount.
	 
	 	 	 	The 3.B. amount based upon revenues shall equal —
	 
	 	 	 	If actual 2009 revenues for the Business Unit is less than 85% of the budgeted
revenues for 2009, the 3.B. amount will be zero.
	 
	 	 	 	If actual 2009 revenues for the Business Unit is equal to 85% of the budgeted
revenues for 2009, the 3.B. amount will be 12.5% of the preliminary bonus amount
determined in Step 1 above.
	 
	 	 	 	If actual 2009 revenues for the Business Unit is equal to 100% of the budgeted
revenues for 2009, the 3.B. amount will be 25% of the preliminary bonus amount
determined in Step 1 above.
	 
	 	 	 	If actual 2009 revenues for the Business Unit is equal to or greater than 115%
of the budgeted revenues for 2009, the 3.B. amount will be 50% of the preliminary bonus
amount determined in Step 1 above.
	 
	 	 	 	If actual 2009 revenues for the Business Unit is between 85% and 100% or
between 100% and 115% of the budgeted revenues for 2009, the 3.B. amount will
be calculated on a pro rata basis consistent with the foregoing determinations of B.
	 
	 	 	 	Step 4 — Corporate/Functional Business Unit (Without MBOs).
	 
	 	 	 	For each Bonus Eligible Employee without MBOs in the Corporate/Functional Business
Unit, the initial bonus amount for such Bonus Eligible Employee shall be the
preliminary bonus amount determined in Step 1 above.
	 
	 	 	 	Step 5 – Recovery Audit and Healthcare Business Units (With MBOs).
	 
	 	 	 	For each Bonus Eligible Employee with MBOs in the Recovery Audit (by geographic region)
and Heathcare Business Units, the preliminary bonus amount determined in Step 1 above
then shall be adjusted to equal the sum of the 5.A. and 5.B. amounts as described
below.
	 
	 	 	 	The 5.A. amount based upon adjusted EBITDA shall equal —
	 
	 	 	 	The sum of (i) 35% of the preliminary bonus amount determined in Step 1 above and (ii)
the 5.A.(1). amount determined below based upon the total adjusted EBITDA for 2009 of
the Business Unit to which the Bonus Eligible Employee is assigned as compared to the
total adjusted EBITDA for 2009 included in the company’s 2009 budget for the

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PRG-Schultz Performance Bonus Plan

	 	 	 	Business Unit (by geographic region for Recovery Audit) approved by the company’s board
of directors, as follows:
	 
	 	 	 	The 5.A.(1). amount based upon adjusted EBITDA shall equal —
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit (by geographic region for Recovery
Audit) is less than 85% of the budgeted adjusted EBITDA for 2009, the 5.A.(1).
amount shall be zero.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit (by geographic region for Recovery
Audit) is equal to 85% of the budgeted adjusted EBITDA for 2009, the 5.A.(1).
amount shall be 17.5% of the preliminary bonus amount determined in Step 1 above.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit (by geographic region for Recovery
Audit) is equal to 100% of the budgeted adjusted EBITDA for 2009, the 5.A.(1).
amount shall be 35% of the preliminary bonus amount determined in Step 1 above.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit (by geographic region for Recovery
Audit) is equal to or greater than 115% of the budgeted adjusted EBITDA for
2009, the 5.A.(1). amount shall be 70% of the preliminary bonus amount determined in
Step 1 above.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit (by geographic region for Recovery
Audit) is between 85% and 100% or between 100% and 115% of the budgeted
adjusted EBITDA for 2009, the 5.A.(1). amount shall be calculated on a pro rata basis
consistent with the foregoing determinations of such amount.
	 
	 	 	 	The 5.B. amount based upon MBOs shall equal —
	 
	 	 	 	The 5.B. amount will be determined as described below based upon the achievement of the
MBOs assigned to the Bonus Eligible Employee. Each such Bonus Eligible Employee will
have three MBOs, the achievement of each which will determine the adjustments to 10% of
the aggregate 30% of the preliminary bonus amount determined in Step 1 above for the
Bonus Eligible Employee. The achievement of each MBO will be scored based on the
achievement chart below.

Achievement Scale

	 	 	 	 	 	 	 
	0

	 	 	0	%	 	Did not Meet
	1

	 	 	80	%	 	Met Some
	2

	 	 	100	%	 	Met
	3

	 	 	110	%	 	Exceeded
	4

	 	 	115	%	 	Super Exceeded

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PRG-Schultz Performance Bonus Plan

	 	 	 	For example, for MBO #1, if the Bonus Eligible Employee has determined to have
“Exceeded” expectations, the MBO will be scored a 3 and 10% of the preliminary bonus
amount for such Bonus Eligible Employee determined in Step 1 above that is assigned to
MBO #1 shall be multiplied by 110% to determine the adjustment for that 10% portion of
the preliminary bonus amount determined in Step 1 above. The foregoing calculation
shall be made for each Bonus Eligible Employee and each MBO assigned to the Bonus
Eligible Employee. The initial bonus amounts for the three MBOs then will be
aggregated to determine the 5.B. amount for each such Bonus Eligible Employee.
	 
	 	 	 	Step 6 — New Services/Consulting Business Unit (With MBOs).
	 
	 	 	 	For each Bonus Eligible Employee with MBOs in the New Services/Consulting Business
Unit, the preliminary bonus amount determined in Step 1 above then shall be adjusted to
equal the sum of the 6.A. and 6.B. amounts as described below.
	 
	 	 	 	The 6.A. amount based upon adjusted EBITDA and revenues shall equal —
	 
	 	 	 	The sum of (i) 35% of the preliminary bonus amount determined in Step 1 above, (ii)
the 6.A.(1). amount determined below based upon the total adjusted EBITDA for 2009 of
the Business Unit as compared to the total adjusted EBITDA for 2009 included in the
company’s 2009 budget for the Business Unit approved by the company’s board of
directors, and (iii) the 6.A.(2). amount determined below based upon the total revenues
for 2009 of the Business Unit as compared to the total revenues for 2009 included in
the company’s 2009 budget for the Business Unit, as follows:
	 
	 	 	 	The 6.A.(1). amount based upon adjusted EBITDA shall equal —
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit is less than 85% of the
budgeted adjusted EBITDA for 2009, the 6.A.(1). amount shall be zero.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit is equal to 85% of the
budgeted adjusted EBITDA for 2009, the 6.A.(1). amount shall be 8.75% of the
preliminary bonus amount determined in Step 1 above.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit is equal to 100% of the
budgeted adjusted EBITDA for 2009, the 6.A.(1). amount shall be 17.5% of the
preliminary bonus amount determined in Step 1 above.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit is equal to or greater than
115% of the budgeted adjusted EBITDA for 2009, the

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PRG-Schultz Performance Bonus Plan

	 	 	 	6.A.(1). amount shall be 35% of the preliminary bonus amount determined in Step 1
above.
	 
	 	 	 	If actual 2009 adjusted EBITDA for the Business Unit is between 85% and 100% or
between 100% and 115% of the budgeted adjusted EBITDA for 2009, the 6.A.(1).
amount shall be calculated on a pro rata basis consistent with the foregoing
determinations of such amount.
	 
	 	 	 	The 6.A.(2). amount based upon revenues shall equal —
	 
	 	 	 	If actual 2009 revenues for the Business Unit is less than 85% of the budgeted
revenues for 2009, the 6.A.(2). amount shall be zero.
	 
	 	 	 	If actual 2009 revenues for the Business Unit is equal to 85% of the budgeted
revenues for 2009, the 6.A.(2). amount shall be 8.75% of the preliminary bonus amount
determined in Step 1 above.
	 
	 	 	 	If actual 2009 revenues for the Business Unit is equal to 100% of the budgeted
revenues for 2009, the 6.A.(2). amount shall be 17.5% of the preliminary bonus amount
determined in Step 1 above.
	 
	 	 	 	If actual 2009 revenues for the Business Unit is equal to or greater than 115%
of the budgeted revenues for 2009, the 6.A.(2). amount shall be 35% of the preliminary
bonus amount determined in Step 1 above.
	 
	 	 	 	If actual 2009 revenues for the Business Unit is between 85% and 100% or
between 100% and 115% of the budgeted revenues for 2009, the 6.A.(2). amount
shall be calculated on a pro rata basis consistent with the foregoing determinations of
such amount.
	 
	 	 	 	The 6.B. amount based upon MBOs shall equal —
	 
	 	 	 	The 6.B. amount will be determined as described below based upon the achievement of the
MBOs assigned to the Bonus Eligible Employee. Each such Bonus Eligible Employee will
have three MBOs, the achievement of each which will determine the adjustments to 10% of
the aggregate 30% of the preliminary bonus amount determined in Step 1 above for the
Bonus Eligible Employee. The achievement of each MBO will be scored based on the
achievement chart below.

Achievement Scale

	 	 	 	 	 	 	 
	0

	 	 	0	%	 	Did not Meet
	1

	 	 	80	%	 	Met Some
	2

	 	 	100	%	 	Met
	3

	 	 	110	%	 	Exceeded
	4

	 	 	115	%	 	Super Exceeded

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PRG-Schultz Performance Bonus Plan

	 	 	 	For example, for MBO #1, if the Bonus Eligible Employee has determined to have
“Exceeded” expectations, the MBO will be scored a 3 and 10% of the preliminary bonus
amount for such Bonus Eligible Employee determined in Step 1 above that is assigned to
MBO #1 shall be multiplied by 110% to determine the adjustment for that 10% portion of
the preliminary bonus amount determined in Step 1 above. The foregoing calculation
shall be made for each Bonus Eligible Employee and each MBO assigned to the Bonus
Eligible Employee. The initial bonus amounts for the three MBOs then will be
aggregated to determine the 6.B. amount for each such Bonus Eligible Employee.
	 
	 	 	 	Step 7 – Corporate/Functional Business Unit (With MBOs).
	 
	 	 	 	For each Bonus Eligible Employee with MBOs in the Corporate/Functional Business Unit,
the preliminary bonus amount determined in Step 1 above then shall be adjusted to equal
the sum of the 7.A. and 7.B. amounts as described below.
	 
	 	 	 	The 7.A. amount based upon adjusted EBITDA shall equal –
	 
	 	 	 	70% of the preliminary bonus amount determined in Step 1 above for the Bonus Eligible
Employee.
	 
	 	 	 	The 7.B. amount based on MBOs shall equal —
	 
	 	 	 	The 7.B. amount will be determined as described below based upon the achievement of the
MBOs assigned to the Bonus Eligible Employee. Each such Bonus Eligible Employee will
have three MBOs, the achievement of each which will determine the adjustments to 10% of
the aggregate 30% of the preliminary bonus amount determined in Step 1 above for the
Bonus Eligible Employee. The achievement of each MBO will be scored based on the
achievement chart below.

Achievement Scale

	 	 	 	 	 	 	 
	0

	 	 	0	%	 	Did not Meet
	1

	 	 	80	%	 	Met Some
	2

	 	 	100	%	 	Met
	3

	 	 	110	%	 	Exceeded
	4

	 	 	115	%	 	Super Exceeded

	 	 	 	For example, for MBO #1, if the Bonus Eligible Employee has determined to have
“Exceeded” expectations, the MBO will be scored a 3 and 10% of the preliminary bonus
amount for such Bonus Eligible Employee determined in Step 1 above that is assigned to
MBO #1 shall be multiplied by 110% to determine the adjustment for that 10% portion

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PRG-Schultz Performance Bonus Plan

	 	 	 	of the preliminary bonus amount determined in Step 1 above. The foregoing calculation
shall be made for each Bonus Eligible Employee and each MBO assigned to the Bonus
Eligible Employee. The initial bonus amounts for the three MBOs then will be
aggregated to determine the 7.B. amount for each such Bonus Eligible Employee.
	 
	 	E.	 	Allocation of Total Bonus Pool to Bonus Eligible Employees
	 
	 	 	 	The Total Bonus Pool determined in II.C. above based on the 2009 adjusted EBITDA for
the company will then be allocated among all Bonus Eligible Employees by multiplying
the Total Bonus Pool determined in II.C. above by the percentage that equals the
initial bonus amount for the Bonus Eligible Employee determined in II.D. above divided
by the total of all of the initial bonus amounts for all Bonus Eligible Employees
determined in II.D. above. The resulting product shall be the portion of the Total
Bonus Pool to be allocated, and paid, to each Bonus Eligible Employee, subject to the
second paragraph of this II.E.
	 
	 	 	 	Notwithstanding the foregoing, some Bonus Eligible Employees could be paid a bonus
somewhat higher, or somewhat lower, than their bonus as calculated in the first
paragraph of this II.E. These exceptions are expected to be rare, will be based on
individual performance and must be approved in advance by the company’s SVP-Human
Resources and CEO. Since the Total Bonus Pool will be a fixed amount, if any Bonus
Eligible Employee receives a larger bonus than calculated in the first paragraph of
this II.E., one or more other Bonus Eligible Employees must receive less than their
allocated bonus, so that the aggregate bonuses to be paid will never exceed the Total
Bonus Pool determined in II.C. above.
	 
	 	F.	 	Qualification for and Payment of Bonuses
	 
	 	 	 	Bonus Eligible Employees must have at least a satisfactory performance rating during
the Plan year and at the time bonus payments are made to be eligible to receive a bonus
payment under this Plan.
	 
	 	 	 	Bonuses will be paid annually in a lump sum, net of the tax withholdings, and in most
cases within thirty (30) days after completion of the annual audit of the company’s
2009 results (but in no event later than March 15, 2010).
	 
	 	 	 	Bonus Eligible Employees must be actively employed by PRG-Schultz at the time of the
payment in order to receive a bonus. Exceptions to this requirement may be made in
connection with terminations due to retirement, disability or death.

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PRG-Schultz Performance Bonus Plan

	 	 	 	If an employee becomes eligible to participate in the 2009 PRG-Schultz Performance
Bonus Plan after January 1st (by beginning work in a Bonus Eligible
Position), he/she may be eligible for a prorated payout based on the date of entry into
the Plan, but may not enter the plan after November 1st of the Plan Year.

	III.	 	Plan Interpretation and Administration
	 
	 	 	Overall responsibility for the administration of the Plan resides with the SVP-Human
Resources.
	 
	 	 	All bonus payments are subject to the approval of the company’s SVP-Human Resources, the CEO,
and the Compensation Committee of the company’s Board of Directors.
	 
	 	 	The company reserves the right to discontinue or amend the Plan, (with or without payment of
any bonuses hereunder) any time and from time to time. Such changes could include, for
instance and without limitation, the revision of the company’s financial targets in the event
of business or organizational changes, including acquisitions and divestitures, deemed to
warrant such action. This Plan is a discretionary bonus plan and confers no rights to Bonus
Eligible Employees or other employees. Authority and responsibility for interpretation and
application of the Plan rest solely with the company’s SVP-Human Resources, CEO and the
Compensation Committee of the company’s Board of Directors.

[This space intentionally left blank.]

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PRG-Schultz Performance Bonus Plan

	IV.	 	Plan Acknowledgement Form

I have received and reviewed the terms of the 2009 PRG-Schultz Performance Bonus Plan. I
understand and agree that this Plan does not create a contract of employment between the
PRG-Schultz and me nor does it confer on me any other rights with respect to any bonuses that may
or may not become payable under this Plan.

Position:

Business Unit (other than

Corporate/Functional)

(If Applicable):

2009 Target Bonus:

2009 Maximum Bonus:

 

Employee’s Signature

Date                                

 

Employee’s Name (typed or printed)

PLEASE FORWARD THE COMPLETED EMPLOYEE ACKNOWLEDGEMENT FORM TO LISA CHASEY IN
HUMAN RESOURCES IN ATLANTA

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15

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