| (6) | Pursuant to the terms of the equity award agreements governing Ms. Ackermann’s and Messrs. Appio’s and Humphries’ 2017 RSUs, and for Messrs. Papa’s, Herendeen’s, Appio’s and Ackermann’s 2018 RSUs and MRSUs and for all of the NEOs’ 2019 RSUs and MRSUs, if their employment is terminated by us without cause, or by Mr. Papa for good reason, in both of those circumstances (other than in connection with our change in control), as well as upon his death or disability, Mr. Papa will be entitled to (i) prorated vesting of unvested PSUs, based on our actual performance, through Mr. Papa’s termination date; (ii) accelerated vesting of unvested RSUs; and (iii) prorated vesting of unvested option awards through Mr. Papa’s termination date. If Mr. Papa’s employment is terminated by us without cause, or by Mr. Papa for good reason, in each case within 12 months of our change in control (or during thesix-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), unvested PSUs will vest based on actual performance through Mr. Papa’s termination date (or, if later, the date of the change in control) and unvested options will vest in full.
For Mr. Papa, “good reason” includes (i) a diminution of duties and responsibilities, including removing Mr. Papa from the position of CEO; (ii) any reduction in base salary or target incentive opportunity; (iii) any relocation of Mr. Papa’s primary place of business that results in an increase of hisone-way commute by 50 miles or more; and (iv) a material breach by us of a material provision of his employment agreement.
Mr. Papa will be subject to customary restrictive covenants, includingnon-competition andnon-solicitation covenants during his employment and for two years following termination of employment for any reason.
Executive Vice President and Chief Financial Officer
In August 2016, we entered into an employment agreement with Mr. Herendeen, our Executive Vice President and CFO, in connection with his hiring. The initial term of Mr. Herendeen’s agreement commenced on
August 22, 2016 and continues until the third anniversary of the commencement date. Beginning at the expiration of the initial term, the term will automatically renew for successive one year periods, unless either party gives notice ofnon-renewal.
Shortly following his commencement date, Mr. Herendeen received a cash payment from us equal to $10,000,000 to compensate him for equity-based compensation he forfeited in connection with the termination of his employment with his former employer. If Mr. Herendeen voluntarily terminates his employment without good reason (as defined below) or his employment is terminated by us for cause during the first year of his employment, he will be required to repay an amount equal to theafter-tax value of $5,000,000 multiplied by a fraction, the numerator of which is the number of complete months that have elapsed from his commencement date through the date of such termination of employment, and the denominator of which is 12.
If Mr. Herendeen’s employment is terminated by us without cause, or by Mr. Herendeen for good reason, subject to his executing and not revoking a general release of claims, Mr. Herendeen will be entitled to receive a cash severance payment equal to one times the sum of his annual base salary and annual target incentive, and a prorated annual incentive for the year of termination equal to the lesser of the annual incentive he would have been entitled to receive based on our actual performance and his annual target incentive. If such termination occurs in contemplation of our change in control or within 12 months following our change in control, he will be entitled to receive a cash severance payment equal to two times the sum of his annual base salary and annual target incentive, and a prorated annual target incentive for the year of termination.
Upon a termination of Mr. Herendeen’s employment due to death or disability or upon expiration of the employment term followingnon-renewal of his employment agreement by either party, Mr. Herendeen will be entitled to receive a prorated annual incentive for the year of termination equal to the lesser of the annual incentive he would have been entitled to receive based on our actual performance and his annual target incentive.
Outstanding equity awards will be treated in accordance with the terms of the agreements memorializing their grant. Under the award agreements that were outstanding as of December 30, 2016, if Mr. Herendeen’s employment is terminated by us without cause, or by Mr. Herendeen for good reason, in both of those circumstances (other than in connection with our change in control), as well as upon his death or disability, Mr. Herendeen will be entitled to (i) accelerated vesting of unvested RSUs; and (ii) prorated vesting of unvested option awards through Mr. Herendeen’s termination date.
If Mr. Herendeen’s employment is terminated by us without cause, or by Mr. Herendeen for good reason, in each case within 12 months of our change in control (or during thesix-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), unvested options will vest in full.
For Mr. Herendeen, “good reason” includes (i) a material reduction in duties and responsibilities, including removing Mr. Herendeen from the position of CFO; (ii) any reduction in his base salary or target incentive opportunity which is not comparable to the reductions for other similarly situated executive officers; (iii) any relocation of Mr. Herendeen’s primary place of business that results in an increase of hisone-way commute by 50 miles or more; and (iv) a material breach by us of a material provision of his employment agreement.
Mr. Herendeen will be subject to certain restrictive covenants, includingnon-competition andnon-solicitation covenants during his employment and for one year following termination of employment for any reason, and confidentiality,non-disparagement and cooperation covenants.
Executive Vice President and General Counsel
In July 2016, we entered into an employment agreement with Ms. Ackermann, our Executive Vice President and General Counsel, in connection with her hiring.
Shortly following her commencement date, Ms. Ackermann received aone-timesign-on bonus payment of $1,500,000. If Ms. Ackermann voluntarily terminates her employment without good reason (as defined below) or her employment is terminated by us for cause during the first two years of her employment, she will be required to repay a prorated portion of theafter-tax amount of $750,000, based on the portion of suchtwo-year period that has not elapsed as of the date of termination.
If Ms. Ackermann’s employment is terminated by us without cause, or by Ms. Ackermann for good reason, she will be entitled to receive a cash severance payment equal to one times the sum of her annual base salary and annual target incentive, and a prorated annual incentive for the year of termination equal to the lesser of the annual incentive she would have been entitled to receive based on our actual performance and her annual target incentive. If such termination occurs in contemplation of our change in control or within 12 months following our change in control, she will be entitled to receive a cash severance payment equal to two times the sum of her annual base salary and annual target incentive, and a prorated annual target incentive for the year of termination.
Pursuant to the terms of the equity award agreements that were outstanding as of December 30, 2016, if Ms. Ackermann’s employment is terminated by us without cause, or by Ms. Ackermann for good reason, in both of those circumstances (other than in connection with our change of control), as well as upon her death or disability, Ms. Ackermann will be entitled to (i) prorated vesting of unvested PSUs, based on our actual performance, through Ms. Ackermann’s termination date; (ii) accelerated vesting of unvested RSUs; and (iii) prorated vesting of unvested option awards through Ms. Ackermann’s termination date.
If Ms. Ackermann’s employment is terminated by us without cause, or by Ms. Ackermann for good reason, in each case within 12 months of our change of control (or during thesix-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), unvested PSUs will vest based on actual performance through Ms. Ackermann’s termination date (or, if later, the date of the change in control) and unvested options will vest in full.
For Ms. Ackermann, “good reason” includes (i) a material reduction in duties and responsibilities, including removing her from the position of General Counsel; (ii) any reduction in her base salary or target incentive opportunity which is not comparable to the reductions for other similarly situated executive officers; and (iii) a material breach by us of a material provision of her employment agreement.
Former Chief Executive Officer
In May 2016, we entered into a separation and consulting agreement with Mr. Pearson, our former CEO. Under this agreement, subject to Mr. Pearson executing and not revoking a general release of claims, Mr. Pearson was entitled to receive (as defined in the termination without cause clause of his employment agreement), in addition to any unpaid base salary due to him in respect of his services prior to his termination date, (i) a prorated annual incentive in respect of the 2016 fiscal year; (ii) a severance payment equal to $9,000,000; (iii) continued health, medical, dental and vision coverage for himself and his dependents at the rates applicable to active employees for a period of two years following his termination date; and (iv) office space andnon-exclusive access to an executive administrative assistant and IT support for a period of two years following his termination date. In addition, under his prior employment agreement, Mr. Pearson is required to hold 1,000,000 Common Shares that he received in connection with his equity awards for two years following his termination date. Based on the best information that the Company has as of the date of this Proxy Statement, Mr. Pearson is not holding this amount of Common Shares as of such date.
Mr. Pearson also agreed to provide us with consulting services through December 31, 2017, subject toone-month renewal periods if mutually agreed upon by Mr. Pearson and us. We agreed to pay Mr. Pearson $83,333 for each month (prorated for partial months) during the consulting period that services are performed through the end of 2016 and $15,000 for each month (prorated for partial months) that services are performed for the remainder of the consulting period. Mr. Pearson last provided consulting services and received payment in October 2016. We reserved the right to terminate the consulting period at any time prior to December 31, 2017 and did so in January 2017.
Mr. Pearson’s separation and consulting agreement also includes covenants addressing cooperation and mutual non-disparagement. Mr. Pearson will also continue to be bound by covenants in his prior employment agreement addressing confidentiality and prohibiting competition and solicitation of our employees through the second anniversary of his termination date.
Former Interim Chief Executive Officer
In July 2015, we entered into a separation and consulting agreement with Mr. Schiller, our former Interim CEO. Mr. Schiller became eligible to receive compensation as one of ournon-employee Directors following the termination date in accordance with ournon-employee Director compensation program as then in effect, prorated for any portion of the year for which he did not qualify as anon-employee Director. For a period beginning on July 1, 2015 and expiring on January 31, 2016, Mr. Schiller agreed to make himself available to consult with us from time to time, for which he received $2,500 per month. In addition, Mr. Schiller’s outstanding awards, other than PSUs, were eligible to continue vesting as service was rendered during the consulting period and, in the case of PSUs, were eligible to vest and be settled in 100,000 Common Shares upon the earlier to occur of the termination of the consulting period or a qualifying event under the terms of the applicable PSU award agreement. The agreement also included covenants addressing cooperation, mutual non-disparagement and confidentiality. Mr. Schiller was bound by covenants in prohibiting competition and solicitation of our employees through January 31, 2017.
Former Executive Vice President and Chief Financial Officer and Former Executive Vice President, Corporate Development and Strategy
In February 2017, we entered into a separation and consulting agreement with Mr. Rosiello, our former Executive Vice President and CFO and former Executive Vice President, Corporate Development and Strategy. Under this agreement, subject to his executing and not revoking a general release of claims, Mr. Rosiello was entitled to receive, in addition to any unpaid base salary due to him in respect of his services prior to his termination date, (i) a lump sum cash payment equal to two times the sum of his annual base salary and annual target incentive; (ii) continued health, medical, dental and vision coverage for himself and his dependents at the rates applicable to active employees for a period of two years following his termination date; and (iii) outplacement services up to an aggregate of $20,000 at Mr. Rosiello’s request until the earlier of 12 months following his termination date and the date he secures full-time employment, payments and benefits that are consistent with his then-existing employment arrangements.
Mr. Rosiello also agreed to provide us with consulting services through December 31, 2017, subject toone-month renewal periods if mutually agreed upon by Mr. Rosiello and us. We agreed to pay Mr. Rosiello $20,000 for each month (prorated for partial months) that services are performed. We reserved the right to terminate the consulting period at any time prior to the first anniversary of Mr. Rosiello’s termination date.
Upon a termination without cause for good reason or upon his death or disability, in each case following theone-year anniversary of the grant date, the performance thresholds applicable to the PSUs would be assessed through termination and a prorated portion of such units could vest upon termination based on a fraction, the numerator of which is the number of days from the date of grant through termination, and the denominator of which is 1,095 or 1,825 depending on whether the PSUs vest over three years or five years, respectively. In the event of a change in control of the Company, the performance-based RSUs would be converted into time-based RSUs equal to the number of RSUs that would have vested based on performance through the change in control. Upon a termination without cause or for good reason, the RSUs received pursuant to a retention letter agreement would have vested on a prorated monthly basis with a minimum vesting credit of 6 months, subject to his executing a general release of claims. The RSUs received pursuant to the Company matching program would have vested in full upon a termination (i) upon death or (ii) by us without cause, or by Mr. Rosiello for good reason, within 12 months following a Change of Control.
With respect to his actual payment in connection with his separation, Mr. Rosiello’s unvested PSUs, as well as the RSUs that he received pursuant to the Company matching program, were forfeited. The RSUs that he received pursuant to his retention letter agreement vested on a prorated monthly basis with a minimum vesting credit of six months, subject to his executing a general release of claims.
Mr. Rosiello’s separation and consulting agreement also includes covenants addressing cooperation and mutual non-disparagement. Mr. Rosiello will also continue to be bound by covenants in his prior employment agreement addressing confidentiality and prohibiting competition and solicitation of our employees through the first anniversary of his termination date.
Former Executive Vice President and Company Group Chairman — Dr. Kellen
In February 2017, we entered into a separation and consulting agreement with Dr. Kellen, our former Executive Vice President and Company Group Chairman. Under this agreement, subject to his executing and not revoking a general release of claims, Dr. Kellen was entitled to receive (i) a lump sum cash payment equal to two times the sum of his annual base salary and annual target incentive; (ii) continued health, medical, dental and vision coverage for himself and his dependents at the rates applicable to active employees for a period of two years following his termination date; and (iii) outplacement services up to an aggregate of $20,000 at Dr. Kellen’s request until the earlier of 12 months following his termination date and the date he secures full-time employment, payments and benefits that are consistent with his then-existing employment arrangements.
Dr. Kellen also agreed to provide us with consulting services through December 31, 2017, subject toone-month renewal periods if mutually agreed upon by Dr. Kellen and us. We agreed to pay Dr. Kellen $20,000 for each month (prorated for partial months) that services are performed. We reserve the right to terminate the consulting period at any time prior to the first anniversary of Dr. Kellen’s termination date or any subsequentone-month renewal period.
With respect to his actual payment in connection with his separation, Dr. Kellen’s unvested PSUs, as well as the RSUs that he received pursuant to the Company matching program, were forfeited. The RSUs that he received pursuant to his retention letter agreement vested on a prorated monthly basis with a minimum vesting credit of 6 months, subject to his executing a general release of claims.
Dr. Kellen’s separation and consulting agreement also includes covenants addressing cooperation and mutual non-disparagement. Dr. Kellen will also continue to be bound by covenants in his prior employment agreement addressing confidentiality and prohibiting competition and solicitation of our employees through the first anniversary of his termination date.
Former Executive Vice President and Company Group Chairman — Ms. Whitaker
In February 2017, we entered into a separation agreement with Ms. Whitaker, our former Executive Vice President and Company Group Chairman. Under this agreement, subject to her executing and not revoking a general release of claims, Ms. Whitaker was entitled to receive (i) a lump sum cash payment equal to two times the sum of her annual base salary and annual cash incentive; (ii) continued health medical, dental and vision coverage for herself and her dependents at the rates applicable to active employees for a period of two years following her termination date; and (iii) outplacement services up to an aggregate of $20,000 at Ms. Whitaker’s request until the earlier of 12 months following her termination date and the date she secures full-time employment, payments and benefits that are consistent with her then-existing employment arrangements.
With respect to her actual payment in connection with her separation, Ms. Whitaker’s unvested PSUs, as well as the RSUs that she received pursuant to the Company matching program, were forfeited. The RSUs that she received pursuant to her retention letter agreement vested on a prorated monthly basis with a minimum vesting credit of six months, subject to her executing a general release of claims.
Ms. Whitaker’s separation agreement also includes covenants addressing cooperation and mutual non-disparagement. Ms. Whitaker will also continue to be bound by covenants in her prior employment agreement addressing confidentiality and prohibiting competition and solicitation of our employees through the first anniversary of her termination date.
Former Executive Vice President, General Counsel and Chief Legal Officer, Head of Corporate and Business Development
In October 2016, we entered into a separation agreement with Mr. Chai-Onn, our former Executive Vice President, General Counsel and Chief Legal Officer, Head of Corporate and Business Development. Under this agreement, subject to his executing and not revoking a general release of claims, Mr. Chai-Onn was entitled to receive, in addition to any unpaid base salary due to him in respect of his services prior to his termination date, (i) a lump sum cash payment equal to two times the sum of his annual base salary and annual target incentive; (ii) a lump sum cash payment equal to the remaining balance of the “special retention award” granted pursuant to the terms of the retention letter agreement dated May 9, 2016; (iii) continued health, medical, dental and vision coverage for himself and his dependents at the rates applicable to active employees for a period of two years following his termination date; and (iv) outplacement services up to an aggregate of $20,000 atMr. Chai-Onn’s request until the earlier of 12 months following his termination date and the date he secures full-time employment, payments and benefits that are consistent with his then-existing employment arrangements.
With respect to his actual payment in connection with his separation,Mr. Chai-Onn’s unvested PSUs, as well as the RSUs that he received pursuant to the Company matching program, were forfeited. The RSUs that he received pursuant to his retention letter agreement vested on a prorated monthly basis with a minimum vesting credit of six months, subject to his executing a general release of claims.
Mr. Chai-Onn’s separation agreement also includes covenants addressing cooperation and mutualnon-disparagement. Mr. Chai-Onn will also continue to be bound by covenants in his prior employment agreement addressing confidentiality and prohibiting competition and solicitation of our employees through the first anniversary of his termination date.
Termination/Change in Control(1)
| | | | | | | | | | | | | | | | | Name | | Cash
Severance
($) | | | Benefits and
Perquisites
($)(2) | | | Accelerated RSU
Vesting
($)(3) | | | Accelerated
Option
Vesting
($)(4) | | Current Officers | | | | | | | | | | | | | | | | | Joseph C. Papa | | | 7,500,000 | | | | 44,504 | | | | 5,421,289 | | | | — | | Paul S. Herendeen | | | 4,830,685 | | | | — | | | | 2,178,000 | | | | — | | Christina M. Ackermann | | | 2,348,055 | | | | — | | | | 636,615 | | | | — | | Former Officers | | | | | | | | | | | | | | | | | J. Michael Pearson(5) | | | — | | | | — | | | | — | | | | — | | Howard B. Schiller(6) | | | — | | | | — | | | | — | | | | — | | Robert L. Rosiello(7) | | | 4,400,000 | | | | 64,504 | | | | 378,415 | | | | — | | Dr. Ari S. Kellen(5) | | | — | | | | — | | | | — | | | | — | | Anne C. Whitaker(8) | | | — | | | | — | | | | — | | | | — | | Robert R. Chai-Onn(5) | | | — | | | | — | | | | — | | | | — | |
(1) | This table includes estimated amounts payable assuming each Named Executive Officer’s employment was terminated on December 31, 2016 by us without cause or by the Named Executive OfficerNEOs for good reason, unvested RSUs will vestpro-rata and if their employment is terminated due to death or disability, all unvested RSUs will vest. Under these agreements, if an NEO is terminated without cause (or, in the case of the 2017, 2018 and 2019 RSUs, by the NEO for good reason) within 12 months followingof a change in control.control (or during thesix-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), all unvested RSUs will vest. This table does not include amounts payablevesting treatment, except in the case of death or disability shown above under “Termination due to Messrs. Pearson, SchillerDeath or Disability,” applies beginning after the first anniversary of the grant date. Therefore, no value is shown above for the 2019 RSUs and Chai-Onn, Dr. KellenMRSUs under “Termination without Cause or for Good Reason” or “Termination within 12 months of a Change in Control.” For all of the NEOs’ 2018 and Ms. Whitaker because they separated from2019 RSUs, if the Company
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| beforeNEO voluntarily terminates his or her service with us on or after age 55, and age plus years of service total at least 65, all unvested RSUs will vest. This vesting treatment also applies beginning after the filingfirst anniversary of this proxy statement, as permitted by SEC rules. Mr. Rosiello also separated from the Company beforegrant date. Therefore, no value is shown for the filing of this proxy statement; however, this table includes estimated amounts payable2019 RSUs separately above for “Termination due to Mr. Rosiello, as required by SEC rules for CFOs.Retirement.”
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(2)(7) | The amounts shown in this column represent certain benefits and perquisites that the Named Executive Officers would receive, including medical insurance coverage, 401(k) matching contributions, life insurance coverage and outplacement services.
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(3) | The amounts shown in this column represent the product of (i) the number of unvested shares subject to PSUs, matching RSUs and RSUs, held by the Named Executive Officer, as applicable, at December 31, 2016 which would be accelerated pursuantPursuant to the terms of the individual employment agreements orequity award agreements multiplied by (ii) the closing share price on December 31, 2016, which was $14.52.
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(4) | The amounts shown in this column represent the product of (i) the number of unvested shares underlying the stock options held by the Named Executive Officer at December 31, 2016 which would vest pursuant to the termsgoverning Ms. Ackermann’s and Messrs. Appio’s and Humphries’ 2017 PSUs, Messrs. Papa’s, Herendeen’s and Appio’s and Ms. Ackermann’s 2018 PSUs, and for all of the individualNEOs’ 2019 PSUs, if their employment agreements or award agreements, multiplied by (ii) an amount equal to the excess of the closing share price, if any, on December 31, 2016, which was $14.52, over the option price.
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(5) | These former Named Executive Officers separated from the Company in 2016. The amounts paid or payable to these Named Executive Officers in connection with their terminations are shown in the “Termination/No Change in Control” table.
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(6) | Mr. Schiller assumed the role of interim CEO from January 6, 2016 to February 28, 2016, during the medical leave of absence of Mr. Pearson, the Company’s former Chairman and CEO. Mr. Schiller was not entitled any termination benefits upon the termination of his employment agreement as interim CEO.
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(7) | Mr. Rosiello separated from the Company on December 31, 2016. The amounts shown in this table represent the amounts payable by the Company upon termination of his employmentis terminated by us without cause, or by Mr. Rosiellothe NEOs for good reason, within 12 months following a change in control. The amounts paidor upon death or disability, they will be entitled to Mr. Rosiello in connection with his termination on December 31, 2016 areprorated vesting of unvested PSUs at actual performance as shown in the “Termination/No Change in Control” table.
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(8) | Ms. Whitaker separated from the Company in January 2017. The amount payableabove under “Termination without Cause or for Good Reason” and “Termination due to Ms. Whitaker in connection with her terminationDeath or Disability.” If their employment is shown in the “Termination/No Change in Control” table.
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Termination/No Change in Control(1)
| | | | | | | | | | | | | | | | | Name | | Cash
Severance
($) | | | Benefits and
Perquisites
($)(2) | | | Accelerated RSU
Vesting
($)(3) | | | Accelerated
Option
Vesting
($)(4) | | Current Officers | | | | | | | | | | | | | | | | | Joseph C. Papa | | | 7,500,000 | | | | 44,504 | | | | 5,421,289 | | | | — | | Paul S. Herendeen | | | 2,630,685 | | | | — | | | | 2,178,000 | | | | — | | Christina M. Ackermann | | | 1,268,055 | | | | — | | | | 636,615 | | | | — | | Former Officers | | | | | | | | | | | | | | | | | J. Michael Pearson(5) | | | 10,460,342 | | | | 45,157 | | | | — | | | | — | | Howard B. Schiller(6) | | | — | | | | — | | | | — | | | | — | | Robert L. Rosiello(7) | | | 4,400,000 | | | | 64,504 | | | | 137,093 | | | | — | | Dr. Ari S. Kellen(7) | | | 4,400,000 | | | | 64,504 | | | | 186,056 | | | | — | | Anne C. Whitaker(8) | | | 2,700,000 | | | | 64,645 | | | | 96,924 | | | | — | | Robert R. Chai-Onn(9) | | | 3,961,159 | | | | 66,406 | | | | 468,581 | | | | — | |
(1) | This table includes estimated amounts payable assuming each Named Executive Officer’s employment were terminated on December 31, 2016 by us without cause, or by the Named Executive OfficerNEOs for good reason, (other thanin each case within 12 months followingof our change of control (or during thesix-month period prior to a change in control if such termination was in contemplation of, and directly related to, the change in control), unvested PSUs will vestpro-rata based on target performance through termination date (or, if later, the date of the change in control).
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(2) | The amounts In the event the PSUs are not assumed or substituted in connection with the change of control, unvested PSUs will vestpro-rata based on target performance on the date of such change of control. This vesting treatment for the PSUs applies beginning after the first anniversary of the grant date. Therefore, no value is shown above for the 2019 PSUs under “Termination without Cause or for Good Reason,” “Termination within 12 months of a Change in this column represent certain benefitsControl,” or “Termination due to Death or Disability.” For Messrs. Papa’s, Herendeen’s and perquisites thatAppio’s and Ms. Ackermann’s 2018 PSUs and for all of the Named Executive Officers would receive, including medical insurance coverage, 401(k) matching contributions, life insurance coverageNEOs’ 2019 PSUs, if the NEO voluntarily terminates his or her service with us on or after age 55, and outplacement services.age plus years of service total at least 65, any unvested portion of the PSU will vestpro-rata based on actual results. This vesting treatment also applies beginning after the first anniversary of the grant date. Therefore, no value is shown separately above for “Termination due to Retirement.”
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(3)(8) | The amounts shown in this column represent the product of (i) the number of unvested shares subject to PSUs, matching RSUs and RSUs, held by the Named Executive Officer, as applicable, at December 31, 2016 which would be accelerated pursuantPursuant to the terms of the individual employment agreements orequity award agreements multipliedgoverning Ms. Ackermann’s and Messrs. Appio’s and Humphries’ 2017 Stock Options, Messrs. Papa’s, Herendeen’s and Appio’s and Ms. Ackermann’s 2018 Stock Options, and for all of the NEOs’ 2019 Stock Options, if their employment is terminated by (ii)us without cause, or terminated by the share priceNEOs for Good Reason, in either case within 12 months of our change of control (or during thesix-month period prior to a change in control if such termination was in
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| contemplation of, and directly related to, the change in control), or in the case of death or disability, unvested options will vest in full. This vesting treatment, except in the case of death or disability shown above under “Termination due to Death or Disability,” applies beginning after the first anniversary of the grant date. Therefore, no value is shown above for the 2019 Stock Options under “Termination within 12 months of a Change in Control.” For Messrs. Papa’s, Herendeen’s and Appio’s and Ms. Ackermann’s 2018 Stock Options and for all of the NEOs’ 2019 Stock Options, if the NEO voluntarily terminates his or her service with us on December 31, 2016, which was $14.52.or after age 55, and age plus years of service total at least 65, all unvested options will vest. This vesting treatment also applies beginning after the first anniversary of the grant date. Therefore, no value is shown separately above for “Termination due to Retirement.” |
(4)(9) | The amounts shown in this column represent the product of (i) the number of unvested shares underlying the stock options held by the Named Executive Officer at December 31, 2016 which would vest pursuantPursuant to the terms of the individualequity award agreement governing Mr. Humphries’ RSUs received upon hire, if Mr. Humphries’ employment agreementsis terminated by us without cause or award agreements, multiplied by (ii) an amount equalhim for good reason, or upon death or disability, he is entitled to the excessaccelerated vesting of the share price, if any on December 31, 2016, which was $14.52, over the option price.
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(5) | Mr. Pearson separated from the Companyunvested RSUs as shown above under “Termination without Cause or for Good Reason,” “Termination within 12 months of a Change in May 2016. The amount shown represents Mr. Pearson’s cash severance paid in 2016Control,” and is equal“Termination due to the sum of (A) lesser of (x) two times the sum of (i) Mr. Pearson’s base salary as of the termination date and (ii) target bonus and (y) $9,000,000 and (B) a prorated bonus based on actual performance based on the number of days employed during 2016.
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(6) | Mr. Schiller assumed the role of interim CEO from January 6, 2016 to February 28, 2016, during the medical leave of absence of Mr. Pearson, the Company’s former Chairman and CEO. Mr. Schiller was not entitled any termination benefits upon the termination of his employment agreement as interim CEO.
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(7) | These former Named Executive Officers separated from the Company on December 31, 2016. The amounts shown represent the cash severance paid to these former Named Executive Officers and are equal to the sum of two times (x) the Named Executive Officer’s base salary as of December 31, 2016, and (y) 2016 target bonus.
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(8) | Ms. Whitaker separated from the Company in January 2017. The amount shown represents the cash severance paid to Ms. Whitaker and is equal to two times the sum of (x) Ms. Whitaker’s base salary as of December 31, 2016, and (y) 2016 target bonus.
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(9) | Mr. Chai-Onn separated from the Company in October 2016. The amount shown represents the cash severance paid to Mr. Chai-Onn and is equal to the sum of (A) two times the sum of(x) Mr. Chai-Onn’s base salary as of his termination date, and (y) 2016 target bonus and (B) prorated bonus based on actual performance based on the number of days employed during 2016.Death or Disability.”
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Termination/Death(1)2019 Pay Ratio Disclosure
Pay Ratio In accordance with the requirements of Section 953(b) of the Dodd-Frank Act and Item 402(u) of RegulationS-K (which we collectively refer to as the “Pay Ratio Rule”), we are providing the following estimated information for 2019: | | | | | | | | | | | | | | | | | Name | | Cash
Severance
($) | | | Benefits and
Perquisites
($) | | | Accelerated RSU
Vesting
($)(2) | | | Accelerated
Option
Vesting
($)(3) | | Current Officers | | | | | | | | | | | | | | | | | Joseph C. Papa | | | — | | | | — | | | | 5,421,289 | | | | — | | Paul S. Herendeen | | | 430,685 | | | | — | | | | 2,178,000 | | | | — | | Christina M. Ackermann | | | — | | | | — | | | | 636,615 | | | | — | | Former Officers | | | | | | | | | | | | | | | | | J. Michael Pearson(4) | | | — | | | | — | | | | — | | | | — | | Howard B. Schiller(5) | | | — | | | | — | | | | — | | | | — | | Robert L. Rosiello(6) | | | — | | | | — | | | | 241,322 | | | | — | | Dr. Ari S. Kellen(4) | | | — | | | | — | | | | — | | | | — | | Anne C. Whitaker(7) | | | — | | | | — | | | | — | | | | — | | Robert R. Chai-Onn(4) | | | — | | | | — | | | | — | | | | — | |
the median of the annual total compensation of all our employees (excluding our CEO) was $38,090; (1) | This table includes estimated amounts payable assuming each Named Executive Officer’s employment were terminated on December 31, 2016 as a result of the Named Executive Officer’s death. This table does not
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the annual total compensation of our CEO was $17,141,646; and | include amounts payable to Messrs. Pearson, Schiller and Chai-Onn, Dr. Kellen and Ms. Whitaker because they separated from the Company before the filing of this proxy statement, as permitted by SEC rules. Mr. Rosiello also separated from the Company before the filing of this proxy statement; however, this table includes estimated amounts payable to Mr. Rosiello, as required by SEC rules for CFOs.
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(2) | The amounts shown in this column represent the product of (i) the number of unvested shares subject to PSUs, matching RSUs and RSUs, held by the Named Executive Officer, as applicable, at December 31, 2016 which would be accelerated pursuant to the terms of the individual employment agreements or award agreements, multiplied by (ii) the closing share price on December 31, 2016, which was $14.52.
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the ratio of these two amounts was 450 to 1. We believe that this ratio is a reasonable estimate calculated in a manner consistent with the requirements of the Pay Ratio Rule. (3) | The amounts shown in this column represent the product of (i) the number of unvested shares underlying the stock options held by the Named Executive Officer at December 31, 2016 which would vest pursuant to the terms of the individual employment agreements or award agreements, multiplied by (ii) an amount equal to the excess of the closing share price, if any, on December 31, 2016, which was $14.52, over the option price.
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(4) | These former Named Executive Officers separated from the Company in 2016. The amounts paid or payable to these Named Executive Officers in connection with their terminations are shown in the “Termination/No Change in Control” table.
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(5) | Mr. Schiller assumed the role of interim CEO from January 6, 2016 to February 28, 2016, during the medical leave of absence of Mr. Pearson, the Company’s former Chairman and CEO. Mr. Schiller was not entitled any termination benefits upon the termination of his employment agreement as interim CEO.
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(6) | Mr. Rosiello separated from the Company on December 31, 2016. The amounts shown in this table represent the amounts payable by the Company upon termination of his employment as a result of death. The amounts paid to Mr. Rosiello in connection with his separation on December 31, 2016 are shown in the “Termination/No Change in Control” table.
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(7) | Ms. Whitaker separated from the Company in January 2017. The amounts payable to Ms. Whitaker in connection with her termination are shown in the “Termination/No Change in Control” table.
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Termination/ Disability(1)Methodology for Identifying Our Median Employee
| | | | | | | | | | | | | | | | | Name | | Cash Severance
($) | | | Benefits and
Perquisites
($) | | | Accelerated RSU
Vesting
($)(2) | | | Accelerated
Option
Vesting
($)(3) | | Current Officers | | | | | | | | | | | | | | | | | Joseph C. Papa | | | — | | | | — | | | | 5,421,289 | | | | — | | Paul S. Herendeen | | | 430,685 | | | | — | | | | 2,178,000 | | | | — | | Christina M. Ackermann | | | — | | | | — | | | | 636,615 | | | | — | | Former Officers | | | | | | | | | | | | | | | | | J. Michael Pearson(4) | | | — | | | | — | | | | — | | | | — | | Howard B. Schiller(5) | | | — | | | | — | | | | — | | | | — | | Robert L. Rosiello(4) | | | — | | | | — | | | | — | | | | — | | Dr. Ari S. Kellen(4) | | | — | | | | — | | | | — | | | | — | | Anne C. Whitaker(6) | | | — | | | | — | | | | — | | | | — | | Robert R. Chai-Onn(4) | | | — | | | | — | | | | — | | | | — | |
(1) | This table includes estimated amounts payable assuming each Named Executive Officer’s employment were terminated on December 31, 2016 as a result of the Named Executive Officer’s disability. This table does not include amounts payable to Messrs. Pearson, Schiller and Chai-Onn, Dr. Kellen and Ms. Whitaker because they separated from the Company before the filing of this proxy statement, as permitted by SEC rules. Mr. Rosiello also separated from the Company before the filing of this proxy statement; however, this table includes estimated amounts payable to Mr. Rosiello, as required by SEC rules for CFOs.
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Employee Population(2) | The amounts shown in this column represent the product of (i) the number of unvested shares subject to PSUs, matching RSUs and RSUs, held by the Named Executive Officer, as applicable, at December 31, 2016 which would be accelerated pursuant to the terms of the individual employment agreements or award agreements, multiplied by (ii) the closing share price on December 31, 2016, which was $14.52.
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(3) | The amounts shown in this column represent the product of (i) the number of unvested shares underlying the stock options held by the Named Executive Officer at December 31, 2016 which would vest pursuant to the terms of the individual employment agreements or award agreements, multiplied by (ii) an amount equal to the excess of the closing share price, if any, on December 31, 2016, which was $14.52, over the option price.
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(4) | These former Named Executive Officers separated from the Company in 2016. The amounts paid or payable to these Named Executive Officers in connection with their terminations are shown in the “Termination/No Change in Control” table.
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(5) | Mr. Schiller assumed the role of interim CEO from January 6, 2016 to February 28, 2016, during the medical leave of absence of Mr. Pearson, the Company’s former Chairman and CEO. Mr. Schiller was not entitled any termination benefits upon the termination of his employment agreement as interim CEO.
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(6) | Ms. Whitaker separated from the Company in January 2017. The amounts payable to Ms. Whitaker in connection with her termination are shown in the “Termination/No Change in Control” table.
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To identify the median of the annual total compensation of all of our employees (other than our CEO), we first identified our total employee population from which we determined our median employee. We determined that, as of October 2, 2017, our employee population consisted of approximately 20,893 individuals (of which approximately 27% were located in the United States and 73% were located in jurisdictions outside the United States).As permitted by the Pay Ratio Rule, we adjusted our total employee population (as described above) for purposes of identifying our median employee by excluding approximately 1,023 of our employees located in certain jurisdictions outside of the United States given the relatively small number of employees in those jurisdictions, as follows: 49 employees from Algeria, 70 employees from Australia, 47 employees from Belarus, 32 employees from Bulgaria, 20 employees from Croatia, 94 employees from Hong Kong, 46 employees from Kazakhstan, 24 employees from Lithuania, 84 employees from Malaysia, 48 employees from the Philippines, 24 employees from Portugal, 57 employees from Romania, 48 employees from Singapore, 33 employees from Slovakia, 61 employees from Slovenia, 25 employees from South Africa, 25 employees from Sweden, 17 employees from Switzerland, and 96 employees from Taiwan. There are 15 employees or less in the following jurisdictions: Austria, Belgium, Bosnia & Herzegovina, Costa Rica, Denmark, the Dominican Republic, El Salvador, Estonia, Finland, Guatemala, Honduras, Indonesia, Montenegro, Nicaragua, Norway, Panama, Peru, and Sri Lanka. After taking into to account the above described adjustments to our employee population as permitted by the Pay Ratio Rule, our total adjusted employee population for purposes of determining our median employee consisted of approximately 19,870 individuals. Since October 2, 2017, our employee population has changed slightly. We determined that this change in our employee base did not result in any significant impact on our pay ratio disclosure. Determining our Median Employee To identify our median employee from our adjusted employee population, we compared the amount of base salary of our employees as reflected in our payroll records and converted to U.S. Dollars. In making this determination, we annualized the compensation of our full-time employees, including those who were hired in 2017 (but did not work for us for the entire fiscal year) and permanent part-time employees (reflecting what they would have earned if they had worked the entire year at their part-time schedule). We identified our median employee using this compensation measure, which was consistently applied to all our employees included in the calculation. Our median employee served in a similar role in 2019 and had his or her compensation adjusted based on his or her performance in that role. We determined that the changes in our median employee’s compensation arrangements for 2019 did not result in a significant change to our pay ratio disclosure and, therefore, we determined that our median employee was still reasonable to utilize for our pay ratio disclosure this year. Determination of Annual Total Compensation of our Median Employee and our CEO Once we identified that our median employee selected in 2017 was still reasonable for 2019 disclosure, we then calculated such employee’s annual total compensation for 2019 by using the same methodology we used for purposes of determining the annual total compensation of our NEOs for 2019 as set forth in the 2019 Summary Compensation Table on page 56. Our CEO’s annual total compensation for 2018 for purposes of the Pay Ratio Rule is equal to the amount reported in the “Total” column in the 2019 Summary Compensation Table, adjusted, to the extent applicable, in a similar manner as the annual total compensation of our median employee. Please note that SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various methodologies and apply various assumptions and, as result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies. DIRECTOR COMPENSATION TABLE | | | | | | | | | | | | | | | | | | | | | Name | | Fees
Earned or
Paid in
Cash
($) | | | Stock
Awards
($)(1) | | | Option
Awards
($) | | Non-Equity
Incentive Plan
Compensation
($) | | Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) | | All Other
Compensation
($) | | Total
($) | | William A. Ackman(2) | | | — | | | | — | | | — | | — | | — | | — | | | — | | Richard U. DeSchutter(3) | | | — | | | | — | | | — | | — | | — | | — | | �� | — | | Dr. Fredric N. Eshelman(4) | | | 75,821 | | | | 444,868 | | | — | | — | | — | | — | | | 520,689 | | Ronald H. Farmer(5) | | | — | | | | 54,093 | (6) | | — | | — | | — | | — | | | 54,093 | | Stephen Fraidin(7) | | | — | | | | — | | | — | | — | | — | | — | | | — | | Colleen A. Goggins(5) | | | 43,227 | | | | — | | | — | | — | | — | | — | | | 43,227 | | D. Robert Hale | | | 104,551 | | | | 368,641 | | | — | | — | | — | | — | | | 473,192 | | Robert A. Ingram(8) | | | — | | | | 463,105 | (6) | | — | | — | | — | | — | | | 463,105 | | Dr. Argeris (Jerry) N. Karabelas(9) | | | 65,055 | | | | 368,641 | | | — | | — | | — | | — | | | 433,696 | | Sarah B. Kavanagh(10) | | | 43,710 | | | | 339,618 | | | — | | — | | — | | — | | | 383,328 | | Anders O. Lönner(11) | | | 16,501 | | | | — | | | — | | — | | — | | — | | | 16,501 | | Theo Melas-Kyriazi(5) | | | — | | | | 51,512 | (6) | | — | | — | | — | | — | | | 51,512 | | G. Mason Morfit(5) | | | 34,127 | | | | — | | | — | | — | | — | | — | | | 34,127 | | Joseph C. Papa | | | — | | | | — | | | — | | — | | — | | — | | | — | | J. Michael Pearson(5) | | | — | | | | — | | | — | | — | | — | | — | | | — | | Robert N. Power | | | 114,133 | | | | 368,641 | | | — | | — | | — | | — | | | 482,774 | | Norma A. Provencio(5) | | | — | | | | 64,401 | (6) | | — | | — | | — | | — | | | 64,401 | | Russel C. Robertson(9) | | | — | | | | 442,450 | (6) | | — | | — | | — | | — | | | 442,450 | | Thomas W. Ross, Sr.(12) | | | 178,944 | | | | 444,868 | | | — | | — | | — | | — | | | 623,812 | | Howard B. Schiller(5)(13) | | | 22,609 | | | | — | | | — | | — | | — | | — | | | 22,609 | | Katharine B. Stevenson(14) | | | 22,420 | | | | — | | | — | | — | | — | | — | | | 22,420 | | Amy B. Wechsler, M.D.(9) | | | — | | | | 423,153 | (6) | | — | | — | | — | | — | | | 423,153 | |
| | | | | | | | | | | | | | | | | Name | | Fees Earned
or Paid in
Cash
($) | | | Stock Awards
($)(1)(2) | | | All Other
Compensation
($) | | | Total
($) | | Richard U. De Schutter | | | — | | | | 375,000 | | | | — | | | | 375,000 | | D. Robert Hale | | | 130,000 | | | | 250,000 | | | | — | | | | 380,000 | | Dr. Argeris (Jerry) N. Karabelas | | | 137,500 | | | | 250,000 | | | | — | | | | 387,500 | | Sarah B. Kavanagh | | | 135,000 | | | | 250,000 | | | | — | | | | 385,000 | | Robert N. Power | | | 142,500 | | | | 250,000 | | | | — | | | | 392,500 | | John A. Paulson | | | — | | | | 360,000 | | | | — | | | | 360,000 | | Russel C. Robertson | | | — | | | | 400,000 | | | | — | | | | 400,000 | | Thomas W. Ross, Sr. | | | 200,000 | | | | 250,000 | | | | — | | | | 450,000 | | Andrew C. von Eschenbach, M.D. | | | 120,000 | | | | 250,000 | | | | — | | | | 370,000 | | Amy B. Wechsler, M.D. | | | — | | | | 377,500 | | | | — | | | | 377,500 | |
| (1) | ThisThe amounts shown in this column representsrelate to the aggregateannual RSU grant made to eachnon-employee director in 2019, as further described below under the heading “Director Compensation,” and with respect to Mr. De Schutter, Mr. Paulson, Mr. Robertson and Dr. Wechsler, also relate to RSUs granted in lieu of cash for annual Board and committee retainers, pursuant to their respective elections. These amounts are based upon the grant date fair value computedof awards calculated in accordance with FASB ASC Topic 718 for all RSUs granted in 2016.718. Fair value is calculated using the closing price of our Common Shares on the date of grant for purposes of determining the individual grant amounts as described in the narrative below. The following amounts.
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| (2) | Directors had aggregate outstanding DSUs and/or RSUs at 20162019 fiscalyear-end:year-end Dr. Eshelman (16,726),as follows: Mr. De Schutter, 29,439; Mr. Hale, (16,726), Mr. Ingram (84,424),10,633; Dr. Karabelas, (16,726),66,646; Ms. Kavanagh, (14,458),64,378; Mr. Melas-Kyriazi (65,243),Paulson, 55,712; Mr. Power, (26,221), Ms. Provencio (38,638),76,141; Mr. Robertson, (20,738),93,983; Mr. Ross, (17,822)67,742; Dr. von Eschenbach, 16,465; and Dr. Wechsler, (19,690).88,874. With respect to Mr. Hale, this RSU award and all boardBoard compensation accrueaccrues to the benefit of the investors in ValueAct Capital Master Fund, L.P., and not to any individual. Under an agreement with ValueAct Capital, Mr. Hale is deemed to hold the RSUs for the benefit of the limited partners of ValueAct Capital Master Fund, L.P. and indirectly for (i) VA Partners I, LLC as General Partner of ValueAct Capital Master Fund, L.P., (ii) Value Act Capital Management, L.P. as the manager of ValueAct Capital Master Fund, L.P., (iii) ValueAct Capital Management, LLC as General Partner of ValueAct Capital Management, L.P., (iv) ValueAct Holdings, L.P. as the sole owner of the limited partnership interests of ValueAct Capital Management, L.P. and the membership interests of ValueAct Capital Management, LLC and as the majority owner of the membership interests of VA Partners I, LLC and (v) ValueAct Holdings GP, LLC as General Partner of ValueAct Holdings, L.P. |
(2) | Mr. Ackman was appointed to the Board on March 21, 2016 and has waived compensation for his services as a Director.
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(3) | Mr. DeSchutter was appointed to the Board on January 2, 2017.
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Director Compensation(4) | Dr. Eshelman was appointed to the Board on March 8, 2016.
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(5) | Messrs. Farmer, Melas-Kyriazi, Morfit, Pearson and Schiller and Ms. Goggins and Ms. Provencio did not stand for reelection at our 2016 Annual Meeting.
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(6) | Includes RSUs granted in lieu of cash for annual Board and committee retainers.
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(7) | Mr. Fraidin was appointed to the Board on March 8, 2016 and has waived compensation for his services as a Director.
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(8) | Mr. Ingram was appointed as InterimNon-Executive Chairman of the Board on January 6, 2016,Non-Executive Chairman of the Board on February 28, 2016 and continued asNon-Executive Chairman of the Board until Mr. Papa’s appointment on May 2, 2016. Mr. Ingram waived his compensation for his services as the InterimNon-Executive Chairman of the Board and as theNon-Executive Chairman of the Board.
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(9) | Dr. Karabelas, Mr. Robertson and Dr. Wechsler were appointed to the Board on June 14, 2016.
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(10) | Ms. Kavanagh was appointed to the Board on July 22, 2016.
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(11) | Mr. Lönner resigned from the Board on March��8, 2016.
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(12) | Mr. Ross was appointed to the Board on March 8, 2016.
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(13) | On February 1, 2016, the Company entered into an employment letter (the “Schiller Employment Letter”) with Mr. Schiller relating to his appointment as Interim CEO of the Company, effective January 6, 2016 (the “Schiller Appointment Date”), during the previously-announced medical leave of absence of J. Michael Pearson. The Company terminated a previously executed consulting arrangement with Mr. Schiller, effective as of the Appointment Date. Mr. Schiller served as Interim CEO under the terms of the Schiller Employment Letter for thetwo-month period following the Schiller Appointment Date until February 28, 2016. Mr. Schiller received cash compensation equal to $400,000 per month for such period and did not receive any cash retainers for service as a member of the Board and related committees during such period. The amount listed is for his Board and related committee retainers when he was not the Interim CEO.
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(14) | Ms. Stevenson resigned from the Board on March 21, 2016.
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At the direction of the full Board, theOur Nominating and Corporate Governance Committee evaluates the competitiveness ofnon-employee Directors’ compensationis required by its charter to periodically review, and makesmake recommendations to the full Board as appropriate. The Board can changeregarding, the compensation of such Directors at any time. In making its recommendations, the Nominating and Corporate Governance Committee considers both the high level of expertise and the time commitment that Board service at the Company requires.ournon-employee directors. The Nominating and Corporate Governance Committee has sole authority under its charter to retain and/or terminate compensation consultants or compensation consulting firms as the Nominating and Corporate Governance Committee may deem appropriate in recommendingnon-employee Directordirector compensation.
Compensation
The annual cash retainer for eachIn 2018, our Nominating and Corporate Governance Committee engaged Pay Governance to assist in its periodic assessment of ournon-employee Director is $100,000, payabledirector compensation. In their evaluation, which concluded in quarterly installments. Annual cash retainers for the committee chair of each committee are: $40,000 for the Audit and Risk Committee, $25,000 for the Talent and Compensation Committee, $15,000 forFebruary 2019, the Nominating and Corporate Governance Committee $15,000 forconsidered (i) compensation data of comparator groups; (ii) the Financehigh level of expertise and Transactions Committeethe time commitment that service on our Board requires; and $15,000 for(iii) the Conduct and Compliance Committee,workload of each payable in quarterly installments. In addition, annual committee member retainers are $15,000 for the Audit and Risk Committee, $15,000 for the Talent and Compensation Committee, $10,000 for thenon-employee director. The Nominating and Corporate Governance Committee $10,000determined that no changes were required tonon-employee director compensation for 2019, and that the
compensation of our Lead Independent Director and Chairperson of our Audit and Risk Committee accurately reflect the Financeworkload associated with each position at this time. The Nominating and TransactionsCorporate Governance Committee and $10,000 forwill conduct its next periodic evaluation ofnon-employee director compensation in 2021. In 2019, our directors’ fees consisted of the Conduct and Compliance Committee, each payable in quarterly installments. On February 20, 2015, the Board approved annual cash retainers for the Sustainability and Environmental Subcommittee chair of $15,000 and members of $10,000 (dissolved on June 15, 2016). Directors are also reimbursed for their following: | | | | | Annual Cash Compensation | | | | | Board Retainer | | $ | 100,000 | | Additional Fee—Lead Independent Director | | $ | 75,000 | | Additional Retainers—Committee Chairpersons | | | | | Audit and Risk Committee Chairperson | | $ | 40,000 | | Talent and Compensation Committee Chairperson | | $ | 25,000 | | Nominating and Corporate Governance Committee Chairperson | | $ | 15,000 | | Science and Technology Committee Chairperson | | $ | 20,000 | | Finance and Transactions Committee Chairperson | | $ | 15,000 | | Additional Retainers—Committee Members not serving as Chairpersons | | | | | Audit and Risk Committee Member | | $ | 15,000 | | Talent and Compensation Committee Member | | $ | 15,000 | | Nominating and Corporate Governance Committee Member | | $ | 10,000 | | Science and Technology Committee Member | | $ | 12,500 | | Finance and Transactions Committee Member | | $ | 10,000 | | Annual Equity Compensation | | | | | Annual RSU Grant | | $ | 250,000 | |
out-of-pocket expenses in attendingin-person meetings. Directors are permitted toOur directors may elect to receive their fees in cash, in RSUs, or in lieua combination of anycash and RSUs. RSUs received pursuant to this election are paid in a lump sum of the above cash retainers. Any such RSUs so elected are deliverableCommon Shares at the end of a Director’ssuch director’s service with the Company.
In addition to All fees, whether payable in cash or RSUs, are delivered in quarterly installments, with the cash retainers above, it has previously beenexception of the Company’s practice to grant eachnon-employeeadditional fee for the Lead Independent Director, a number of RSUs with a fair market value equal to $375,000which is paid once annually on the third day following each Annual Meeting of Shareholders. However, on the third day following the 2017 Annual Meeting, eachnon-employee Director will be granted a number of RSUs with a fair market value equal to $250,000. These annual grants of RSUs vest and are deliverable prior to the next Annual Meeting of Shareholders, unless the Director elects to defer issuance until the Director’s separation from the Company.
Eachnon-employee Director is expected to hold or control Common Shares vested, restricted or deferred share units or a combination thereof, having a market value at least equal to five (5) times the annual Board cash retainer by not later than the fifth anniversary of his or her election or appointment to the Board or, for individuals who were Directors on May 30, 2012, not later than May 30, 2017.
In addition to the compensation described above any Directorfees, directors are also reimbursed for theirout-of-pocket expenses in attendingin-person meetings. Any director serving as the Lead Independent Director has previously been entitled to receive an annual fee of $100,000 payable on the third day following each Annual Meeting of Shareholders. Going forward, commencing after the 2017 Annual Meeting, a Director serving as the Lead Independent Director will be entitled to receive an annual fee of $75,000, payable on the third day following each Annual Meeting of Shareholders. Also, a Director serving as theNon-Executive Chairperson would be entitled to receive an annual payment of $400,000 (payable $220,000 in RSUs and $180,000 in cash). There is currently noNon-Executive Chairperson on the Board, and Mr. Papa, our Chairman and CEO, received compensation in 20162019 only in his capacity as our CEO. See “SummarySummary Compensation Table.” Mr. Ingram waived his compensation when he served asTable on page 56. The Company also grants eachnon-employee director, on the InterimNon-Executive Chairmanthird business day following each Annual Meeting of Shareholders, a number of RSUs with a fair market value equal to $250,000. These annual grants of RSUs vest and are deliverable prior to the Board and asnext Annual Meeting of Shareholders, unless theNon-Executive Chairman of director elects to defer issuance until the Boarddirector’s separation from January 6, 2016 to May 2, 2016. Each of Mr. Ackman and Mr. Fraidin has waived compensation for his services as a Director of the Company. EQUITY COMPENSATION PLAN INFORMATION | Plan Category | | Number of Securities
to Be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights | | Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights | | | Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a)) | | | Number of Securities
to Be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights | | Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights | | | Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a)) | | | | | (a) | | (b) | | | (c) | | | (a) | | (b) | | | (c) | | Equity Compensation Plans Approved By Shareholders | | | 12,541,669 | (1)(2) | | $ | 49.57 | | | | 11,983,991 | | | | 15,200,000 | (1) | | $ | 26.99 | | | | 9,864,096 | | Equity Compensation Plans Not Approved By Shareholders | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | Total | | | 12,541,669 | | | $ | 49.57 | | | | 11,983,991 | | | | 15,200,000 | (1) | | $ | 26.99 | | | | 9,864,096 | |
| (1) | Included in this amount is the maximum number of Common Shares that may be issued under each of the PSUs and annual RSUs outstanding as of December 31, 2016. Includes securities underlying Valeant Pharmaceuticals International (“VPI”) awards granted prior to the Biovail Corporation and VPI merger in September 2010 (the “Merger”) that were converted to Company awards in connection with the Merger.2019. As of December 31, 2016,2019, the weighted average remaining contractual term of outstanding options was 7.47.5 years. |
(2) | Included in this amount is the maximum number of Common Shares that may be issued under the Valeant 2003 and Valeant 2006 Plans representing (i) 79,495 Common Shares issuable in respect of options and (ii) 2,239,566 Common Shares issuable in respect of RSUs granted and which remain outstanding under such plans. The weighted average exercise price on the 79,495 Common Shares issuable in respect of options is $5.72.
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2014 Omnibus Incentive Plan
The Company’sAmended and Restated 2014 Omnibus Incentive Plan Summary
The 2014 Plan was originally adopted and approved by the Board and the shareholders of the Company effective as of May 20, 2014, and was amended and restated effective as of April 30, 2018 as approved by the Board and the shareholders of the Company. For Information about the 2014 Plan, please see Proposal No. 3 starting on page 78. 2011 Omnibus Incentive Plan Summary The Company’s 2011 Omnibus Incentive Plan (the “2014“2011 Plan”) was adopted and approved by the Board and the shareholders of the Company effective as of May 16, 2011. The Company ceased granting new awards under the 2011 Plan upon the approval of the 2014 Omnibus Incentive Plan in 2014. Awards Under The 2011 Plan Awards under the 2011 Plan may be granted as options (including both incentive stock options and nonqualified stock options), share appreciation rights (“SARs”), share awards (including restricted shares, deferred shares and share units that may be settled either in Common Shares or cash) or cash awards. A SAR entitles the participant to receive an amount equal to the difference between the market price of the Company’s Common Shares on the exercise date and the exercise price of the SAR (which may not be less than 100% of the market price of a Common Share on the grant date), multiplied by the number of Common Shares subject to the SAR. However, no SARs or deferred shares have been granted under the 2011 Plan. Awards may be granted singly, in combination or in tandem as determined by the Talent and Compensation Committee, in its sole discretion. A maximum of 395,737 Common Shares (less than 1% of the issued and outstanding Common Shares as of December 31, 2019) may be issued pursuant to the exercise of options or in connection with the vesting of share awards under the terms of the 2011 Plan. Eligibility Persons eligible to receive awards are any employees, directors or individuals performing services for the Company or its subsidiaries in the capacity of a consultant, agent or otherwise, as determined by the Talent and Compensation Committee. Unless otherwise determined by the Talent and Compensation Committee, members of the Board shall generally not be eligible to receive SARs or options. Participation Limits Subject to adjustments made to reflect a change in the Company’s capital structure, including as a result of a stock dividend, stock split, reverse consolidation, recapitalization, reorganization or divestiture or other similar event (“capital structure adjustments”), the aggregate number of Common Shares that may be granted to any “covered employee” during a calendar year in the form of options, SARs, and/or share awards intended to qualify as “performance-based compensation” (such terms having the meanings given in Section 162(m) of the Code, including any rules and regulations thereunder) shall not exceed 1,000,000 Common Shares (computed based on maximum performance). Furthermore, (i) the number of Common Shares issuable to persons who are reporting insiders (as defined in National Instrument55-104 — Insider Reporting Requirements and Exemptions of the Canadian Securities Administrators), at any time, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding Common Shares of the Company; and (ii) the number of Common Shares issued to such insiders, within any one year period, under all security-based compensation arrangements of the Company, cannot exceed 10% of its issued and outstanding securities. Expiration of Options and SARs Generally, options and SARs are granted for a term determined by the Talent and Compensation Committee but not to exceed 10 years (the “Original Term”). For options granted as incentive stock options to certain participants, the Original Term shall not exceed five years. If the Original Term of an option and SAR held by a participant expires during a Company blackout period applicable to the participant which prohibits the participant from trading in Company securities, the term of such option shall be extended until the tenth business day following the end of the Company blackout period. Exercise Price of Options and SARs The exercise price per share for each option and SAR is not less than 100% of the closing price of the Common Shares on the trading day immediately preceding the date of grant. Vesting Awards under the 2011 Plan are subject to such vesting provisions as the Talent and Compensation Committee may determine. Options currently outstanding vest in equal installments over a period of three or four years after the date of grant or 100% on the third or fourth anniversary of the grant date. Share units generally vest 100% on the third anniversary of the date of grant. Dividend Equivalents The Talent and Compensation Committee may provide that share awards earn dividends or dividend equivalents in the form of additional share awards, subject to such terms, conditions, restrictions and limitations as it may establish from time to time. Notwithstanding the foregoing, dividends or dividend equivalents may not be paid with respect to any share award subject to the achievement of performance criteria, unless and until the relevant performance criteria have been satisfied. Generally, holders of share units receive dividend equivalents which are subject to vesting in line with the underlying award to which they relate. Termination of Employment Except as otherwise provided in a participant’s employment agreement or letter, in the event that the optionholder’s employment is terminated by reason of death, disability, termination by the Company without cause or the participant voluntarily resigns, the right to exercise such option terminates on the date that is 90 days from the participant’s termination (but in no event beyond the Original Term). Any options or share units that are unvested and do not vest on the termination date are cancelled and forfeited. In the event that the optionholder’s employment is terminated by the Company without cause within one year following a change of control, all unvested options will vest on such termination and the optionholder will have one year following such a termination to exercise the option (but in no event beyond the Original Term). In the case of a holder of share units whose employment is terminated by the Company within one year following a change of control, a number of the holder’s share units will vest on such termination equal to the number of share units granted multiplied by a fraction, the numerator of which is the number of completed months between the date of grant and the date of termination and the denominator of which isthirty-six (36). Any remaining unvested share units which do not vest on the termination date will be cancelled and forfeited on the date of termination. In the event that the optionholder’s employment is terminated by the Company for cause prior to the exercise of the option, the option shall terminate and expire as of the date of termination of the employment. In the case of a holder of share units whose employment is terminated by the Company for cause, all of the holder’s share units shall terminate as of the date of termination of the employment. Nontransferability Awards granted under the 2011 Plan, and during any period of restriction on transferability, Common Shares issued in connection with the exercise of an option, may not be sold, pledged, hypothecated, assigned, margined or otherwise transferred in any manner other than by will or the laws of descent and distribution, unless and until the Common Shares underlying such award have been issued, and all restrictions applicable to such Common Shares have lapsed or have been waived by the Talent and Compensation Committee. Notwithstanding the foregoing, the Talent and Compensation Committee may, in its sole discretion, permit (on such terms, conditions and limitations as it may establish) nonqualified stock options and/or Common Shares issued in connection with an option exercise to be transferred to a member of a participant’s immediate family or to a trust or similar vehicle for the benefit of a participant’s immediate family members. Amendment and Termination The 2011 Plan and any award may be amended, suspended or terminated at any time by the Board, provided that no amendment shall be made without shareholder approval if such shareholder approval is required in order to comply with applicable law or the rules of the NYSE, the rules of the TSX, or any other securities exchange on which the Common Shares are traded or quoted. Under the 2011 Plan, the Company shall obtain shareholder approval for: (i) a reduction in the exercise price or purchase price of an award (or the cancellation andre-grant of an award resulting in a lower exercise price or purchase price), except where the reduction is made to reflect a change in the Company’s capital structure, including as a result of a capital structure adjustment; (ii) the extension of the Original Term of an option; (iii) any amendment to remove or to exceed the participation limits described above; (iv) an increase to the maximum number of Common Shares issuable under the 2011 Plan (other than adjustments made to reflect a change in the Company’s capital structure, including as a result of a capital structure adjustment); (v) amendments to the amendment provision of the 2011 Plan other than amendments of a clerical nature; and (vi) any amendment that permits awards to be transferable or assignable other than for normal estate settlement purposes or for other purposes not involving the receipt of monetary consideration. Without shareholder approval, the Board has the discretion to make certain amendments to the 2011 Plan, including: (i) amend the vesting provisions of an award, (ii) amend the payment provisions of an award, (iii) cancel or modify outstanding awards, (iv) waive any restrictions imposed with respect to awards or the Common Shares issued pursuant to awards, (v) make amendments to the 2011 Plan to ensure compliance with applicable securities and tax law as well as the TSX and NYSE rules, (vi) make any amendment of a clerical nature as well as any amendment clarifying any provision of the 2011 Plan, (vii) make any adjustment to reflect a change in the Company’s capital structure, including as a result of capital structure adjustments, and (viii) suspend or terminate the 2011 Plan. Except for adjustments to awards made in connection with a change of control of the Company, no termination, suspension or amendment of the 2011 Plan or any award shall adversely affect the right of any participant with respect to any award theretofore granted, as determined by the Talent and Compensation Committee, without such participant’s written consent. No amendments were made to the 2011 Plan in 2019. Option and RSU Plans As of March 2, 2020, 425,124 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2011 Plan and 2,607,034 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2011 Plan. As of March 2, 2020, a total of 395,373 Common Shares (less than 1% of the issued and outstanding Common Shares) remained reserved for issuance under the 2011 Plan, representing (i) 390,715 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 5,022 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan. The Company ceased granting new awards under the 2011 Plan upon the approval of the 2014 Plan in 2014. As of March 2, 2020, 550,606 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2014 Plan and 6,992,806 Common Shares (1.98% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2014 Plan. As of March 2, 2020, a total of 15,658,523 Common Shares (4.43% of the issued and outstanding Common Shares) remained reserved for issuance under the 2014 Plan, representing (i) 6,608,774 Common Shares (1.87% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 9,049,779 Common Shares (2.56% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan. AUDIT COMMITTEE REPORT The Report of the Audit and Risk Committee of the Board shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts. The Audit and Risk Committee, comprised of independent directors, is delegated by the Board to monitor the integrity of our financial statements, the auditors’ qualifications and independence, the performance of the auditors and our internal auditors, and the Company’s compliance with legal and regulatory requirements. Management has primary responsibility for our financial statements and the overall reporting process as well as establishing and maintaining our internal controls. PricewaterhouseCoopers LLP, our auditors for fiscal year ended December 31, 2019, had the responsibility for expressing an opinion as to whether the audited financial statements have been prepared in accordance with generally accepted accounting principles in the United States in all material respects and on the effectiveness of our internal controls over financial reporting. The Audit and Risk Committee met with management and the auditors to review and discuss the audited financial statements for the year ended December 31, 2019, as well as management’s assessment of the effectiveness of our internal controls over financial reporting and the auditor’s assessment of our internal controls over financial reporting. The auditors, as well as the internal auditors, had full access to the Audit and Risk Committee, including regular meetings without management present. The Audit and Risk Committee received from and discussed with the auditors the written report and the letter from the auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the auditor’s communications with the Audit and Risk Committee concerning independence and has discussed with the auditor the auditor’s independence. Additionally, the committee discussed with the auditors the matters required by Auditing Standard No. 16, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board. The Audit and Risk Committee acts only in an oversight capacity and must rely on the information provided to it and on the representations made by management and the auditors. Based on the aforementioned reviews and discussions, and the report of the auditors, the Audit and Risk Committee recommended to the Board that the audited financial statements for the year ended December 31, 2019, be included in the Company’s Annual Report filed with the SEC. Audit and Risk Committee Russel C. Robertson, Chairperson Sarah B. Kavanagh Robert N. Power Thomas W. Ross, Sr. CERTAIN TRANSACTIONS Certain Related-Party Transactions As described in the section titled “Statement of Corporate Governance Practices — Ethical Business Conduct — Standards of Business Conduct” on page 27, the Board has adopted the Standards, which sets out the Company’s expectations for the conduct of our employees and directors in their dealings on behalf of the Company. The Conflict of Interest Policy set forth in our Standards requires that our employees and directors avoid situations in which they have a potential or actual conflict of interest with the Company. In accordance with our Conflict of Interest Policy, any employee, including our officers, involved any type of relationship described in the Conflict of Interest Policy is required to immediately and fully disclose the relevant circumstances to his or her immediate supervisor, the General Counsel or the Chief Compliance & Ethics Officer, and in accordance with the process set out in the Company’s Conflicts of Interest Standard Operating Procedures.Non-employee directors are required to report their involvement in any type of relationship described in the Conflict of Interest Policy to the Audit and Risk Committee. In addition to reviewing cases where the conflict, or potential conflict, involves a member of the Board, the Audit and Risk Committee reviews transactions or proposed transactions in which an executive officer has an interest that conflicts with the Company’s interests and makes recommendations to the Board regarding any such transaction. Our Conflict of Interest Policy states that the following are types of outside activities that can create conflicts: Ownership by a director or employee, or any member of the director’s or employee’s family, of a substantial interest in any concern that does business with the Company, whether as a supplier, dealer or customer, or are a competitor (except in the case of a publicly owned corporation whose securities are traded on the open market). Serving as a director, officer, employee, consultant, advisor, or in any other capacity for any business or other organization with which the Company currently (or potentially) has a business relationship or which is, or can expect to become, a competitor of the Company. Engaging in an outside activity with an individual, business or organization which currently (or potentially) has a competitive or business relationship with the Company where such activity is likely to decrease the impartiality, judgment, effectiveness or productivity expected from an employee. Performance by a director or employee or a member of the director’s or employee’s family of services for any outside concern or individual that does business with the Company. Outside employment which conflicts or might be reasonably expected to conflict with the normal duties of the director or employee. Since January 1, 2019, the Company was involved in the following related-party transaction, which has been approved or ratified by the Audit and Risk Committee: Joseph C. Papa’s son, Dr. Matthew Papa, District Manager, has been employed by the Company since September 2016. In 2019, Dr. Papa received an aggregate of $248,838 in compensation. PROPOSAL NO. 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION At our 2017 Annual Meeting of Shareholders, our Board recommended, and shareholders approved, in anon-binding advisory vote, that anon-binding advisory vote on executive compensation(“say-on-pay”) be held every year. The Board determined that our shareholders should vote on asay-on-pay proposal every year, consistent with the preference expressed by our shareholders at the 2017 Annual Meeting of Shareholders. At our 2019 Annual Meeting, approximately 93% of the total shareholders’ votes cast voted in favor of our executive compensation program. We believe these favorable results indicate strong support for continuing our current executive compensation program that was introduced in 2017. Proposal No. 2 provides the Company’s shareholders with an opportunity to provide an advisory vote related to compensation of the Company’s named executive officers. The Company has a“pay-for-performance” philosophy that forms the foundation of the executive compensation program for our Company’s named executive officers. This philosophy and the executive compensation program approved by the Talent and Compensation Committee have been central to the Company’s ability to attract, retain and motivate individuals who are committed to the ongoing transformation of our company and to improving people’s lives through our products. Our compensation program is intended to link executive compensation to long-term business performance, while providing compensation opportunities that are competitive as compared to our peers and align the interests of our executives with those of our shareholders. Our programs also balance appropriate risk taking and incorporate shareholder feedback. Please refer to “Executive Compensation — Compensation Discussion and Analysis” starting on page 39 for detailed information regarding our executive compensation program for the Company’s named executive officers. Pursuant to Schedule 14A of the Exchange Act, we are asking for shareholder approval, in an advisory resolution, of the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with SEC rules. This disclosure is provided in the section titled “Executive Compensation — Compensation Discussion and Analysis,” the compensation tables and the narrative discussion following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation program of our named executive officers and the executive compensation policies and practices described in this Proxy Statement. The Board requests that shareholders endorse the compensation of our named executive officers through the following resolution: Resolved, that the shareholders approve, in an advisory resolution, the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables, and other narrative executive compensation disclosures, contained in this Proxy Statement. This vote is advisory and therefore not binding on the Company, the Talent and Compensation Committee, or the Board. The Board and the Talent and Compensation Committee value the opinions of our shareholders and will take the outcome of the vote into consideration in the design of our executive compensation program going forward. The Board recommends that the shareholders vote FOR Proposal No. 2. PROPOSAL NO. 3 APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED 2014 OMNIBUS INCENTIVE PLAN TO INCREASE THE NUMBER OF COMMON SHARES AUTHORIZED UNDER THE PLAN The 2014 Plan was originally adopted and approved by our shareholders effective as of May 20, 2014.2014 as the 2014 Omnibus Incentive Plan, and was amended and restated effective as of April 30, 2018 to increase the number of Common Shares available for issuance by an additional 11,900,000 Common Shares. As of December 31, 2019, 9,864,096 Common Shares were available for future issuance under the 2014 Plan representing 2.8% of the issued and outstanding Common Shares as of that date. On February 11, 2020, the Talent and Compensation Committee approved an amendment and restatement to the 2014 Plan, subject to approval by the shareholders at the Annual Meeting, to increase the number of Common Shares authorized for issuance under the 2014 Plan (the “Amended Plan”). We are asking our shareholders to approve at the Annual Meeting an amendment to the 2014 Plan to increase the number of Common Shares authorized for issuance under the 2014 Plan by 13,500,000. The proposed 13,500,000 additional Common Shares, which represents 3.8% of the 352,562,636 Common Shares outstanding as of December 31, 2019 and 3.8% of the 353,356,114 Common Shares outstanding as of our record date, March 2, 2020, is expected to allow us to make grants under the Amended Plan for approximately three years. We believe that increasing the number of Common Shares issuable under the 2014 Plan is necessary in order to allow Bausch Health to continue to align the long-term financial interests of employees, members of the Board, consultants, members of our sales force and other service providers of the Company and its subsidiaries with those of the Company’s shareholders, to attract and retain those individuals by providing compensation opportunities that are competitive with other companies and provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company and its subsidiaries. As of the filing of this Proxy Statement, the number of persons eligible to participate in the Amended Plan is approximately 4,000. A copy of the Amended Plan is attached to this Proxy Statement as Exhibit A. In addition to the amendment increasing the number of Common Shares issuable under the 2014 Plan, the Amended Plan includes the following amendments that do not require shareholder approval, as shareholder approval is not required under the amendment provisions of the 2014 Plan: (i) the exercise price of stock options and SARs will be based on the closing price of the underlying Common Shares on the date such stock options or SARs are granted (rather than on the last preceding trading date), (ii) additional provisions clarifying that (A) stock options and SARs will not be eligible for the payment of dividend or dividend equivalents and (B) the Talent and Compensation Committee cannot, without shareholder approval, seek to effect any repricing of any previously granted “underwater” stock option or SAR and (iii) other housekeeping and/or clerical changes. The Board believes that the Amended Plan is in the best interest of shareholders and supports this proposal for the following reasons: The Plan is administered by our Talent and Compensation Committee, which is composed entirely of independent directors. The Company strives to maximize employee and shareholder alignment through the use of equity awards, while minimizing dilution. If the proposed amendments are not approved, the Company will not have sufficient Common Shares for grant needs and will lose a critical tool for recruiting, retaining and motivating employees. The Company would thus be at a competitive disadvantage in attracting and retaining talent. The terms of the Company’s equity and other annual and long-term incentive compensation awards and employee policies are all designed to protect shareholder interests and encourage employees to focus on the long-term success of the Company. Employees typically cannot fully monetize equity awards until three years after grant subject to certain exceptions. For example, RSUs granted for 2019 generally vest inone-third increments with the final third not converting to Common Shares until after the third year. The Company does not permit “liberal” share recycling. Common Shares that are withheld to satisfy any tax withholding obligations may not again be available for issuance under the Amended Plan. The Amended Plan does not contain an “evergreen” feature pursuant to which the Common Shares authorized for issuance under the Amended Plan can be increased automatically without shareholder approval. Equity awards under the Amended Plan are generally double-trigger unless the outstanding awards are not assumed or substituted in connection with a Change of Control (as defined in the Amended Plan). As a shareholder of the Company, you are invited to vote with respect to the Amended Plan through the following resolution: Resolved, that the shareholders approve the amendment to the 2014 Plan to increase to the maximum number of Common Shares subject to Awards which may be issued pursuant to such plan by 13,500,000 Common Shares. The Board recommends that the shareholders vote “FOR” Proposal No. 3. The following is a summary of the Amended Plan which is qualified in its entirety by the full text of the Amended Plan, a copy of which is included as Exhibit A to this Proxy Statement. The capitalized terms not otherwise defined in this summary have the meaning assigned to them in the Amended Plan. For the avoidance of doubt, the changes to the 2014 Plan incorporated in the Amended Plan and described below will only be applicable to equity awards granted after approval of the Amended Plan at the Annual Meeting. Summary of Plan Terms Common Shares Subject to the 2014Amended Plan The Common Shares issued or to be issued under the Amended Plan consists of authorized but unissued Common Shares or issued Common Shares that have been reacquired by the Company in any manner. Subject to adjustment made in connection with a recapitalization, Change of Control (as defined in the Amended Plan) and certain other events set forth in the Amended Plan, the maximum number of Common Shares thatsubject to Awards which may be issued to participants pursuant to awards (allthe Amended Plan will be equal to the sum of which may be granted as incentive stock options, discussed below) is 18,368,825 including 18 million(i) 30,268,825 Common Shares, plus the 368,825(ii) 13,500,000 Common Shares under the 2011 Plan reserved but unissued and not underlying outstanding awards and(iii) the number of Common Shares becoming available for reuse after awards are terminated, forfeited, cancelled, exchanged or surrendered following the Effective Date under the Company’s 2011 Omnibus Incentive Plan and the 2007 Plan following the adoption of the 2014Equity Compensation Plan. In determining the number of Common Shares to be reserved for issuance under the 2014Amended Plan, the Company’s management and Talent and Compensation Committee evaluated the historic share usage and burn rate under the 20112014 Plan and the existing terms of outstanding awardsAwards under the 20112014 Plan, as discussed in the section titled “Historical Annual PlanCommon Share Usage” below.beginning on page 86. The number of Common Shares authorized for grant under the 2014Amended Plan is subject to adjustment, as described below.in the section titled “Types of Awards — Adjustments” on page 84. In addition, (i) the number of Common Shares issuable to insiders of the Company,Insiders, at any time, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding Common Shares of the Company;Shares; (ii) the number of Common Shares issued to insiders of the Company,Insiders, within any one year period, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding securities; (iii) the number of Common Shares issuable tonon-employee members of the Board, at any time, under all security-based compensation arrangements of the Company, cannot exceed 1% of the issued and outstanding securities;Common Shares; and (iv) the aggregate number of Common Shares that may be granted prior to November 2, 2017 to any Covered Employeeemployee covered by Section 162(m) of the Internal Revenue Code (the “Code”) during a calendar year in the form of options, share appreciation rights, and/or share awards and intended to qualify as “performance-based compensation” under Section 162(m) of the Code shallthereunder were not permitted to exceed the number of Common Shares initially authorized for grant,grant. Subject to adjustment, as described above.in the section titled “Types of Awards — Adjustments” on page 84, in any calendar year, no Participant who is anon-employee director of the Company shall be granted Awards, in either equity, cash or other compensation, with an aggregate fair market value as of the grant date or payment date, as applicable, in excess of $750,000. If any Common Shares subject to an awardAward are forfeited, canceled, exchanged or surrendered, or if an awardAward terminates or expires without a distribution of Common Shares to the participant, the Common Shares with respect to the awardAward shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for awardsAwards under the 2014Amended Plan; however, the Common Shares surrendered or withheld as payment of either the exercise price of an option (including Common Shares otherwise underlying an award of a share appreciation right (“SAR”)SAR that are retained by the Company to account for the exercise price of the SAR) and/or withholding taxes in respect of an awardAward will no longer be available for awardsAwards under the 2014Amended Plan. The maximum number of Common Shares available for awardsAwards under the 2014Amended Plan shall not be affected by the payment of cash dividends on outstanding awards,Awards, the payment of share-denominated awards that must be settled in cash, the granting of cash awards, or, in connection with a transaction with another entity, the granting of awardsAwards to individuals who previously received awardsAwards from the other entity and are receiving awardsAwards under the 2014Amended Plan as a result of such transaction. Administration of the 2014Amended Plan Except as otherwise required by law or as designated otherwise by the 2014Board, the Amended Plan iswill be administered by our Talent and Compensation Committee. To the extent required for employees subject to Section 162(m) of the Code, the Talent and Compensation Committee will consist of two or more individuals, each of whom, unless otherwise determined by our Board, is an “outside director” to comply with the applicable requirements of Section 162(m) of the Code and Section 16 of the U.S. Securities Act of 1934. The Talent and Compensation Committee will determine which employees, consultants, Directors, members of our sales force and other individuals are eligible to receive awards under the 2014 Plan. In addition, the Talent and Compensation Committee will interpret the 2014Amended Plan and may adopt any administrative rules, regulations, procedures and guidelines governing the 2014Amended Plan or any awardsAwards granted under the 2014Amended Plan as it deems to be appropriate. As of the date of this Proxy Statement, we expect that approximately 4,000 employees and 10 directors will be eligible to receive Awards under the Amended Plan. The basis for participation in the Amended Plan is the Talent and Compensation Committee’s decision, in its sole discretion, that an Award to an eligible participant will further the Amended Plan’s purposes. In exercising its discretion, the Talent and Compensation Committee will consider the recommendations of management and the purposes of the Amended Plan, which are to continue to align the long-term financial interests of employees, directors, consultants, members of our sales force and other service providers of the Company and its subsidiaries with those of the Company’s shareholders, to attract and retain those individuals by providing compensation opportunities that are competitive with other companies and provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company and its subsidiaries. In recent years, all eligible directors have received Awards under the 2014 Plan (unless such compensation was waived) and approximately 16% of our employees have received Awards under the 2014 Plan. Types of Awards The following types of awardsAwards may be made under the 2014Amended Plan. All of the awardsAwards described below are subject to the conditions, limitations, restrictions, exercise price, vesting and forfeiture provisions determined by the Talent and Compensation Committee, in its sole discretion, subject to such limitations as are provided in the 2014Amended Plan. In addition, subject to the limitations provided in the 2014Amended Plan and in accordance with applicable law, the Talent and Compensation Committee may accelerate or defer the vesting or payment of awards, cancel or modify outstanding awards,Awards, and waive any conditions or restrictions imposed with respect to awardsAwards or the Common Shares issued pursuant to awards.Awards. As of March 2, 2020, the equity awards outstanding under our equity compensation plans were held by a total of 4,430 current and former employees andnon-employee directors (all of the 4,430 current and former employees andnon-employee directors held outstanding Awards granted under the 2014 Plan). Non-qualified Stock Options An award of anon-qualified stock option grants a participant the right to purchase a certain number of Common Shares during a specified term in the future, after a vesting period, at an exercise price equal to at least 100% of the Market Price (as defined below) of our Common Shares on the grant date. The “Market Price” of Common Shares as of a particular date shall generally mean the closing price per Common Share on the national securities exchange on which the Common Shares are principally traded for the last preceding date on which there was a sale of such Common Shares on such exchange (subject to certain exceptions set forth in 2014the Amended Plan in the event that the Company is no longer traded on a national securities exchange). The repricing ofnon-qualified stock options is prohibited. Unless otherwise determined by the Talent and Compensation Committee, members of the BoardDirectors shall generally not be eligible to receive options. The term of anon-qualified stock option may not exceed ten years from the date of grant. The exercise price may be paid with cash, Common Shares already owned by the participant, or with the proceeds from a sale of the Common Shares subject to the option or any combination thereof.option. The Talent and Compensation Committee may also provide that an option may be “net exercised,”exercised”, meaning that the participant would receive the number of whole Common Shares underlyingequal to (A) the options exercised less such numberdifference between (x) the aggregate Market Price of the Common Shares equivalent in valuesubject to the portion of such option then being exercised and (y) the aggregate exercise price andfor all such Common Shares under the portion thereof then being exercised plus (to the extent it would not give rise to adverse accounting consequences pursuant to applicable accounting principles or to adverse tax consequences to the Participants under Canadian federal, provincial or territorial tax laws) the amount of withholding taxes resultingtax due upon exercise divided by (B) the Market Price of a Common Share on the date of exercise. Any fractional share that would result from the exercise of the options.such equation shall be canceled. Anon-qualified stock option is an option that does not meet the qualifications of an incentive stock option as described below. Incentive Stock Options An incentive stock option is a stock option that meets the requirements of Section 422 of the Code, which include an exercise price of no less than 100% of Market Price on the grant date, having a term of no more than ten years, and beingthat the option be granted from a plan that has been approved by shareholders. The repricing of incentive stock options is prohibited. Notwithstanding the foregoing, if granted to a participant who owns Common Sharesshares representing more than 10% of the voting power of all classes of shares of the Company, its parent or one of its subsidiaries, an incentive stock option must have a term of not more than five years and have an exercise price which is at least 110% of the Market Price. In addition, if the aggregate Market Price of the Common Shares (as of the grant date) for which incentive stock options are exercisable for the first time by a participant during any calendar year exceeds $100,000, such excess will be treated asnon-qualified stock options. Share Appreciation Rights A share appreciation right (“SAR”) entitles the participant to receive an amount equal to the difference between the Market Price of the Company’s Common Shares on the exercise date and the exercise price of the SAR (which may not be less than 100% of the Market Price of a Common Share on the grant date), multiplied by the number of Common Shares subject to the SAR. A SAR may be granted in substitution for a previously granted option, and if so, the exercise price of any such SAR may not be less than 100% of the Market Price of Common Shares as determined at the time the option for which it is being substituted was granted. Payment to a participant upon the exercise of a SAR may be in cash or Common Shares (in which case, the number of Common Shares to be paid will be determined by dividing the amount calculated above by the Market Price of a Common Share at the time of payment). Unless otherwise determined by the Talent and Compensation Committee, members of the Board willDirectors shall generally not be eligible to receive SARs. Restricted Shares A restricted share award is an award of outstanding Common Shares that does not vest until after a specified period of time, or satisfaction of other vesting conditions as determined by the Talent and Compensation Committee, and which may be forfeited if conditions to vesting are not met. Participants generally accrue (but are not paid) dividends or dividend equivalents on the Common Shares subject to their award during the vesting period (unless the awards are subject to performance-vesting criteria) and are also generally entitled to provide voting instructions with respect to the Common Shares underlying their awards. Deferred Shares A deferred share award is an unfunded, unsecured promise to deliver Common Shares to the participant in the future, if the participant satisfies the conditions to vesting, as determined by the Talent and Compensation Committee. Participants do not have voting rights, but generally receiveaccrue (but are not paid) dividend equivalent payments during the vesting period subject to the same vesting conditions as the underlying award. Share Units A share unit is an award denominated in Common Shares that may be settled either in Common Shares or cash, subject to terms and conditions determined by the Talent and Compensation Committee. Participants generally receiveaccrue (but are not paid) dividend equivalent payments during the vesting period subject to the same vesting conditions as the underlying award. Share Payment Subject to limits in the 2014Amended Plan, the Talent and Compensation Committee may issue unrestricted Common Shares, alone or in tandem with other awards,Awards, in such amounts and subject to such terms and conditions as the Talent and Compensation Committee determines. A share payment may be granted as, or in payment of, a bonus (including, without limitation, any compensation that is intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code), or to provide incentives or recognize special achievements or contributions. Cash Awards The Talent and Compensation Committee may issue awards that are payable in cash, as deemed by the Talent and Compensation Committee to be consistent with the purposes of the 2014Amended Plan. These cash awards will be subject to the terms, conditions, restrictions and limitations determined by the Talent and Compensation Committee from time to time. The payment of cash awards may be subject to the achievement of specified performance criteria. The 2014Amended Plan provides that the maximum amount of a cash award that may be granted during any annual performance period to any employee subject to Section 162(m)Participant (other than anon-employee director of the CodeCompany) may not exceed $10,000,000. Performance Criteria Awards granted under the 2014Amended Plan may be subject to specified performance criteria. Performance criteria are based on the Company’s attainment of performance measurespre-established by the Talent and Compensation Committee, in its sole discretion, based on one or more of the following: revenues, income before taxes and extraordinary items, net income, operating income, earnings before income tax, earnings before interest, taxes, depreciation and amortization, cash flow or a combination of any or all of the foregoing; after-tax orpre-tax profits including, without limitation, those attributable to continuing and/or other operations; the level of the Company’s bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company either in absolute terms or as it relates to a profitability ratio including operating income or EBITA; return on capital employed, return on assets, or return on invested capital; after-tax orpre-tax return on shareholders’ equity; economic value added targets based on a cash flow return on investment formula; the market price of the Common Shares; the market capitalization or enterprise value of the Company, either in amount or relative to industry peers; the value of an investment in the Common Shares assuming the reinvestment of dividends; the achievement of operating margin targets or other measures of improving profitability; the filing of one or more new drug application(s) (“NDA”) or one or more new drug submission(s) (“NDS”) or the approval of one or more NDA(s) or one or more NDS(s) by the U.S. Food and Drug Administration or the Canadian Therapeutic Products Directorate, as applicable; the achievement of, or progress toward, a launch of one or more new drug(s); the achievement of research and development milestones; the achievement of other strategic milestones including, without limitation, the achievement of specific synergy capture and cost savings realization relating to integrations and the successful creation or execution of a restructuring plan for a specific business or function; the successful completion of clinical trial phases; licensing or acquiring new products or product platforms; acquisition or divestiture of products or business; the entering into new, or exiting from existing, geographic markets or industry segments; or the attainment of a certain level of, reduction of, or other specified objectives with regard to limiting the level in or increase in, all or a portion of controllable expenses or costs or other expenses or costs.costs For purposes of the first item above, “extraordinary items” includes all items of gain, loss or expense for the fiscal year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to a corporate transaction, restructuring, or related to a change in accounting principles. Each financial metric above may be on a business unit, geographic segment, total company, orper-share basis, and on a GAAP ornon-GAAP adjusted basis. The performance criteria may be based upon the attainment of specified levels of performance under one or more of the measures described above relative to the performance of other entities. To the extent permitted under Section 162(m) of the Code or to the extent that an award is not intended to qualify as “performance-based compensation” under Section 162(m) of the Code, theThe Talent and Compensation Committee in its sole discretion, may designate additional business criteria on which the performance criteria may be based or adjust, modify or amend the previously mentioned business criteria, including to take into account actions approved by the Board or a committee thereof that affect the achievement of the original performance criteria. Performance criteria may include a threshold level of performance below which no awardAward will be earned, a level of performance at which the target amount of an awardAward will be earned and a level of performance at which the maximum amount of the awardAward will be earned. To the extent permitted under Section 162(m) of the Code, theThe Talent and Compensation Committee shall make appropriate equitable adjustments to the performance criteria in recognition of unusual ornon-recurring events affecting us or our financial statements, in response to changes in applicable laws or regulations, including changes in generally accepted accounting principles, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles, as applicable.
Deferrals The Talent and Compensation Committee may postpone the exercise of awards,Awards, or the issuance or delivery of Common Shares or cash pursuant to any awardAward for such periods and upon such terms and conditions as the Talent and Compensation Committee determines. In addition, the Talent and Compensation Committee may determine that all or a portion of a payment to a participant, whether in cash and/or Common Shares, will be deferred in order to prevent the Company or any subsidiary from being denied a U.S. federal income tax deduction with respect to an award granted under the 2014Amended Plan. Notwithstanding this authority, the Talent and Compensation Committee will not postpone the exercise or delivery of Common Sharesshares or cash payable in respect of awardsAwards constituting deferred compensation under Section 409A of the Code, where such postponement will cause the imposition of additional taxes under Section 409A of the Code. Section 409A of the Code provides rules that govern the manner in which compensation of various types may be deferred and imposes taxes upon compensation that is improperly deferred or accelerated. Blackout Periods The 2014Amended Plan provides that (i) if the expiration of the term of options or SARs awarded under the 2014Amended Plan occurs during a period self-imposed by the Company during which a participant is prohibited from trading in the Company’s securities (a “Blackout Period”) such term will be extended until the tenth business day after the end of such Blackout Period, and (ii) if share units are to be delivered during a Blackout Period, the sharesCommon Shares subject to such Common Sharesshare units will be delivered as soon as practicable after the end of such Blackout Period. Dividends and Dividends Equivalents The Talent and Compensation Committee may provide that share awardsShare Awards shall earn dividends or dividend equivalents, as applicable, subject to such terms, conditions, restrictions and limitations as the Talent and Compensation Committee may establish. Notwithstanding the foregoing, dividends or dividend equivalents (i) shall have the same vesting dates and shall be paid in accordance with the same terms as the Awards to which they relate and (ii) with respect to any Award subject to the achievement of performance criteria, shall not be paid unless and until the relevant performance criteria have been satisfied. Stock options and SARs will not be eligible for dividends and dividend equivalents. Adjustments The 2014Amended Plan provideswill provide that the Talent and Compensation Committee will make appropriate equitable adjustments to the maximum number of Common Shares available for issuance under the 2014Amended Plan and other limits stated in the 2014Amended Plan, the number of Common Shares covered by outstanding awards,Awards, and the exercise prices and performance measures applicable to outstanding awards.Awards. These changes will be made to reflect changes in our capital structure (including a change in the number of Common Shares outstanding) on account of any share dividend, share split, reverse share split or any similar equity restructuring, or any combination or exchange of equity securities, merger, consolidation, recapitalization, reorganization or similar event, or to the extent necessary to prevent the enlargement or diminution of participants’ rights by reason of any such transaction or event or any extraordinary dividend, divestiture or other distribution (other than ordinary cash dividends) of assets to shareholders. These adjustments will be made only to the extent they conform to the requirements of applicable provisions of the Code and other applicable laws and regulations. The Talent and Compensation Committee, in its discretion, may decline to adjust an awardAward if it determines that the adjustment would violate applicable law or result in adverse tax consequences to the participant or to the Company. Adjustments described in this paragraph are subject to any applicable regulatory approvals. Terminations Unless the applicable award agreement provides otherwise or the Talent and Compensation Committee determines otherwise, vesting with respect to an awardAward will cease upon termination of a participant’s employment or service with the Company, and unvested awardsAwards shall be forfeited upon such termination. In the case of termination for cause, vested awards shall also be forfeited. ChangeTermination of ControlEmployment
The 2014 Plan provides that, unlessExcept as otherwise set forthprovided in a participant’s awardemployment agreement or letter, in the event that the optionholder’s employment agreement, all awardsis terminated by reason of death, disability, termination by the Company without cause or the participant voluntarily resigns, the right to exercise such option terminates on the date that is 90 days
from the participant’s termination (but in no event beyond the Original Term). Any options or share units that are assumed or substituted in connection with a Change of Control transaction (as defined below) will become fully vested, exercisableunvested and free of restrictions,do not vest on the termination date are cancelled and any performance conditions on those awards will be deemed to be achieved ifforfeited. In the participant’sevent that the optionholder’s employment or service is terminated by the Company without “cause” (as definedcause within one year following a change of control, all unvested options will vest on such termination and the optionholder will have one year following such a termination to exercise the option (but in no event beyond the 2014 Plan)Original Term). In the case of a holder of share units whose employment is terminated by the Company within 12one year following a change of control, a number of the holder’s share units will vest on such termination equal to the number of share units granted multiplied by a fraction, the numerator of which is the number of completed months followingbetween the Changedate of Control. grant and the date of termination and the denominator of which isthirty-six (36). Any remaining unvested share units which do not vest on the termination date will be cancelled and forfeited on the date of termination. In addition, the 2014event that the optionholder’s employment is terminated by the Company for cause prior to the exercise of the option, the option shall terminate and expire as of the date of termination of the employment. In the case of a holder of share units whose employment is terminated by the Company for cause, all of the holder’s share units shall terminate as of the date of termination of the employment. Nontransferability Awards granted under the 2011 Plan, provides that, unless otherwise set forth in a participant’s award agreement, all awards that are not assumed or substitutedand during any period of restriction on transferability, Common Shares issued in connection with the Changeexercise of Control transaction will become fully vested, exercisable and free of restrictions and any performance conditions on those awards will be deemed to be achieved immediately upon the occurrence of the Change of Control transaction. In addition, in the event of a Change of Control transaction, the Talent and Compensation Committee may, in its discretion, (i) provide that eachan option, and each SAR which may, by its terms, only be settled in Common Shares, will, immediately upon the occurrence of a Change in Control, be deemed to have been exercised on a “net exercise” basis, and (ii) may, in its discretion, except as would otherwise result in adverse tax consequences under Section 409A of the Code, provide that each award, other than options and SARs will, immediately upon the occurrence of the Change of Control, be cancelled in exchange for a payment in an amount equal to the excess of the consideration paid per Common Share in the Change of Control over the purchase price (if any) per Common Share subject to the award, multiplied by the number of Common Shares subject to the award.
Assignability
Except in specific circumstances described in the 2014 Plan, awards granted under the 2014 Plan may not be sold, pledged, hypothecated, assigned, margined or otherwise transferred in any manner other than by will or the laws of descent and distribution, unless and until the Common Shares underlying such award have been issued, and all restrictions applicable to such Common Shares have lapsed or have been waived by the Talent and Compensation Committee. Notwithstanding the foregoing, the Talent and Compensation Committee may, in its sole discretion, permit (on such terms, conditions and limitations as it may establish) nonqualified stock options and/or Common Shares issued in connection with an option exercise to be transferred to a member of a participant’s immediate family or to a trust or similar vehicle for the benefit of a participant’s immediate family members.
Amendment and Termination The 20142011 Plan and any award may be amended, suspended or terminated at any time by the Board, provided that no amendment willshall be made without shareholder approval if such shareholder approval is required in order to comply with applicable law or the rules of the NYSE, the rules of the Toronto Stock Exchange (“TSX”),TSX, or any other securities exchange on which the Common Shares are traded or quoted. For instance,Under the Board may, without shareholder approval but subject to applicable law and2011 Plan, the provisions of the 2014 Plan, (i) amend the vesting provisions of an award or of the 2014 Plan, (ii) amend the payment provisions of an award, (iii) cancel or modify outstanding awards, (iv) waive any restrictions imposed with respect to awards or the Common Shares issued pursuant to awards or of the 2014 Plan, (v) amend the provisions of the 2014 Plan in order to ensure its compliance with applicable securities and tax law as well as the TSX and NYSE rules, (vi) make any amendment of a clerical nature as well as any amendment clarifying any provision of the 2014 Plan, (vii) make any adjustment as described above under the heading “Adjustments”, and (viii) suspend or terminate the 2014 Plan. Except as may be required to comply with applicable tax law, no termination, suspension or amendment of the 2014 Plan may adversely affect the right of any participant with respect to a previously granted award without the participant’s written consent.
The Company willshall obtain shareholder approval for: (i) subject to the Talent and Compensation Committee’s right to make equitable adjustments as mentioned above, a reduction in the exercise price or purchase price of an award (or the cancellation andre-grant of an award resulting in a lower exercise price or purchase price);, except where the reduction is made to reflect a change in the Company’s capital structure, including as a result of a capital structure adjustment; (ii) the extension of the original termOriginal Term of an option over the maximum period of 10 years described above, except if such term occurs during a Blackout Period as described above;option; (iii) any amendment to remove or to exceed the participation limits described in the 2014 Plan;above; (iv) an increase to the maximum number of Common Shares issuable under the 20142011 Plan (other than adjustments made to reflect a change in accordance with the 2014 Plan)Company’s capital structure, including as a result of a capital structure adjustment); (v) amendments to the amendment and termination sectionprovision of the 20142011 Plan other than amendments of a clerical nature; and (vi) any amendment that permits Awardsawards to be transferable or assignable other than for normal estate settlement purposes or for other purposes not involving the receipt of monetary consideration.
Without shareholder approval, the Board has the discretion to make certain amendments to the 2011 Plan, including: (i) amend the vesting provisions of an award, (ii) amend the payment provisions of an award, (iii) cancel or modify outstanding awards, (iv) waive any restrictions imposed with respect to awards or the Common Shares issued pursuant to awards, (v) make amendments to the 2011 Plan to ensure compliance with applicable securities and tax law as well as the TSX and NYSE rules, (vi) make any amendment of a clerical nature as well as any amendment clarifying any provision of the 2011 Plan, (vii) make any adjustment to reflect a change in the Company’s capital structure, including as a result of capital structure adjustments, and (viii) suspend or terminate the 2011 Plan. Except for adjustments to awards made in connection with a change of control of the Company, no termination, suspension or amendment of the 2011 Plan or any award shall adversely affect the right of any participant with respect to any award theretofore granted, as determined by the Talent and Compensation Committee, without such participant’s written consent. No amendments were made to the 20142011 Plan in 2016.2019. 2011 Omnibus Incentive Plan SummaryOption and RSU Plans
The Company’s 2011 Omnibus Incentive Plan (the “2011 Plan”) was adopted and approved by the Board and the shareholdersAs of March 2, 2020, 425,124 Common Shares (less than 1% of the Company effective asissued and outstanding Common Shares) had been issued upon the exercise of May 16, 2011.options granted under the 2011 Plan and 2,607,034 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2011 Plan. As of March 2, 2020, a total of 395,373 Common Shares (less than 1% of the issued and outstanding Common Shares) remained reserved for issuance under the 2011 Plan, representing (i) 390,715 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 5,022 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan. The Company ceased granting new awards under the 2011 Plan upon the approval of the 2014 Omnibus Incentive Plan in 2014.
Awards Under The Plan
Awards under the 2011 Plan may be granted as options (including both incentive stock options and nonqualified stock options), share appreciation rights (“SARs”), share awards (including restricted shares, deferred shares and share units that may be settled either in Common Shares or cash) or cash awards. However, no SARs or deferred shares have been granted under the 2011 Plan. Awards may be granted singly, in combination or in tandem as determined by the Talent and Compensation Committee, in its sole discretion. A maximumAs of 2,001,476March 2, 2020, 550,606 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2014 Plan and 6,992,806 Common Shares (1.98% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2014 Plan. As of March 2, 2020, a total of 15,658,523 Common Shares (4.43% of the issued and outstanding Common Shares) remained reserved for issuance under the 2014 Plan, representing (i) 6,608,774 Common Shares (1.87% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 9,049,779 Common Shares (2.56% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan.
AUDIT COMMITTEE REPORT The Report of the Audit and Risk Committee of the Board shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts. The Audit and Risk Committee, comprised of independent directors, is delegated by the Board to monitor the integrity of our financial statements, the auditors’ qualifications and independence, the performance of the auditors and our internal auditors, and the Company’s compliance with legal and regulatory requirements. Management has primary responsibility for our financial statements and the overall reporting process as well as establishing and maintaining our internal controls. PricewaterhouseCoopers LLP, our auditors for fiscal year ended December 31, 2019, had the responsibility for expressing an opinion as to whether the audited financial statements have been prepared in accordance with generally accepted accounting principles in the United States in all material respects and on the effectiveness of our internal controls over financial reporting. The Audit and Risk Committee met with management and the auditors to review and discuss the audited financial statements for the year ended December 31, 2019, as well as management’s assessment of the effectiveness of our internal controls over financial reporting and the auditor’s assessment of our internal controls over financial reporting. The auditors, as well as the internal auditors, had full access to the Audit and Risk Committee, including regular meetings without management present. The Audit and Risk Committee received from and discussed with the auditors the written report and the letter from the auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the auditor’s communications with the Audit and Risk Committee concerning independence and has discussed with the auditor the auditor’s independence. Additionally, the committee discussed with the auditors the matters required by Auditing Standard No. 16, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board. The Audit and Risk Committee acts only in an oversight capacity and must rely on the information provided to it and on the representations made by management and the auditors. Based on the aforementioned reviews and discussions, and the report of the auditors, the Audit and Risk Committee recommended to the Board that the audited financial statements for the year ended December 31, 2019, be included in the Company’s Annual Report filed with the SEC. Audit and Risk Committee Russel C. Robertson, Chairperson Sarah B. Kavanagh Robert N. Power Thomas W. Ross, Sr. CERTAIN TRANSACTIONS Certain Related-Party Transactions As described in the section titled “Statement of Corporate Governance Practices — Ethical Business Conduct — Standards of Business Conduct” on page 27, the Board has adopted the Standards, which sets out the Company’s expectations for the conduct of our employees and directors in their dealings on behalf of the Company. The Conflict of Interest Policy set forth in our Standards requires that our employees and directors avoid situations in which they have a potential or actual conflict of interest with the Company. In accordance with our Conflict of Interest Policy, any employee, including our officers, involved any type of relationship described in the Conflict of Interest Policy is required to immediately and fully disclose the relevant circumstances to his or her immediate supervisor, the General Counsel or the Chief Compliance & Ethics Officer, and in accordance with the process set out in the Company’s Conflicts of Interest Standard Operating Procedures.Non-employee directors are required to report their involvement in any type of relationship described in the Conflict of Interest Policy to the Audit and Risk Committee. In addition to reviewing cases where the conflict, or potential conflict, involves a member of the Board, the Audit and Risk Committee reviews transactions or proposed transactions in which an executive officer has an interest that conflicts with the Company’s interests and makes recommendations to the Board regarding any such transaction. Our Conflict of Interest Policy states that the following are types of outside activities that can create conflicts: Ownership by a director or employee, or any member of the director’s or employee’s family, of a substantial interest in any concern that does business with the Company, whether as a supplier, dealer or customer, or are a competitor (except in the case of a publicly owned corporation whose securities are traded on the open market). Serving as a director, officer, employee, consultant, advisor, or in any other capacity for any business or other organization with which the Company currently (or potentially) has a business relationship or which is, or can expect to become, a competitor of the Company. Engaging in an outside activity with an individual, business or organization which currently (or potentially) has a competitive or business relationship with the Company where such activity is likely to decrease the impartiality, judgment, effectiveness or productivity expected from an employee. Performance by a director or employee or a member of the director’s or employee’s family of services for any outside concern or individual that does business with the Company. Outside employment which conflicts or might be reasonably expected to conflict with the normal duties of the director or employee. Since January 1, 2019, the Company was involved in the following related-party transaction, which has been approved or ratified by the Audit and Risk Committee: Joseph C. Papa’s son, Dr. Matthew Papa, District Manager, has been employed by the Company since September 2016. In 2019, Dr. Papa received an aggregate of $248,838 in compensation. PROPOSAL NO. 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION At our 2017 Annual Meeting of Shareholders, our Board recommended, and shareholders approved, in anon-binding advisory vote, that anon-binding advisory vote on executive compensation(“say-on-pay”) be held every year. The Board determined that our shareholders should vote on asay-on-pay proposal every year, consistent with the preference expressed by our shareholders at the 2017 Annual Meeting of Shareholders. At our 2019 Annual Meeting, approximately 93% of the total shareholders’ votes cast voted in favor of our executive compensation program. We believe these favorable results indicate strong support for continuing our current executive compensation program that was introduced in 2017. Proposal No. 2 provides the Company’s shareholders with an opportunity to provide an advisory vote related to compensation of the Company’s named executive officers. The Company has a“pay-for-performance” philosophy that forms the foundation of the executive compensation program for our Company’s named executive officers. This philosophy and the executive compensation program approved by the Talent and Compensation Committee have been central to the Company’s ability to attract, retain and motivate individuals who are committed to the ongoing transformation of our company and to improving people’s lives through our products. Our compensation program is intended to link executive compensation to long-term business performance, while providing compensation opportunities that are competitive as compared to our peers and align the interests of our executives with those of our shareholders. Our programs also balance appropriate risk taking and incorporate shareholder feedback. Please refer to “Executive Compensation — Compensation Discussion and Analysis” starting on page 39 for detailed information regarding our executive compensation program for the Company’s named executive officers. Pursuant to Schedule 14A of the Exchange Act, we are asking for shareholder approval, in an advisory resolution, of the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with SEC rules. This disclosure is provided in the section titled “Executive Compensation — Compensation Discussion and Analysis,” the compensation tables and the narrative discussion following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation program of our named executive officers and the executive compensation policies and practices described in this Proxy Statement. The Board requests that shareholders endorse the compensation of our named executive officers through the following resolution: Resolved, that the shareholders approve, in an advisory resolution, the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables, and other narrative executive compensation disclosures, contained in this Proxy Statement. This vote is advisory and therefore not binding on the Company, the Talent and Compensation Committee, or the Board. The Board and the Talent and Compensation Committee value the opinions of our shareholders and will take the outcome of the vote into consideration in the design of our executive compensation program going forward. The Board recommends that the shareholders vote FOR Proposal No. 2. PROPOSAL NO. 3 APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED 2014 OMNIBUS INCENTIVE PLAN TO INCREASE THE NUMBER OF COMMON SHARES AUTHORIZED UNDER THE PLAN The 2014 Plan was originally adopted and approved by our shareholders effective as of May 20, 2014 as the 2014 Omnibus Incentive Plan, and was amended and restated effective as of April 30, 2018 to increase the number of Common Shares available for issuance by an additional 11,900,000 Common Shares. As of December 31, 2019, 9,864,096 Common Shares were available for future issuance under the 2014 Plan representing 2.8% of the issued and outstanding Common Shares as of Aprilthat date. On February 11, 2016)2020, the Talent and Compensation Committee approved an amendment and restatement to the 2014 Plan, subject to approval by the shareholders at the Annual Meeting, to increase the number of Common Shares authorized for issuance under the 2014 Plan (the “Amended Plan”). We are asking our shareholders to approve at the Annual Meeting an amendment to the 2014 Plan to increase the number of Common Shares authorized for issuance under the 2014 Plan by 13,500,000. The proposed 13,500,000 additional Common Shares, which represents 3.8% of the 352,562,636 Common Shares outstanding as of December 31, 2019 and 3.8% of the 353,356,114 Common Shares outstanding as of our record date, March 2, 2020, is expected to allow us to make grants under the Amended Plan for approximately three years. We believe that increasing the number of Common Shares issuable under the 2014 Plan is necessary in order to allow Bausch Health to continue to align the long-term financial interests of employees, members of the Board, consultants, members of our sales force and other service providers of the Company and its subsidiaries with those of the Company’s shareholders, to attract and retain those individuals by providing compensation opportunities that are competitive with other companies and provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company and its subsidiaries. As of the filing of this Proxy Statement, the number of persons eligible to participate in the Amended Plan is approximately 4,000. A copy of the Amended Plan is attached to this Proxy Statement as Exhibit A. In addition to the amendment increasing the number of Common Shares issuable under the 2014 Plan, the Amended Plan includes the following amendments that do not require shareholder approval, as shareholder approval is not required under the amendment provisions of the 2014 Plan: (i) the exercise price of stock options and SARs will be based on the closing price of the underlying Common Shares on the date such stock options or SARs are granted (rather than on the last preceding trading date), (ii) additional provisions clarifying that (A) stock options and SARs will not be eligible for the payment of dividend or dividend equivalents and (B) the Talent and Compensation Committee cannot, without shareholder approval, seek to effect any repricing of any previously granted “underwater” stock option or SAR and (iii) other housekeeping and/or clerical changes. The Board believes that the Amended Plan is in the best interest of shareholders and supports this proposal for the following reasons: The Plan is administered by our Talent and Compensation Committee, which is composed entirely of independent directors. The Company strives to maximize employee and shareholder alignment through the use of equity awards, while minimizing dilution. If the proposed amendments are not approved, the Company will not have sufficient Common Shares for grant needs and will lose a critical tool for recruiting, retaining and motivating employees. The Company would thus be at a competitive disadvantage in attracting and retaining talent. The terms of the Company’s equity and other annual and long-term incentive compensation awards and employee policies are all designed to protect shareholder interests and encourage employees to focus on the long-term success of the Company. Employees typically cannot fully monetize equity awards until three years after grant subject to certain exceptions. For example, RSUs granted for 2019 generally vest inone-third increments with the final third not converting to Common Shares until after the third year. The Company does not permit “liberal” share recycling. Common Shares that are withheld to satisfy any tax withholding obligations may not again be available for issuance under the Amended Plan. The Amended Plan does not contain an “evergreen” feature pursuant to which the Common Shares authorized for issuance under the Amended Plan can be increased automatically without shareholder approval. Equity awards under the Amended Plan are generally double-trigger unless the outstanding awards are not assumed or substituted in connection with a Change of Control (as defined in the Amended Plan). As a shareholder of the Company, you are invited to vote with respect to the Amended Plan through the following resolution: Resolved, that the shareholders approve the amendment to the 2014 Plan to increase to the maximum number of Common Shares subject to Awards which may be issued pursuant to such plan by 13,500,000 Common Shares. The Board recommends that the shareholders vote “FOR” Proposal No. 3. The following is a summary of the Amended Plan which is qualified in its entirety by the full text of the Amended Plan, a copy of which is included as Exhibit A to this Proxy Statement. The capitalized terms not otherwise defined in this summary have the meaning assigned to them in the Amended Plan. For the avoidance of doubt, the changes to the 2014 Plan incorporated in the Amended Plan and described below will only be applicable to equity awards granted after approval of the Amended Plan at the Annual Meeting. Summary of Plan Terms Common Shares Subject to the Amended Plan The Common Shares issued or to be issued under the Amended Plan consists of authorized but unissued Common Shares or issued Common Shares that have been reacquired by the Company in any manner. Subject to adjustment made in connection with a recapitalization, Change of Control (as defined in the Amended Plan) and certain other events set forth in the Amended Plan, the maximum number of Common Shares subject to Awards which may be issued pursuant to the exerciseAmended Plan will be equal to the sum of options(i) 30,268,825 Common Shares, (ii) 13,500,000 Common Shares and (iii) the number of Common Shares becoming available for reuse after awards are terminated, forfeited, cancelled, exchanged or in connection withsurrendered following the vesting of share awardsEffective Date under the termsCompany’s 2011 Omnibus Incentive Plan and the 2007 Equity Compensation Plan. In determining the number of Common Shares to be reserved for issuance under the 2011 Plan. Eligibility
Persons eligible to receive awards are any employees, Directors or individuals performing services forAmended Plan, the Company or its subsidiaries in the capacity of a consultant, agent or otherwise, as determined by the TalentCompany’s management and Compensation Committee. Unless otherwise determined by the Talent and Compensation Committee membersevaluated the historic share usage and burn rate under the 2014 Plan and the existing terms of outstanding Awards under the Board shall generally not be eligible to receive SARs or options.
Participation Limits
Subject to adjustments made to reflect a change2014 Plan, as discussed in the Company’s capital structure, including as a result of a stock dividend, stock split, reverse consolidation, recapitalization, reorganization or divestiture or other similar event (“capital structure adjustments”), the aggregatesection titled “Historical Annual Common Share Usage” beginning on page 86.
The number of Common Shares that may be grantedauthorized for grant under the Amended Plan is subject to any “covered employee” during a calendar yearadjustment, as described in the formsection titled “Types of options, SARs, and/or share awards intended to qualify as “performance-based compensation” (such terms having the meanings given in Section 162(m) of the Code, including any rules and regulations thereunder) shall not exceed 1,000,000 Common Shares (computed basedAwards — Adjustments” on maximum performance).
Furthermore,page 84. In addition, (i) the number of Common Shares issuable to persons who are reporting insiders (as defined in National Instrument55-104 — Insider Reporting Requirements and Exemptions of the Canadian Securities Administrators),Insiders, at any time, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding Common Shares of the Company; andShares; (ii) the number of Common Shares issued to such insiders,Insiders, within any one year period, under all security-based compensation arrangements of the Company, cannot exceed 10% of its issued and outstanding securities.securities; (iii) the number of Common Shares issuable tonon-employee members of the Board, at any time, under all security-based compensation arrangements of the Company, cannot exceed 1% of issued and outstanding Common Shares; and (iv) the aggregate number of
Common Shares that may be granted prior to November 2, 2017 to any employee covered by Section 162(m) of the Internal Revenue Code (the “Code”) during a calendar year in the form of options, share appreciation rights, and/or share awards and intended to qualify as “performance-based compensation” thereunder were not permitted to exceed the number of Common Shares initially authorized for grant. Subject to adjustment, as described in the section titled “Types of Awards — Adjustments” on page 84, in any calendar year, no Participant who is anon-employee director of the Company shall be granted Awards, in either equity, cash or other compensation, with an aggregate fair market value as of the grant date or payment date, as applicable, in excess of $750,000. ExpirationIf any Common Shares subject to an Award are forfeited, canceled, exchanged or surrendered, or if an Award terminates or expires without a distribution of OptionsCommon Shares to the participant, the Common Shares with respect to the Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Amended Plan; however, the Common Shares surrendered or withheld as payment of either the exercise price of an option (including Common Shares otherwise underlying an award of a SAR that are retained by the Company to account for the exercise price of the SAR) and/or withholding taxes in respect of an Award will no longer be available for Awards under the Amended Plan. The maximum number of Common Shares available for Awards under the Amended Plan shall not be affected by the payment of cash dividends on outstanding Awards, the payment of share-denominated awards that must be settled in cash, the granting of cash awards, or, in connection with a transaction with another entity, the granting of Awards to individuals who previously received Awards from the other entity and SARsare receiving Awards under the Amended Plan as a result of such transaction.
Administration of the Amended Plan Generally optionsExcept as otherwise required by law or as designated otherwise by the Board, the Amended Plan will be administered by our Talent and SARsCompensation Committee. The Talent and Compensation Committee will interpret the Amended Plan and may adopt any administrative rules, regulations, procedures and guidelines governing the Amended Plan or any Awards granted under the Amended Plan as it deems to be appropriate.
As of the date of this Proxy Statement, we expect that approximately 4,000 employees and 10 directors will be eligible to receive Awards under the Amended Plan. The basis for participation in the Amended Plan is the Talent and Compensation Committee’s decision, in its sole discretion, that an Award to an eligible participant will further the Amended Plan’s purposes. In exercising its discretion, the Talent and Compensation Committee will consider the recommendations of management and the purposes of the Amended Plan, which are granted for a termto continue to align the long-term financial interests of employees, directors, consultants, members of our sales force and other service providers of the Company and its subsidiaries with those of the Company’s shareholders, to attract and retain those individuals by providing compensation opportunities that are competitive with other companies and provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company and its subsidiaries. In recent years, all eligible directors have received Awards under the 2014 Plan (unless such compensation was waived) and approximately 16% of our employees have received Awards under the 2014 Plan. Types of Awards The following types of Awards may be made under the Amended Plan. All of the Awards described below are subject to the conditions, limitations, restrictions, exercise price, vesting and forfeiture provisions determined by the Talent and Compensation Committee, butin its sole discretion, subject to such limitations as are provided in the Amended Plan. In addition, subject to the limitations provided in the Amended Plan and in accordance with applicable law, the Talent and Compensation Committee may accelerate or defer the vesting or payment of awards, cancel or modify outstanding Awards, and waive any conditions or restrictions imposed with respect to Awards or the Common Shares issued pursuant to Awards. As of March 2, 2020, the equity awards outstanding under our equity compensation plans were held by a total of 4,430 current and former employees andnon-employee directors (all of the 4,430 current and former employees andnon-employee directors held outstanding Awards granted under the 2014 Plan). Non-qualified Stock Options An award of anon-qualified stock option grants a participant the right to purchase a certain number of Common Shares during a specified term in the future, after a vesting period, at an exercise price equal to at least 100% of the Market Price (as defined below) of our Common Shares on the grant date. The “Market Price” of Common Shares as of a particular date shall generally mean the closing price per Common Share on the national securities exchange on which the Common Shares are principally traded (subject to certain exceptions set forth in the Amended Plan in the event that the Company is no longer traded on a national securities exchange). The repricing ofnon-qualified stock options is prohibited. Unless otherwise determined by the Talent and Compensation Committee, Directors shall generally not be eligible to receive options. The term of anon-qualified stock option may not exceed 10ten years (the “Original Term”). For optionsfrom the date of grant. The exercise price may be paid with cash, Common Shares already owned by the participant, or with the proceeds from a sale of the Common Shares subject to the option. The Talent and Compensation Committee may also provide that an option may be “net exercised”, meaning that the participant would receive the number of whole Common Shares equal to (A) the difference between (x) the aggregate Market Price of the Common Shares subject to the portion of such option then being exercised and (y) the aggregate exercise price for all such Common Shares under the portion thereof then being exercised plus (to the extent it would not give rise to adverse accounting consequences pursuant to applicable accounting principles or to adverse tax consequences to the Participants under Canadian federal, provincial or territorial tax laws) the amount of withholding tax due upon exercise divided by (B) the Market Price of a Common Share on the date of exercise. Any fractional share that would result from such equation shall be canceled. Anon-qualified stock option is an option that does not meet the qualifications of an incentive stock option as described below. Incentive Stock Options An incentive stock option is a stock option that meets the requirements of Section 422 of the Code, which include an exercise price of no less than 100% of Market Price on the grant date, a term of no more than ten years, and that the option be granted asfrom a plan that has been approved by shareholders. The repricing of incentive stock options is prohibited. Notwithstanding the foregoing, if granted to certain participants,a participant who owns shares representing more than 10% of the Original Term shallvoting power of all classes of shares of the Company, its parent or one of its subsidiaries, an incentive stock option must have a term of not exceedmore than five years. Ifyears and have an exercise price which is at least 110% of the Original TermMarket Price. In addition, if the aggregate Market Price of an option and SAR heldthe Common Shares (as of the grant date) for which incentive stock options are exercisable for the first time by a participant expires during a Company blackout period applicableany calendar year exceeds $100,000, such excess will be treated asnon-qualified stock options. Share Appreciation Rights A share appreciation right (“SAR”) entitles the participant to receive an amount equal to the participant which prohibitsdifference between the participant from trading in Company securities, the term of such option shall be extended until the tenth business day following the endMarket Price of the Company blackout period. Exercise Price of OptionsCompany’s Common Shares on the exercise date and SARs
Thethe exercise price per share for each option andof the SAR is(which may not be less than 100% of the closingMarket Price of a Common Share on the grant date), multiplied by the number of Common Shares subject to the SAR. A SAR may be granted in substitution for a previously granted option, and if so, the exercise price of any such SAR may not be less than 100% of the Market Price of Common Shares as determined at the time the option for which it is being substituted was granted. Payment to a participant upon the exercise of a SAR may be in cash or Common Shares (in which case, the number of Common Shares to be paid will be determined by dividing the amount calculated above by the Market Price of a Common Share at the time of payment). Unless otherwise determined by the Talent and Compensation Committee, Directors shall generally not be eligible to receive SARs.
Restricted Shares A restricted share award is an award of outstanding Common Shares that does not vest until after a specified period of time, or satisfaction of other vesting conditions as determined by the Talent and Compensation Committee, and which may be forfeited if conditions to vesting are not met. Participants generally accrue (but are not paid) dividends or dividend equivalents on the Common Shares onsubject to their award during the trading day immediately precedingvesting period (unless the date of grant. Vesting
Awards under the 2011 Planawards are subject to performance-vesting criteria) and are also generally entitled to provide voting instructions with respect to the Common Shares underlying their awards.
Deferred Shares A deferred share award is an unfunded, unsecured promise to deliver Common Shares to the participant in the future, if the participant satisfies the conditions to vesting, as determined by the Talent and Compensation Committee. Participants do not have voting rights, but generally accrue (but are not paid) dividend equivalent payments during the vesting period subject to the same vesting conditions as the underlying award. Share Units A share unit is an award denominated in Common Shares that may be settled either in Common Shares or cash, subject to terms and conditions determined by the Talent and Compensation Committee. Participants generally accrue (but are not paid) dividend equivalent payments during the vesting period subject to the same vesting conditions as the underlying award. Share Payment Subject to limits in the Amended Plan, the Talent and Compensation Committee may issue unrestricted Common Shares, alone or in tandem with other Awards, in such vesting provisionsamounts and subject to such terms and conditions as the Talent and Compensation Committee determines. A share payment may determine. Options currently outstanding vestbe granted as, or in equal installments overpayment of, a periodbonus (including, without limitation, any compensation that is intended to qualify as performance-based compensation for purposes of three or four years after the date of grant or 100% on the third or fourth anniversarySection 162(m) of the grant date. Share units generally vest 100% on the third anniversary of the date of grant.Code), or to provide incentives or recognize special achievements or contributions. Dividend EquivalentsCash Awards
The Talent and Compensation Committee may issue awards that are payable in cash, as deemed by the Talent and Compensation Committee to be consistent with the purposes of the Amended Plan. These cash awards will be subject to the terms, conditions, restrictions and limitations determined by the Talent and Compensation Committee from time to time. The payment of cash awards may be subject to the achievement of specified performance criteria. The Amended Plan provides that the maximum amount of a cash award that may be granted during any annual performance period to any Participant (other than anon-employee director of the Company) may not exceed $10,000,000. Performance Criteria Awards granted under the Amended Plan may be subject to specified performance criteria. Performance criteria are based on the Company’s attainment of performance measurespre-established by the Talent and Compensation Committee, in its sole discretion, based on one or more of the following: revenues, income before taxes and extraordinary items, net income, operating income, earnings before income tax, earnings before interest, taxes, depreciation and amortization, cash flow or a combination of any or all of the foregoing; after-tax orpre-tax profits including, without limitation, those attributable to continuing and/or other operations; the level of the Company’s bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company either in absolute terms or as it relates to a profitability ratio including operating income or EBITA; return on capital employed, return on assets, or return on invested capital; after-tax orpre-tax return on shareholders’ equity; economic value added targets based on a cash flow return on investment formula; the market price of the Common Shares; the market capitalization or enterprise value of the Company, either in amount or relative to industry peers; the value of an investment in the Common Shares assuming the reinvestment of dividends; the achievement of operating margin targets or other measures of improving profitability; the filing of one or more new drug application(s) (“NDA”) or one or more new drug submission(s) (“NDS”) or the approval of one or more NDA(s) or one or more NDS(s) by the U.S. Food and Drug Administration or the Canadian Therapeutic Products Directorate, as applicable; the achievement of, or progress toward, a launch of one or more new drug(s); the achievement of research and development milestones; the achievement of other strategic milestones including, without limitation, the achievement of specific synergy capture and cost savings realization relating to integrations and the successful creation or execution of a restructuring plan for a specific business or function; the successful completion of clinical trial phases; licensing or acquiring new products or product platforms; acquisition or divestiture of products or business; the entering into new, or exiting from existing, geographic markets or industry segments; or the attainment of a certain level of, reduction of, or other specified objectives with regard to limiting the level in or increase in, all or a portion of controllable expenses or costs or other expenses or costs For purposes of the first item above, “extraordinary items” includes all items of gain, loss or expense for the fiscal year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to a corporate transaction, restructuring, or related to a change in accounting principles. Each financial metric above may be on a business unit, geographic segment, total company, orper-share basis, and on a GAAP ornon-GAAP adjusted basis. The performance criteria may be based upon the attainment of specified levels of performance under one or more of the measures described above relative to the performance of other entities. The Talent and Compensation Committee may designate additional business criteria on which the performance criteria may be based or adjust, modify or amend the previously mentioned business criteria, including to take into account actions approved by the Board or a committee thereof that affect the achievement of the original performance criteria. Performance criteria may include a threshold level of performance below which no Award will be earned, a level of performance at which the target amount of an Award will be earned and a level of performance at which the maximum amount of the Award will be earned. The Talent and Compensation Committee shall make appropriate equitable adjustments to the performance criteria in recognition of unusual ornon-recurring events affecting us or our financial statements, in response to changes in applicable laws or regulations, including changes in generally accepted accounting principles, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles, as applicable. Deferrals The Talent and Compensation Committee may postpone the exercise of Awards, or the issuance or delivery of Common Shares or cash pursuant to any Award for such periods and upon such terms and conditions as the Talent and Compensation Committee determines. In addition, the Talent and Compensation Committee may determine that all or a portion of a payment to a participant, whether in cash and/or Common Shares, will be deferred in order to prevent the Company or any subsidiary from being denied a U.S. federal income tax deduction with respect to an award granted under the Amended Plan. Notwithstanding this authority, the Talent and Compensation Committee will not postpone the exercise or delivery of shares or cash payable in respect of Awards constituting deferred compensation under Section 409A of the Code, where such postponement will cause the imposition of additional taxes under Section 409A of the Code. Section 409A of the Code provides rules that govern the manner in which compensation of various types may be deferred and imposes taxes upon compensation that is improperly deferred or accelerated. Blackout Periods The Amended Plan provides that (i) if the expiration of the term of options or SARs awarded under the Amended Plan occurs during a period self-imposed by the Company during which a participant is prohibited from trading in the Company’s securities (a “Blackout Period”) such term will be extended until the tenth business day after the end of such Blackout Period, and (ii) if share units are to be delivered during a Blackout Period, the Common Shares subject to such share units will be delivered as soon as practicable after the end of such Blackout Period. Dividends and Dividends Equivalents The Talent and Compensation Committee may provide that share awardsShare Awards shall earn dividends or dividend equivalents, in the form of additional share awards,as applicable, subject to such terms, conditions, restrictions and limitations as itthe Talent and Compensation Committee may establish from time to time.establish. Notwithstanding the foregoing, dividends or dividend equivalents may not(i) shall have the same vesting dates and shall be paid in accordance with the same terms as the Awards to which they relate and (ii) with respect to any share awardAward subject to the achievement of performance criteria, shall not be paid unless and until the relevant performance criteria have been satisfied. Generally, holdersStock options and SARs will not be eligible for dividends and dividend equivalents. Adjustments The Amended Plan will provide that the Talent and Compensation Committee will make appropriate equitable adjustments to the maximum number of Common Shares available for issuance under the Amended Plan and other limits stated in the Amended Plan, the number Common Shares covered by outstanding Awards, and the exercise prices and performance measures applicable to outstanding Awards. These changes will be made to reflect changes in our capital structure (including a change in the number of Common Shares outstanding) on account of any share units receive dividend, equivalents whichshare split, reverse share split or any similar equity restructuring, or any combination or exchange of equity securities, merger, consolidation, recapitalization, reorganization or similar event, or to the extent necessary to prevent the enlargement or diminution of participants’ rights by reason of any such transaction or event or any extraordinary dividend, divestiture or other distribution (other than ordinary cash dividends) of assets to shareholders. These adjustments will be made only to the extent they conform to the requirements of applicable provisions of the Code and other applicable laws and regulations. The Talent and Compensation Committee, in its discretion, may decline to adjust an Award if it determines that the adjustment would violate applicable law or result in adverse tax consequences to the participant or to the Company. Adjustments described in this paragraph are subject to any applicable regulatory approvals. Terminations Unless the applicable award agreement provides otherwise or the Talent and Compensation Committee determines otherwise, vesting in linewith respect to an Award will cease upon termination of a participant’s employment or service with the underlying award to which they relate.Company, and unvested Awards shall be forfeited upon such termination. In the case of termination for cause, vested awards shall also be forfeited. Termination of Employment Except as otherwise provided in a participant’s employment agreement or letter, in the event that the optionholder’s employment is terminated by reason of death, disability, termination by the Company without cause or the participant voluntarily resigns, the right to exercise such option terminates on the date that is 90 days from the participant’s termination (but in no event beyond the Original Term). Any options or share units that are unvested and do not vest on the termination date are cancelled and forfeited. In the event that the optionholder’s employment is terminated by the Company without cause within one year following a change of control, all unvested options will vest on such termination and the optionholder will have one year following such a termination to exercise the option (but in no event beyond the Original Term). In the case of a holder of share units whose employment is terminated by the Company within one year following a change of control, a number of the holder’s share units will vest on such termination equal to the number of share units granted multiplied by a fraction, the numerator of which is the number of completed months between the date of grant and the date of termination and the denominator of which isthirty-six (36). Any remaining unvested share units which do not vest on the termination date will be cancelled and forfeited on the date of termination. In the event that the optionholder’s employment is terminated by the Company for cause prior to the exercise of the option, the option shall terminate and expire as of the date of termination of the employment. In the case of a holder of share units whose employment is terminated by the Company for cause, all of the holder’s share units shall terminate as of the date of termination of the employment. Nontransferability Awards granted under the 2011 Plan, and during any period of restriction on transferability, Common Shares issued in connection with the exercise of an option, may not be sold, pledged, hypothecated, assigned, margined or otherwise transferred in any manner other than by will or the laws of descent and distribution, unless and until the Common Shares underlying such award have been issued, and all restrictions applicable to such Common Shares have lapsed or have been waived by the Talent and Compensation Committee. Notwithstanding the foregoing, the Talent and Compensation Committee may, in its sole discretion, permit (on such terms, conditions and limitations as it may establish) nonqualified stock options and/or Common Shares issued in connection with an option exercise to be transferred to a member of a participant’s immediate family or to a trust or similar vehicle for the benefit of a participant’s immediate family members. Amendment and Termination The 2011 Plan and any award may be amended, suspended or terminated at any time by the Board, provided that no amendment shall be made without shareholder approval if such shareholder approval is required in order to comply with applicable law or the rules of the NYSE, the rules of the TSX, or any other securities exchange on which the Common Shares are traded or quoted. Under the 2011 Plan, the Company shall obtain shareholder approval for: (i) a reduction in the exercise price or purchase price of an award (or the cancellation andre-grant of an award resulting in a lower exercise price or purchase price), except where the reduction is made to reflect a chancechange in the Company’s capital structure, including as a result of a capital structure adjustment; (ii) the extension of the Original Term of an option; (iii) any amendment to remove or to exceed the participation limits described above; (iv) an increase to the maximum number of Common Shares issuable under the 2011 Plan (other than adjustments made to reflect a change in the Company’s capital structure, including as a result of a capital structure adjustment); (v) amendments to the amendment provision of the 2011 Plan other than amendments of a clerical nature; and (vi) any amendment that permits awards to be transferable or assignable other than for normal estate settlement purposes or for other purposes not involving the receipt of monetary consideration. Without shareholder approval, the Board has the discretion to make certain amendments to the 2011 Plan, including: (i) amend the vesting provisions of an award, (ii) amend the payment provisions of an award, (iii) cancel or modify outstanding awards, (iv) waive any restrictions imposed with respect to awards or the Common Shares issued pursuant to awards, (v) make amendments to the 2011 Plan to ensure compliance with applicable securities and tax law as well as the TSX and NYSE rules, (vi) make any amendment of a clerical nature as well as any amendment clarifying any provision of the 2011 Plan, (vii) make any adjustment to reflect a change in the Company’s capital structure, including as a result of capital structure adjustments, and (viii) suspend or terminate the 2011 Plan. Except for adjustments to awards made in connection with a change of control of the Company, no termination, suspension or amendment of the 2011 Plan or any award shall adversely affect the right of any participant with respect to any award theretofore granted, as determined by the Talent and Compensation Committee, without such participant’s written consent. No amendments were made to the 2011 Plan in 2016.2019. 2007 Equity Compensation Plan
The Company’s 2007 Equity Compensation Plan (the “2007 Plan”) was adopted and approved by the Board and the shareholders of the Company effective as of May 16, 2007. The Company ceased granting new awards under the 2007 Plan upon the approval of the 2011 Omnibus Incentive Plan in 2011.
Awards Under The 2007 Plan
Awards under the 2007 Plan may be granted as options and RSUs.
Eligibility
Persons eligible to receive awards are employees, officers, Directors and “consultants” (as defined in National Instrument45-106 — Prospectus and Registration Exemptions of the Canadian securities administrators) of the Company and its subsidiaries and affiliates.
Participation Limits
Under the current terms of the 2007 Plan:
(a) the number of Common Shares reserved for “insiders” (as defined in the TSX Company Manual) issuable, at any time, under the 2007 Plan and under any other security-based compensation arrangements, will not exceed 10% of issued and outstanding Common Shares;
(b) the number of Common Shares issued to such insiders, within anyone-year period, under the 2007 Plan and under any other security-based compensation arrangements, will not exceed 10% of issued and outstanding Common Shares;
(c) the total number of options and RSUs in aggregate granted pursuant to the 2007 Plan to any one participant during any calendar year must not exceed 20% of the total number of options and RSUs in aggregate granted pursuant to the Plan during such calendar year;
(d) the number of Common Shares to be issued under the 2007 Plan to any one participant during each calendar year during the term of the 2007 Plan shall not exceed the lesser of (i) 5% of the issued and outstanding Common Shares or (ii) 7,987,450 Common Shares;
(e) the number of Common Shares reserved for issuance and issued pursuant to the 2007 Plan to any one participant at any time must not exceed 25% of the total number of Common Shares that may be issued from treasury under the Plan; and
(f) the maximum number of Common Shares issuable in respect of RSUs, that are subject to performance goals, during any calendar year, to any one participant, shall be 300,000 Common Shares (subject to any decrease pursuant to adjustments made in connection with a change in the Company’s capital structure, or an amalgamation, combination, merger or other reorganization involving the Company); provided, however, that if the performance period is less than three consecutive fiscal years, such maximum number of Common Shares above shall be determined by multiplying 300,000 by a fraction, the numerator of which is the number of days in the performance period and denominator of which is 1095.
Expiration of Options
The 2007 Plan provides for a maximum option term of 5 years. Options currently outstanding under the 2007 Plan generally expire on the fifth anniversary of the date of grant. However, if the term of an option expires
during a Company blackout period applicable to the participant which prohibits the participant from trading in Company securities, the term of such option shall be extended until the tenth business day following the end of the Company blackout period.
Exercise Price of Options
The exercise price per share for each option or SAR is not less than 100% of the volume weighted average trading price of the Common Shares for the five trading days immediately preceding the date of grant.
Vesting
Awards under the 2007 Plan are subject to such vesting provisions as the Talent and Compensation Committee may determine. Options generally vest in equal installments over a period of three or four years following the date of grant. RSUs generally vest 100% on the third anniversary of the date of grant. Vesting of RSUs also may be subject to the attainment of specified performance goals.
Dividend Equivalents
RSUs earn dividend equivalents in the form of additional RSUs. Dividend equivalents vest in line with the underlying award to which they relate.
Termination of Employment or Service
Options granted under the Plan to an employee or officer option holder are forfeited upon termination of employment or term of office with the Company, except in certain cases including disability, death, retirement and termination without cause or resignation. Any options held by an option holder that are not exercisable at the date of death, disability, retirement or termination, immediately expire and are cancelled on such date. Employee options that are exercisable at the date of death, disability, retirement or termination expire on the earlier of (a) the original term of the option and (b) either (i) 180 days from the date of death, disability or retirement or (ii) 60 days from the date of termination without cause or resignation. Consultant options that are exercisable at the date of death or disability of the consultant or termination of the consulting relationship expire on the earlier of (a) the original term of the option and (b) 60 days from the date of death, disability or termination. Where an employee or officer option holder’s employment or term of office is terminated for cause, or a consultant’s consulting arrangement is terminated for the consultant’s breach of the consulting arrangement, any options held by the option holder, whether or not exercisable at the termination date, immediately expire and are cancelled on such date. Notwithstanding the foregoing provisions, the Board may permit the exercise of any options held in the manner and on the terms as authorized by the Board, including the right for the Board to accelerate the vesting of options, provided that the Board may not authorize the exercise of an option beyond the expiration of the applicable exercise period.
Where an RSU holder’s employment, term of office or consulting arrangement terminates by reason of (a) in the case of an employee or officer RSU holder, voluntary resignation, or termination by the Company or one of its affiliates for cause or (b) in the case of a consultant RSU holder, voluntary termination or termination by the Company or one of its affiliates for breach of the consulting arrangement, then any RSUs that are unvested on the date of such termination or resignation will be forfeited and cancelled on the termination date. Where the RSU holder’s employment terminates due to death, disability or retirement or termination without cause, or a consultant RSU holder’s consulting arrangement is terminated by the Company or one of its affiliates other than as a result of a breach, then prorated RSUs will vest, based on the number of days of active service from the grant date to the date of death, disability, retirement or termination compared to the number of days from the grant date to the vesting date, and the remainder are cancelled.
In addition to the foregoing, the 2007 Plan provides that:
(a) if an option holder or RSU holder engages in a business that competes with that of the Company, or any activity that would be considered detrimental to the Company (i) prior to any exercise of an option, all options held by the option holder will terminate and expire; (ii) during theone-year period following the date an option is exercised or becomes vested, the option holder will be required to pay to the Company an amount equal to any gain realized as a result of the exercise of the option; (iii) prior to any vesting of RSUs, all RSUs held by the RSU holder will terminate and be cancelled; or (iv) during theone-year period commencing on the date one or more RSUs vest, the RSU holder will be required to pay to us an amount equal to the market price of the Common Shares and/or the cash amount received by the RSU holder, plus any other gain realized as a result of the vesting of the RSUs, issuance of the Common Shares and/or payment of the cash amount; and
(b) if an option holder or RSU holder has been employed by the Company or one of its affiliates for at least 10 consecutive years, the Plan provides that, provided that the sum of the holder’s age and the years of service with the Company, or its affiliate, equals or exceeds 70, upon the retirement, death, disability or termination (other than in the case of a termination for cause) (i) all of the unvested options held by such holder will immediately vest and become exercisable, (ii) all such vested options shall expire on the earlier of (A) the expiration of the term of such options, and (B) one year following the retirement, death, disability or termination with us, and (iii) all unvested RSUs held by such holder will immediately vest (other than for RSU holders who are subject to U.S. taxation, in which case the Plan provides for special vesting rules).
On a change in control, the Board may, without the consent of any participant, take such steps as are necessary or desirable to cause the conversion or exchange of outstanding options or RSUs into or for cash or options, units, rights or other securities of substantially equivalent value in any entity participating in or resulting from the change in control. Alternatively, the Board may accelerate the vesting of any or all outstanding options or RSUs so that they are exercisable conditional upon or prior to the completion of the change in control.
Nontransferability
No assignment or transfer of options or RSUs, whether voluntary, involuntary, by operation of law or otherwise, vests any interest or right in any assignee or transferee and immediately upon any assignment or transfer, or any attempt to make the same, such options or RSUs will terminate and be of no further force or effect.
Notwithstanding the foregoing, the Talent and Compensation Committee may, in its sole discretion, permit (on such terms, conditions and limitations as it may establish) nonqualified stock options and/or Common Shares issued in connection with an option exercise to be transferred to a member of a participant’s immediate family or to a trust or similar vehicle for the benefit of a participant’s immediate family members.
Amendment and Termination
The Board may, without notice, at any time or from time to time for any purpose whatsoever, amend, suspend, discontinue or terminate this 2007 Plan or any award granted under this 2007 Plan.
No amendment shall be made without shareholder approval if such shareholder approval is required in order to comply with applicable law or the rules of the NYSE, the rules of the TSX, or any other securities exchange on which the Common Shares are traded or quoted. Under the 2007 Plan, the Company shall obtain shareholder approval for any amendment (i) to increase the number of Common Shares reserved for issuance under the 2007 Plan; (ii) that would reduce the exercise price of an option (including a cancellation and reissue of an option constituting a reduction of the exercise price); (iii) to extend the term of an outstanding option beyond the originally scheduled expiry date for that option; (iv) to the eligible participants under the 2007 Plan that would
permit the introduction or reintroduction ofnon-employee Directors to participate under the 2007 Plan on a discretionary basis; (v) that would alter the transferability or assignability of options or RSUs; and (vi) to provide for other types of compensation through equity issuance, in each case unless the change results from an adjustment made in connection with a change in the Company’s capital structure, or an amalgamation, combination, merger or other reorganization involving the Company.
Without shareholder approval, the Board has the discretion to make certain amendments to the 2007 Plan, including: (i) amend the vesting provisions of an award, (ii) amend the payment provisions of an award, (iii) cancel or modify outstanding awards, (iv) waive any restrictions imposed with respect to awards or the Common Shares issued pursuant to awards, (v) make amendments to the 2007 Plan to ensure compliance with applicable securities and tax law as well as the TSX and NYSE rules, (vi) make any amendment of a clerical nature, as well as any amendment clarifying any provision of the 2007 Plan, (vii) make any adjustment to reflect a change in the Company’s capital structure, including as a result of capital structure adjustments, and (viii) suspend or terminate the 2007 Plan.
Except for adjustments to awards made in connection with a change of control of the Company, no termination, suspension or amendment of the 2007 Plan or any award shall adversely affect the right of any participant with respect to any award theretofore granted, as determined by the Talent and Compensation Committee, without such participant’s written consent.
No amendments were made to the 2007 Plan in 2016.
Option and RSU Plans As of February 28, 2017, 12,403,495 Common Shares (3.57% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2003 Plan and 165,080 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2003 Plan. As of February 28, 2017, a total of 137,237 Common Shares (less than 1% of the issued and outstanding Common Shares) remained reserved for issuance under the 2003 Plan, representing (i) 79,495 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 57,742 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan. As of February 28, 2017, 74,096 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2006 Plan and 2,704,883 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2006 Plan. As of February 28, 2017, a total of 2,181,824 Common Shares (less than 1% of the issued and outstanding Common Shares) remained reserved for issuance under the 2006 Plan, representing (i) 0 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 2,181,824 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan.
As of February 28, 2017, 4,301,303 Common Shares (1.24% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2007 Plan and 3,573,846 (1.03% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2007 Plan. As of February 28, 2017, a total of 508,339 Common Shares (less than 1% of the issued and outstanding Common Shares) remained reserved for issuance under the 2007 Plan, representing (i) 0 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 508,339 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan. The Company ceased granting new awards under the 2007 Plan upon the approval of the 2011 Plan in 2011.
As of February 28, 2017,March 2, 2020, 425,124 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2011 Plan and 2,547,1312,607,034 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2011 Plan. As of February 28, 2017,March 2, 2020, a total of 2,001,476395,373 Common Shares (less than 1% of the issued and outstanding Common Shares) remained reserved for issuance under the 2011 Plan, representing (i) 1,315,998390,715 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 685,4785,022 Common Shares (less than 1% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan. The Company ceased granting new awards under the 2011 Plan upon the approval of the 2014 Plan in 2014.
As of February 28, 2017, 2,128March 2, 2020, 550,606 Common Shares (less than 1% of the issued and outstanding Common Shares) had been issued upon the exercise of options granted under the 2014 Plan and 519,6016,992,806 Common Shares (less than 1%(1.98% of the issued and outstanding Common Shares) had been issued in connection with the vesting of RSUs granted under the 2014 Plan. As of February 28, 2017,March 2, 2020, a total of 7,594,50615,658,523 Common Shares (2.18%(4.43% of the issued and outstanding Common Shares) remained reserved for issuance under the 2014 Plan, representing (i) 2,634,0826,608,774 Common Shares (less than 1%(1.87% of the issued and outstanding Common Shares) issuable in respect of options and (ii) 4,960,4249,049,779 Common Shares (1.43%(2.56% of the issued and outstanding Common Shares) issuable in respect of RSUs granted and which remain outstanding under such plan. AUDIT COMMITTEE REPORT The Report of the Audit and Risk Committee of the Board shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts. The Audit and Risk Committee, comprised of independent directors, is delegated by the Board to monitor the integrity of our financial statements, the auditors’ qualifications and independence, the performance of the auditors and our internal auditors, and the Company’s compliance with legal and regulatory requirements. Management has primary responsibility for our financial statements and the overall reporting process as well as establishing and maintaining our internal controls. PricewaterhouseCoopers LLP, our auditors for fiscal year ended December 31, 2016,2019, had the responsibility for expressing an opinion as to whether the audited financial statements have been prepared in accordance with generally accepted accounting principles in the United States in all material respects and on the effectiveness of our internal controls over financial reporting. The Audit and Risk Committee met with management and the auditors to review and discuss the audited financial statements for the year ended December 31, 2016,2019, as well as management’s assessment of the effectiveness of our internal controls over financial reporting and the auditor’s assessment of our internal controls over financial reporting. The auditors, as well as the internal auditors, had full access to the Audit and Risk Committee, including regular meetings without management present. The Audit and Risk Committee received from and discussed with the auditors the written report and the letter from the auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the auditor’s communications with the Audit and Risk Committee concerning independence and has discussed with the auditor the auditor’s independence. Additionally, the committee discussed with the auditors the matters required by Auditing Standard No. 16, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board. The Audit and Risk Committee acts only in an oversight capacity and must rely on the information provided to it and on the representations made by management and the auditors. Based on the aforementioned reviews and discussions, and the report of the auditors, the Audit and Risk Committee recommended to the Board that the audited financial statements for the year ended December 31, 2016,2019, be included in the Company’s Annual Report filed with the SEC. Audit and Risk Committee Russel C. Robertson, Chairperson D. Robert Hale
Sarah B. Kavanagh Robert N. Power Thomas W. Ross, Sr. CERTAIN TRANSACTIONS Certain Related-Party Transactions As described above,in the section titled “Statement of Corporate Governance Practices — Ethical Business Conduct — Standards of Business Conduct” on page 27, the Board has adopted the Standards, which setsets out the Board’sCompany’s expectations for the conduct of our Directors, officersemployees and employeesdirectors in their dealings on behalf of the Company. Our conflictThe Conflict of interest policy isInterest Policy set forth in our Standards of Business Conduct and requires that Directors, officersour employees and employeesdirectors avoid situations in which they have a potential or actual conflict of interest with the Company. Directors,In accordance with our Conflict of Interest Policy, any employee, including our officers, or employees involved in any type of the types of relationshipsrelationship described in our conflictthe Conflict of interest policy areInterest Policy is required to immediately and fully disclose the relevant circumstances to theirhis or her immediate supervisors,supervisor, the General Counsel or the Chief Compliance & Ethics Officer, and in accordance with the process set out in the caseCompany’s Conflicts of officers or employees, orInterest Standard Operating Procedures.Non-employee directors are required to report their involvement in any type of relationship described in the Conflict of Interest Policy to the Audit and Risk Committee, inCommittee. In addition to reviewing cases where the caseconflict, or potential conflict, involves a member of Directors. Thethe Board, the Audit and Risk Committee reviews transactions or proposed transactions in which an executive officer has an interest that conflicts with the Company’s interests and makes recommendations to the Board regarding any such transaction. The Audit and Risk Committee also conducts such reviews in cases where the conflict, or potential conflict, involves a memberOur Conflict of the Board. Our conflict of interest policyInterest Policy states that the following are types of outside activities that can create conflicts: Ownership by a Directordirector or employee, or any member of the Director’sdirector’s or employee’s family, of a substantial interest in any concern that does business with the Company, whether as a supplier, dealer or customer, or are a competitor (except in the case of a publicly owned corporation whose securities are traded on the open market). Serving as a Director,director, officer, employee, consultant, advisor, or in any other capacity for any business or other organization with which the Company currently (or potentially) has a business relationship or which is, or can expect to become, a competitor of the Company. Engaging in an outside activity with an individual, business or organization which currently (or potentially) has a competitive or business relationship with the Company where such activity is likely to decrease the impartiality, judgment, effectiveness or productivity expected from an employee. Performance by a Directordirector or employee or a member of the Director’sdirector’s or employee’s family of services for any outside concern or individual that does business with the Company. Outside employment which conflicts or might be reasonably expected to conflict with the normal duties of the Directordirector or employee. Since January 1, 2016,2019, the Company was involved in the following related-party transactions each oftransaction, which has been approved or ratified by the Audit and Risk Committee: Joseph C. Papa’s son, Dr. Matthew Papa, ProductDistrict Manager, has been employed by the Company since September 2016. In 2016, he2019, Dr. Papa received $34,615an aggregate of $248,838 in compensation. Richard U. DeSchutter and TABLE Holdings, L.P. were shareholders of Sprout prior to its merger with the Company’s subsidiary VPI in October 2015. William A. Ackman is the managing member of TABLE Holdings Management LLC, which is the General Partner of TABLE Holdings L.P. As one of the terms of the merger agreement between Sprout and VPI, the shareholders of Sprout received certain payments. Mr. DeSchutter owned 983,101 shares of Sprout and received a payment of $8,231,044 in January 2016. TABLE Holdings, L.P. owned 866,051 Series C Convertible Preferred Shares of Sprout and received a payment of $7,586,913 in October 2015, and a further payment of $7,251,070 in January 2016. In November 2016, the shareholder representative of the former shareholders of Sprout filed a lawsuit against the Company alleging, among other things, breach of contract with respect to certain terms of the merger agreement relating to the Sprout acquisition, including the disputed contractual term to spend no less than $200 million in certain expenditures.
J. Michael Pearson’sbrother-in-law, Robert Brabandt, Director of Corporate Procurement/ Real Estate, has been employed by the Company since September 2010. In 2016, Mr. Brabandt received $511,989 which included his salary, bonuses and equity grant.
On February 10, 2017, the Company, Valeant Pharmaceuticals International and J. Michael Pearson (together, the “Valeant Parties”) and Pershing Square Capital Management, L.P., Pershing Square Holdings, Ltd., Pershing Square International, Ltd., Pershing Square, L.P., Pershing Square II, L.P., PS Management GP, LLC, PS Fund 1, LLC, Pershing Square GP, LLC (together, “Pershing Square”), and William A. Ackman (“Ackman” and, together with Pershing Square, the “Pershing Square Parties”) entered into a litigation management agreement (the “Litigation Management Agreement”). In part, the Litigation Management Agreement (a) allocates potential costs and expenses (including legal fees) among the parties in the event of a settlement of the pending litigationIn reAllergan, Inc. Proxy ViolationSecs.Litig. that is approved by both parties and (b) provides that the Pershing Square Parties, as shareholders, forbear from commencing actions as to certain legal claims relating to the Company for a defined period of time. The Litigation Management Agreement will terminate on November 1, 2017 if a settlement is not yet obtained, unless extended by the parties. In connection with the entrance into the Litigation Management Agreement, on February 10, 2017 the Valeant Parties and the Pershing Square Parties entered into a mutual release of claims where each party will release the other parties from certain claims, including those arising out of any purchase of security of the Company. Pershing Square Holdings, Ltd., Pershing Square International, Ltd., Pershing Square L.P., Pershing Square II, L.P., PS Management GP LLC, PS Fund 1, LLC and Pershing Square GP, LLC are investment funds managed by Pershing Square Capital Management, L.P. William A. Ackman and Stephen Fraidin, both currently members of the Company’s Board, are the CEO and Vice Chairman of Pershing Square Capital Management, L.P. The mutual release will go into effect upon the later of satisfaction of the payment obligations that each party would have in connection with any settlement of the California action pursuant to the Litigation Management Agreement and the date of entry of final judgment, and will not occur if the Litigation Management Agreement is terminated.
PROPOSAL NO. 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION The Board is committed to excellence in governance. At our 20112017 Annual Meeting of Shareholders, our Board recommended, and shareholders approved, in anon-binding advisory vote, that anon-binding advisory vote on executive compensation(“say-on-pay”) be held every year. The Board determined that our shareholders should vote on asay-on-pay proposal every year, consistent with the preference expressed by our shareholders at the 20112017 Annual Meeting of Shareholders. At our 2019 Annual Meeting, approximately 93% of the total shareholders’ votes cast voted in favor of our executive compensation program. We believe these favorable results indicate strong support for continuing our current executive compensation program that was introduced in 2017. Proposal No. 2 provides the Company’s shareholders with an opportunity to provide an advisory vote related to compensation of the Company’s Named Executive Officers.named executive officers.
The Company has a“pay-for-performance” philosophy that forms the foundation of all decisions regardingthe executive compensation of theprogram for our Company’s Named Executive Officers.named executive officers. This compensation philosophy and the executive compensation program structure approved by the Talent and Compensation Committee have been central to the Company’s ability to attract, retain and motivate individuals who can achieve superiorare committed to the ongoing transformation of our company and to improving people’s lives through our products. Our compensation program is intended to link executive compensation to long-term business performance, while providing compensation opportunities that are competitive as compared to our peers and align the interests of our executives with those of our shareholders. Our programs also balance appropriate risk taking and incorporate shareholder returns. The Talent and Compensation Committee is engaged in reevaluating such compensation philosophy and the Company’s compensation programs and practices.feedback. Please refer to “Executive Compensation — Compensation Discussion and Analysis — Executive Summary”Analysis” starting on page 39 for an overview of thedetailed information regarding our executive compensation ofprogram for the Company’s Named Executive Officers.named executive officers. Pursuant to Schedule 14A of the Exchange Act, we are asking for shareholder approval, in an advisory resolution, of the compensation of our Named Executive Officersnamed executive officers as disclosed in this Proxy Statement in accordance with SEC rules, whichrules. This disclosure includesis provided in the disclosure undersection titled “Executive Compensation —Compensation— Compensation Discussion and Analysis,” the compensation tables and the narrative discussion following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation program of our Named Executive Officersnamed executive officers and the executive compensation policies and practices described in this Proxy Statement. This advisory vote gives you as a shareholder the opportunity to endorse or notThe Board requests that shareholders endorse the compensation of our Named Executive Officersnamed executive officers through the following resolution: Resolved, that the shareholders approve, in an advisory resolution, the compensation paid to the Named Executive Officers,named executive officers, as disclosed inpursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, section and compensation tables, as well as theand other narrative executive compensation disclosures, contained in this Proxy Statement. This vote is advisory and therefore not binding on the Company, the Talent and Compensation Committee, of the Board or the Board. The Board and the Talent and Compensation Committee value the opinions of our shareholders and towill take the extent there is any significantoutcome of the vote againstinto consideration in the Named Executive Officer compensation as disclosed in this Proxy Statement, we will consider those shareholders’ concerns, and the Talent and Compensation Committee will evaluate whether any actions are necessary to address those concerns. As noted above, partly in response to the disappointing 62% of votes in favordesign of our executive compensation program at the 2016 Annual Meeting of Shareholders, certain changes have been made to these programs. See “2016 Shareholder Engagement”. Shareholders had previously endorsed the design and administration of our executive compensation programs by significant margins, with votes in favor of these programs at our 2014 and 2015 Annual Meeting of Shareholders of 98% and 90%, respectively.going forward. The Board recommends that the shareholders vote FOR Proposal No. 2. PROPOSAL NO. 3 ADVISORY VOTE ONAPPROVAL OF AN AMENDMENT TO THE FREQUENCYCOMPANY’S AMENDED AND RESTATED 2014 OMNIBUS INCENTIVE PLAN TO INCREASE THE NUMBER OF ADVISORY VOTES ON EXECUTIVE COMPENSATIONCOMMON SHARES AUTHORIZED UNDER THE PLAN
As described in Proposal No. 2 above, we are providingThe 2014 Plan was originally adopted and approved by our shareholders witheffective as of May 20, 2014 as the opportunity2014 Omnibus Incentive Plan, and was amended and restated effective as of April 30, 2018 to castincrease the number of Common Shares available for issuance by an advisory vote onadditional 11,900,000 Common Shares. As of December 31, 2019, 9,864,096 Common Shares were available for future issuance under the compensation of our Named Executive Officers.
Section 14A2014 Plan representing 2.8% of the Exchange Act requires us to allow our shareholders the opportunity to cast an advisory vote on how often we should include advisory votes on the compensationissued and outstanding Common Shares as of our Named Executive Officers in our proxy materials for future shareholder meetings. Under this proposal, shareholders may vote to have the“say-on-pay” vote ever year, every two years or every three years, or may abstain from voting.
Our Board has determined that an annual advisory vote on executive compensation is the most appropriate alternative for the Company. The Board’s determination was influenced by the fact that meaningful portions of the compensation of our Named Executive Officers are evaluated, adjusted and approved on an annual basis, and that it is important to have regular visibility into the long-term incentives that help drive our performance metrics. As part of the annual review process, the Board believes that shareholder perspectives should be a factor that is taken into consideration by the Board anddate. On February 11, 2020, the Talent and Compensation Committee approved an amendment and restatement to the 2014 Plan, subject to approval by the shareholders at the Annual Meeting, to increase the number of Common Shares authorized for issuance under the 2014 Plan (the “Amended Plan”).
We are asking our shareholders to approve at the Annual Meeting an amendment to the 2014 Plan to increase the number of Common Shares authorized for issuance under the 2014 Plan by 13,500,000. The proposed 13,500,000 additional Common Shares, which represents 3.8% of the 352,562,636 Common Shares outstanding as of December 31, 2019 and 3.8% of the 353,356,114 Common Shares outstanding as of our record date, March 2, 2020, is expected to allow us to make grants under the Amended Plan for approximately three years. We believe that increasing the number of Common Shares issuable under the 2014 Plan is necessary in making decisionsorder to allow Bausch Health to continue to align the long-term financial interests of employees, members of the Board, consultants, members of our sales force and other service providers of the Company and its subsidiaries with those of the Company’s shareholders, to attract and retain those individuals by providing compensation opportunities that are competitive with other companies and provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company and its subsidiaries. As of the filing of this Proxy Statement, the number of persons eligible to participate in the Amended Plan is approximately 4,000. A copy of the Amended Plan is attached to this Proxy Statement as Exhibit A. In addition to the amendment increasing the number of Common Shares issuable under the 2014 Plan, the Amended Plan includes the following amendments that do not require shareholder approval, as shareholder approval is not required under the amendment provisions of the 2014 Plan: (i) the exercise price of stock options and SARs will be based on the closing price of the underlying Common Shares on the date such stock options or SARs are granted (rather than on the last preceding trading date), (ii) additional provisions clarifying that (A) stock options and SARs will not be eligible for the payment of dividend or dividend equivalents and (B) the Talent and Compensation Committee cannot, without shareholder approval, seek to effect any repricing of any previously granted “underwater” stock option or SAR and (iii) other housekeeping and/or clerical changes. The Board believes that the Amended Plan is in the best interest of shareholders and supports this proposal for the following reasons: The Plan is administered by our Talent and Compensation Committee, which is composed entirely of independent directors. The Company strives to maximize employee and shareholder alignment through the use of equity awards, while minimizing dilution. If the proposed amendments are not approved, the Company will not have sufficient Common Shares for grant needs and will lose a critical tool for recruiting, retaining and motivating employees. The Company would thus be at a competitive disadvantage in attracting and retaining talent. The terms of the Company’s equity and other annual and long-term incentive compensation awards and employee policies are all designed to protect shareholder interests and encourage employees to focus on the long-term success of the Company. Employees typically cannot fully monetize equity awards until three years after grant subject to certain exceptions. For example, RSUs granted for 2019 generally vest inone-third increments with the final third not converting to Common Shares until after the third year. The Company does not permit “liberal” share recycling. Common Shares that are withheld to satisfy any tax withholding obligations may not again be available for issuance under the Amended Plan. The Amended Plan does not contain an “evergreen” feature pursuant to which the Common Shares authorized for issuance under the Amended Plan can be increased automatically without shareholder approval. Equity awards under the Amended Plan are generally double-trigger unless the outstanding awards are not assumed or substituted in connection with a Change of Control (as defined in the Amended Plan). As a shareholder of the Company, you are invited to vote with respect to executive compensation. By providing an advisory vote on executive compensation on an annual basis, our shareholders will be able to provide us with direct input on our compensation philosophy, policies and practices as disclosed in the management proxy circular and proxy statement every year. We understand that our shareholders may have different views as to what is the best approach for the Company, and we look forward to hearing from our shareholders on this agenda item every year. Accordingly, our Board recommends that the advisory vote on executive compensation be held every year. This advisory vote gives you as a shareholder the opportunity to vote on the frequency of advisory votes on executive compensation for our Named Executive OfficersAmended Plan through the following resolution: Resolved, that the shareholders wishapprove the Companyamendment to include an advisory vote on the compensation2014 Plan to increase to the maximum number of the Company’s Named Executive OfficersCommon Shares subject to Awards which may be issued pursuant to Rule14a-21(b)such plan by 13,500,000 Common Shares. of the Exchange Act: While we believe that a vote every year is the best choice for us, you are not voting to approve or disapprove our recommendation of every year, but rather to make your own choice among a vote of once every year, every two years or every three years. You may also abstain from voting on this proposal.
This vote is advisory and therefore not binding on the Company, the Talent and Compensation Committee of the Board or the Board. The Board and the Talent and Compensation Committee value the opinions of our shareholders and to the extent there is any significant vote against the Named Executive Officer compensation as disclosed in this Proxy Statement, we will consider those shareholders’ concerns, and the Talent and Compensation Committee will evaluate whether any actions are necessary to address those concerns.
The Board recommends that the shareholders vote for EVERY YEAR on“FOR” Proposal No. 3. The following is a summary of the Amended Plan which is qualified in its entirety by the full text of the Amended Plan, a copy of which is included as Exhibit A to this Proxy Statement. The capitalized terms not otherwise defined in this summary have the meaning assigned to them in the Amended Plan. For the avoidance of doubt, the changes to the 2014 Plan incorporated in the Amended Plan and described below will only be applicable to equity awards granted after approval of the Amended Plan at the Annual Meeting. Summary of Plan Terms Common Shares Subject to the Amended Plan The Common Shares issued or to be issued under the Amended Plan consists of authorized but unissued Common Shares or issued Common Shares that have been reacquired by the Company in any manner. Subject to adjustment made in connection with a recapitalization, Change of Control (as defined in the Amended Plan) and certain other events set forth in the Amended Plan, the maximum number of Common Shares subject to Awards which may be issued pursuant to the Amended Plan will be equal to the sum of (i) 30,268,825 Common Shares, (ii) 13,500,000 Common Shares and (iii) the number of Common Shares becoming available for reuse after awards are terminated, forfeited, cancelled, exchanged or surrendered following the Effective Date under the Company’s 2011 Omnibus Incentive Plan and the 2007 Equity Compensation Plan. In determining the number of Common Shares to be reserved for issuance under the Amended Plan, the Company’s management and Talent and Compensation Committee evaluated the historic share usage and burn rate under the 2014 Plan and the existing terms of outstanding Awards under the 2014 Plan, as discussed in the section titled “Historical Annual Common Share Usage” beginning on page 86. The number of Common Shares authorized for grant under the Amended Plan is subject to adjustment, as described in the section titled “Types of Awards — Adjustments” on page 84. In addition, (i) the number of Common Shares issuable to Insiders, at any time, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding Common Shares; (ii) the number of Common Shares issued to Insiders, within any one year period, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding securities; (iii) the number of Common Shares issuable tonon-employee members of the Board, at any time, under all security-based compensation arrangements of the Company, cannot exceed 1% of issued and outstanding Common Shares; and (iv) the aggregate number of Common Shares that may be granted prior to November 2, 2017 to any employee covered by Section 162(m) of the Internal Revenue Code (the “Code”) during a calendar year in the form of options, share appreciation rights, and/or share awards and intended to qualify as “performance-based compensation” thereunder were not permitted to exceed the number of Common Shares initially authorized for grant. Subject to adjustment, as described in the section titled “Types of Awards — Adjustments” on page 84, in any calendar year, no Participant who is anon-employee director of the Company shall be granted Awards, in either equity, cash or other compensation, with an aggregate fair market value as of the grant date or payment date, as applicable, in excess of $750,000. If any Common Shares subject to an Award are forfeited, canceled, exchanged or surrendered, or if an Award terminates or expires without a distribution of Common Shares to the participant, the Common Shares with respect to the Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Amended Plan; however, the Common Shares surrendered or withheld as payment of either the exercise price of an option (including Common Shares otherwise underlying an award of a SAR that are retained by the Company to account for the exercise price of the SAR) and/or withholding taxes in respect of an Award will no longer be available for Awards under the Amended Plan. The maximum number of Common Shares available for Awards under the Amended Plan shall not be affected by the payment of cash dividends on outstanding Awards, the payment of share-denominated awards that must be settled in cash, the granting of cash awards, or, in connection with a transaction with another entity, the granting of Awards to individuals who previously received Awards from the other entity and are receiving Awards under the Amended Plan as a result of such transaction. Administration of the Amended Plan Except as otherwise required by law or as designated otherwise by the Board, the Amended Plan will be administered by our Talent and Compensation Committee. The Talent and Compensation Committee will interpret the Amended Plan and may adopt any administrative rules, regulations, procedures and guidelines governing the Amended Plan or any Awards granted under the Amended Plan as it deems to be appropriate. As of the date of this Proxy Statement, we expect that approximately 4,000 employees and 10 directors will be eligible to receive Awards under the Amended Plan. The basis for participation in the Amended Plan is the Talent and Compensation Committee’s decision, in its sole discretion, that an Award to an eligible participant will further the Amended Plan’s purposes. In exercising its discretion, the Talent and Compensation Committee will consider the recommendations of management and the purposes of the Amended Plan, which are to continue to align the long-term financial interests of employees, directors, consultants, members of our sales force and other service providers of the Company and its subsidiaries with those of the Company’s shareholders, to attract and retain those individuals by providing compensation opportunities that are competitive with other companies and provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company and its subsidiaries. In recent years, all eligible directors have received Awards under the 2014 Plan (unless such compensation was waived) and approximately 16% of our employees have received Awards under the 2014 Plan. Types of Awards The following types of Awards may be made under the Amended Plan. All of the Awards described below are subject to the conditions, limitations, restrictions, exercise price, vesting and forfeiture provisions determined by the Talent and Compensation Committee, in its sole discretion, subject to such limitations as are provided in the Amended Plan. In addition, subject to the limitations provided in the Amended Plan and in accordance with applicable law, the Talent and Compensation Committee may accelerate or defer the vesting or payment of awards, cancel or modify outstanding Awards, and waive any conditions or restrictions imposed with respect to Awards or the Common Shares issued pursuant to Awards. As of March 2, 2020, the equity awards outstanding under our equity compensation plans were held by a total of 4,430 current and former employees andnon-employee directors (all of the 4,430 current and former employees andnon-employee directors held outstanding Awards granted under the 2014 Plan). Non-qualified Stock Options An award of anon-qualified stock option grants a participant the right to purchase a certain number of Common Shares during a specified term in the future, after a vesting period, at an exercise price equal to at least 100% of the Market Price (as defined below) of our Common Shares on the grant date. The “Market Price” of Common Shares as of a particular date shall generally mean the closing price per Common Share on the national securities exchange on which the Common Shares are principally traded (subject to certain exceptions set forth in the Amended Plan in the event that the Company is no longer traded on a national securities exchange). The repricing ofnon-qualified stock options is prohibited. Unless otherwise determined by the Talent and Compensation Committee, Directors shall generally not be eligible to receive options. The term of anon-qualified stock option may not exceed ten years from the date of grant. The exercise price may be paid with cash, Common Shares already owned by the participant, or with the proceeds from a sale of the Common Shares subject to the option. The Talent and Compensation Committee may also provide that an option may be “net exercised”, meaning that the participant would receive the number of whole Common Shares equal to (A) the difference between (x) the aggregate Market Price of the Common Shares subject to the portion of such option then being exercised and (y) the aggregate exercise price for all such Common Shares under the portion thereof then being exercised plus (to the extent it would not give rise to adverse accounting consequences pursuant to applicable accounting principles or to adverse tax consequences to the Participants under Canadian federal, provincial or territorial tax laws) the amount of withholding tax due upon exercise divided by (B) the Market Price of a Common Share on the date of exercise. Any fractional share that would result from such equation shall be canceled. Anon-qualified stock option is an option that does not meet the qualifications of an incentive stock option as described below. Incentive Stock Options An incentive stock option is a stock option that meets the requirements of Section 422 of the Code, which include an exercise price of no less than 100% of Market Price on the grant date, a term of no more than ten years, and that the option be granted from a plan that has been approved by shareholders. The repricing of incentive stock options is prohibited. Notwithstanding the foregoing, if granted to a participant who owns shares representing more than 10% of the voting power of all classes of shares of the Company, its parent or one of its subsidiaries, an incentive stock option must have a term of not more than five years and have an exercise price which is at least 110% of the Market Price. In addition, if the aggregate Market Price of the Common Shares (as of the grant date) for which incentive stock options are exercisable for the first time by a participant during any calendar year exceeds $100,000, such excess will be treated asnon-qualified stock options. Share Appreciation Rights A share appreciation right (“SAR”) entitles the participant to receive an amount equal to the difference between the Market Price of the Company’s Common Shares on the exercise date and the exercise price of the SAR (which may not be less than 100% of the Market Price of a Common Share on the grant date), multiplied by the number of Common Shares subject to the SAR. A SAR may be granted in substitution for a previously granted option, and if so, the exercise price of any such SAR may not be less than 100% of the Market Price of Common Shares as determined at the time the option for which it is being substituted was granted. Payment to a participant upon the exercise of a SAR may be in cash or Common Shares (in which case, the number of Common Shares to be paid will be determined by dividing the amount calculated above by the Market Price of a Common Share at the time of payment). Unless otherwise determined by the Talent and Compensation Committee, Directors shall generally not be eligible to receive SARs. Restricted Shares A restricted share award is an award of outstanding Common Shares that does not vest until after a specified period of time, or satisfaction of other vesting conditions as determined by the Talent and Compensation Committee, and which may be forfeited if conditions to vesting are not met. Participants generally accrue (but are not paid) dividends or dividend equivalents on the Common Shares subject to their award during the vesting period (unless the awards are subject to performance-vesting criteria) and are also generally entitled to provide voting instructions with respect to the Common Shares underlying their awards. Deferred Shares A deferred share award is an unfunded, unsecured promise to deliver Common Shares to the participant in the future, if the participant satisfies the conditions to vesting, as determined by the Talent and Compensation Committee. Participants do not have voting rights, but generally accrue (but are not paid) dividend equivalent payments during the vesting period subject to the same vesting conditions as the underlying award. Share Units A share unit is an award denominated in Common Shares that may be settled either in Common Shares or cash, subject to terms and conditions determined by the Talent and Compensation Committee. Participants generally accrue (but are not paid) dividend equivalent payments during the vesting period subject to the same vesting conditions as the underlying award. Share Payment Subject to limits in the Amended Plan, the Talent and Compensation Committee may issue unrestricted Common Shares, alone or in tandem with other Awards, in such amounts and subject to such terms and conditions as the Talent and Compensation Committee determines. A share payment may be granted as, or in payment of, a bonus (including, without limitation, any compensation that is intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code), or to provide incentives or recognize special achievements or contributions. Cash Awards The Talent and Compensation Committee may issue awards that are payable in cash, as deemed by the Talent and Compensation Committee to be consistent with the purposes of the Amended Plan. These cash awards will be subject to the terms, conditions, restrictions and limitations determined by the Talent and Compensation Committee from time to time. The payment of cash awards may be subject to the achievement of specified performance criteria. The Amended Plan provides that the maximum amount of a cash award that may be granted during any annual performance period to any Participant (other than anon-employee director of the Company) may not exceed $10,000,000. Performance Criteria Awards granted under the Amended Plan may be subject to specified performance criteria. Performance criteria are based on the Company’s attainment of performance measurespre-established by the Talent and Compensation Committee, in its sole discretion, based on one or more of the following: revenues, income before taxes and extraordinary items, net income, operating income, earnings before income tax, earnings before interest, taxes, depreciation and amortization, cash flow or a combination of any or all of the foregoing; after-tax orpre-tax profits including, without limitation, those attributable to continuing and/or other operations; the level of the Company’s bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company either in absolute terms or as it relates to a profitability ratio including operating income or EBITA; return on capital employed, return on assets, or return on invested capital; after-tax orpre-tax return on shareholders’ equity; economic value added targets based on a cash flow return on investment formula; the market price of the Common Shares; the market capitalization or enterprise value of the Company, either in amount or relative to industry peers; the value of an investment in the Common Shares assuming the reinvestment of dividends; the achievement of operating margin targets or other measures of improving profitability; the filing of one or more new drug application(s) (“NDA”) or one or more new drug submission(s) (“NDS”) or the approval of one or more NDA(s) or one or more NDS(s) by the U.S. Food and Drug Administration or the Canadian Therapeutic Products Directorate, as applicable; the achievement of, or progress toward, a launch of one or more new drug(s); the achievement of research and development milestones; the achievement of other strategic milestones including, without limitation, the achievement of specific synergy capture and cost savings realization relating to integrations and the successful creation or execution of a restructuring plan for a specific business or function; the successful completion of clinical trial phases; licensing or acquiring new products or product platforms; acquisition or divestiture of products or business; the entering into new, or exiting from existing, geographic markets or industry segments; or the attainment of a certain level of, reduction of, or other specified objectives with regard to limiting the level in or increase in, all or a portion of controllable expenses or costs or other expenses or costs For purposes of the first item above, “extraordinary items” includes all items of gain, loss or expense for the fiscal year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to a corporate transaction, restructuring, or related to a change in accounting principles. Each financial metric above may be on a business unit, geographic segment, total company, orper-share basis, and on a GAAP ornon-GAAP adjusted basis. The performance criteria may be based upon the attainment of specified levels of performance under one or more of the measures described above relative to the performance of other entities. The Talent and Compensation Committee may designate additional business criteria on which the performance criteria may be based or adjust, modify or amend the previously mentioned business criteria, including to take into account actions approved by the Board or a committee thereof that affect the achievement of the original performance criteria. Performance criteria may include a threshold level of performance below which no Award will be earned, a level of performance at which the target amount of an Award will be earned and a level of performance at which the maximum amount of the Award will be earned. The Talent and Compensation Committee shall make appropriate equitable adjustments to the performance criteria in recognition of unusual ornon-recurring events affecting us or our financial statements, in response to changes in applicable laws or regulations, including changes in generally accepted accounting principles, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles, as applicable. Deferrals The Talent and Compensation Committee may postpone the exercise of Awards, or the issuance or delivery of Common Shares or cash pursuant to any Award for such periods and upon such terms and conditions as the Talent and Compensation Committee determines. In addition, the Talent and Compensation Committee may determine that all or a portion of a payment to a participant, whether in cash and/or Common Shares, will be deferred in order to prevent the Company or any subsidiary from being denied a U.S. federal income tax deduction with respect to an award granted under the Amended Plan. Notwithstanding this authority, the Talent and Compensation Committee will not postpone the exercise or delivery of shares or cash payable in respect of Awards constituting deferred compensation under Section 409A of the Code, where such postponement will cause the imposition of additional taxes under Section 409A of the Code. Section 409A of the Code provides rules that govern the manner in which compensation of various types may be deferred and imposes taxes upon compensation that is improperly deferred or accelerated. Blackout Periods The Amended Plan provides that (i) if the expiration of the term of options or SARs awarded under the Amended Plan occurs during a period self-imposed by the Company during which a participant is prohibited from trading in the Company’s securities (a “Blackout Period”) such term will be extended until the tenth business day after the end of such Blackout Period, and (ii) if share units are to be delivered during a Blackout Period, the Common Shares subject to such share units will be delivered as soon as practicable after the end of such Blackout Period. Dividends and Dividends Equivalents The Talent and Compensation Committee may provide that Share Awards shall earn dividends or dividend equivalents, as applicable, subject to such terms, conditions, restrictions and limitations as the Talent and Compensation Committee may establish. Notwithstanding the foregoing, dividends or dividend equivalents (i) shall have the same vesting dates and shall be paid in accordance with the same terms as the Awards to which they relate and (ii) with respect to any Award subject to the achievement of performance criteria, shall not be paid unless and until the relevant performance criteria have been satisfied. Stock options and SARs will not be eligible for dividends and dividend equivalents. Adjustments The Amended Plan will provide that the Talent and Compensation Committee will make appropriate equitable adjustments to the maximum number of Common Shares available for issuance under the Amended Plan and other limits stated in the Amended Plan, the number Common Shares covered by outstanding Awards, and the exercise prices and performance measures applicable to outstanding Awards. These changes will be made to reflect changes in our capital structure (including a change in the number of Common Shares outstanding) on account of any share dividend, share split, reverse share split or any similar equity restructuring, or any combination or exchange of equity securities, merger, consolidation, recapitalization, reorganization or similar event, or to the extent necessary to prevent the enlargement or diminution of participants’ rights by reason of any such transaction or event or any extraordinary dividend, divestiture or other distribution (other than ordinary cash dividends) of assets to shareholders. These adjustments will be made only to the extent they conform to the requirements of applicable provisions of the Code and other applicable laws and regulations. The Talent and Compensation Committee, in its discretion, may decline to adjust an Award if it determines that the adjustment would violate applicable law or result in adverse tax consequences to the participant or to the Company. Adjustments described in this paragraph are subject to any applicable regulatory approvals. Terminations Unless the applicable award agreement provides otherwise or the Talent and Compensation Committee determines otherwise, vesting with respect to an Award will cease upon termination of a participant’s employment or service with the Company, and unvested Awards shall be forfeited upon such termination. In the case of termination for cause, vested awards shall also be forfeited. Change of Control The Amended Plan will provide that, unless otherwise set forth in a participant’s award agreement or employment agreement, all Awards that are assumed or substituted in connection with a Change of Control transaction will become fully vested, exercisable and free of restrictions, and any performance conditions on those Awards will be deemed to be achieved if the participant’s employment or service is terminated by the Company without “cause” (as defined in the Amended Plan) within 12 months following the Change of Control. In addition, the Amended Plan provides that, unless otherwise set forth in a participant’s award agreement, all Awards that are not assumed or substituted in connection with the Change of Control transaction will become fully vested (on a pro rata basis), exercisable and free of restrictions and any performance conditions on those Awards will be deemed to be achieved at target (on a pro rata basis) immediately upon the occurrence of the Change of Control transaction. In addition, in the event of a Change of Control transaction, the Talent and Compensation Committee may, in its discretion, (i) provide that each option and each SAR which may, by its terms, only be settled in Common Shares, will, immediately upon the occurrence of a Change in Control, be deemed to have been exercised on a “net exercise” basis, and (ii) may, in its discretion, except as would otherwise result in adverse tax consequences under Section 409A of the Code, provide that each Award, other than options and SARs will, immediately upon the occurrence of the Change of Control, be cancelled in exchange for a payment in an amount equal to the excess of the consideration paid per Common Share in the Change of Control over the purchase price (if any) per Common Share subject to the Award, multiplied by the number of Common Shares subject to the Award. Assignability Except in specific circumstances described in the Amended Plan, Awards granted under the Amended Plan may not be sold, pledged, hypothecated, assigned, margined or otherwise transferred in any manner other than by will or the laws of descent and distribution, unless and until the Common Shares underlying such Award have been issued, and all restrictions applicable to such Common Shares have lapsed or have been waived by the Talent and Compensation Committee. Amendment and Termination Subject to the approval of shareholders that we are seeking at the Annual Meeting, the Amended Plan will be effective as of April 28, 2020 and will remain in effect until the earlier of (i) the date all Common Shares subject to the Amended Plan have been purchased or acquired or (ii) April 28, 2030. The Amended Plan and any Award may be amended, suspended or terminated at any time by the Board, provided that no amendment will be made without shareholder approval if such shareholder approval is required in order to comply with applicable law or the rules of the NYSE, the rules of the TSX, or any other securities exchange on which the Common Shares are traded or quoted. For instance, the Board may, without shareholder approval but subject to applicable law and the provisions of the Amended Plan, (i) amend the vesting provisions of an Award or of the Amended Plan, (ii) amend the payment provisions of an Award, (iii) cancel or modify outstanding Awards, (iv) waive any restrictions imposed with respect to Awards or the Common Shares issued pursuant to Awards or of the Amended Plan, (v) amend the provisions of the Amended Plan in order to ensure its compliance with applicable securities and tax law as well as the TSX and NYSE rules, (vi) make any amendment of a clerical nature as well as any amendment clarifying any provision of the Amended Plan, (vii) make any adjustment as described above under the heading “Adjustments”, and (viii) suspend or terminate the Amended Plan. Except as may be required to comply with applicable tax law, no termination, suspension or amendment of the 2014 Plan may adversely affect the right of any participant with respect to a previously granted Award without the participant’s written consent. The Company will obtain shareholder approval for: (i) subject to the Talent and Compensation Committee’s right to make equitable adjustments as mentioned above, a reduction in the exercise price or purchase price of an Award (or the cancellation andre-grant of an Award resulting in a lower exercise price or purchase price); (ii) the extension of the original term of an option over the maximum period of 10 years described above, except if such term occurs during a Blackout Period as described above; (iii) any amendment to remove or to exceed the participation limits described in the Amended Plan; (iv) an increase to the maximum number of Common Shares issuable under the Amended Plan (other than adjustments in accordance with the 2014 Plan); (v) amendments to the amendment and termination section of the Amended Plan other than amendments of a clerical nature; and (vi) any amendment that permits Awards to be transferable or assignable other than for normal estate settlement purposes or for other purposes not involving the receipt of monetary consideration. Option and SAR Repricing Except as provided in the section titled “Types of Awards — Adjustments” on page 84 and without limiting the section titled “Types of Awards — Amendment and Termination” beginning on page 85, the Talent and Compensation Committee may not, without shareholder approval, seek to effect anyre-pricing of any previously granted “underwater” stock option or SAR by: (i) amending or modifying the terms of the stock option or SAR to lower the exercise price; (ii) cancelling the underwater stock option or SAR and granting either (A) replacement stock options or SARs having a lower exercise price or (B) restricted shares, share units, or other share awards in exchange; or (iii) cancelling or repurchasing the underwater stock options or SARs for cash or other securities. A stock option or SAR will be deemed to be “underwater” at any time when the market value of the Common Shares covered by such Award is less than the exercise price of the Award. Clawback Awards under the Amended Plan are subject to our Clawback Policy (adopted February 21, 2017), available on our website at ir.bauschhealth.com (under the tab “Investors” and under the subtab “Corporate Governance - Governance Documents”). Historical Annual Common Share Usage As of December 31, 2019, there were 7,100,000 Common Shares subject to outstanding options (2.0% of Common Shares Outstanding) and 8,100,000 Common Shares subject to outstanding unit awards (2.3% of Common Shares Outstanding) under all plans, as well as 9,864,096 Common Shares available for future grant (2.8% of Common Shares Outstanding). In total, the Company had 25,064,096 Common Shares subject to outstanding equity awards or available for future equity awards under the Plan and predecessor plans, which represented approximately 6.6% of fully diluted Common Shares outstanding (or “Overhang Percentage”). The 13,500,000 new Common Shares proposed to be included in the Amended Plan share reserve would increase the overhang percentage by an additional 3.6% to approximately 10% as of December 31, 2019. The options outstanding as of December 31, 2019 have a weighted average exercise price of $26.99 and a weighted average remaining life of 7.5 years. The Company’s gross burn rate for the last fiscal year was 1.9% and average gross burn rate for fiscal year 2017 through fiscal year 2019 was 1.9%. Burn rate does not take into account equity awards that have been cancelled or forfeited. Burn rate with respect to each year is calculated by dividing the total number of Common Shares subject to stock options and full value awards (such as restricted stock units) granted during the year (assuming achievement of the maximum performance levels for outstanding performance awards) by the total weighted-average number of Common Shares outstanding during the period. Using the Institutional Shareholder Services (“ISS”) methodology for calculating burn rate, the Company’s three-year average (ISS adjusted) burn rate for equity grants made in fiscal year 2017, 2018 and 2019 was 2.45%, which was less than the allowable burn rate of 8.08% under ISS policy, based on the Company’s industry group. The Company’s burn rate calculation using the standard TSX methodology for the year ended 2019 was 1.6%, for the year ended 2018 was 1.7%, and for the year ended 2017 was 1.6%. This burn rate calculation assumes performance-based share units vest at target. Performance-based share units granted in 2017, 2018 and 2019 can pay out at a maximum of 2 times target. Amended Plan Benefits The Amended Plan was designed by the Talent and Compensation Committee, as part of a comprehensive compensation strategy to provide long-term broad-based incentives for employees to contribute to the growth of the Company and its subsidiaries. If approved by the shareholders, participants in the Amended Plan will be eligible for annual long-term awards which may include performance shares, stock options, restricted stock and share payments (or other Awards permitted under the Amended Plan). The level and types of Awards will be fixed by the Talent and Compensation Committee in light of the participants’ targeted long-term incentive level. The Talent and Compensation Committee may impose additional conditions or restrictions to the vesting of such Awards as it deems appropriate, including, but not limited to, the achievement of performance goals based on one or more business criteria. Awards under the Amended Plan are made at the discretion of the Talent and Compensation Committee and are not determinable at this time. Moreover, the ultimate value of any grants that are made will depend on the value of the underlying Common Shares at the time of settlement, which likewise is not determinable at this time. Please refer to the “Grants of Plan-Based Awards Table” on page 58 to review equity and equity-based awards made to our NEOs in 2019. U.S. Federal Income Tax Consequences of Amended Plan Awards The following is a brief summary of the principal United States federal income tax consequences of transactions under the Amended Plan, based on current United States federal income tax laws. This summary is not intended to be exhaustive, does not constitute tax advice and, among other things, does not describe state, local or foreign tax consequences, which may be substantially different. In particular, this summary does not address Canadian federal, provincial or territorial income tax consequences, including those applicable to employees resident in or whose employment is exercised in Canada. Non-Qualified Stock Options Generally, a participant will not recognize taxable income on the grant or vesting of anon-qualified stock option. Upon the exercise of anon-qualified stock option, a participant will recognize ordinary income in an amount equal to the difference between the market value of our Common Shares received on the date of exercise and the option cost (number of Common Shares purchased multiplied by the exercise price per Common Share). The Company will ordinarily be entitled to a deduction on the exercise date equal to the ordinary income recognized by the participant upon exercise. Incentive Stock Options No taxable income is recognized by a participant on the grant or vesting of an incentive stock option. If a participant exercises an incentive stock option in accordance with its terms and does not dispose of the Common Shares acquired within two years after the date of the grant of the incentive stock option or within one year after the date of exercise, the participant will be entitled to treat any gain related to the exercise of the incentive stock option as capital gain (instead of ordinary income). In this case, the Company will not be entitled to a deduction by reason of the grant or exercise of the incentive stock option, however the excess of the market value over the exercise price of the Common Shares acquired is an item of adjustment in computing alternative minimum tax of the participant. If a participant holds the Common Shares acquired for at least one year from the exercise date and does not sell or otherwise dispose of the Common Shares for at least two years from the grant date, the participant’s gain or loss upon a subsequent sale will be long-term capital gain or loss equal to the difference between the amount realized on the sale and the participant’s basis in the Common Shares acquired. If a participant sells or otherwise disposes of the Common Shares acquired without satisfying the required minimum holding period, such “disqualifying disposition” will give rise to ordinary income equal to the excess of the market value of the Common Shares acquired on the exercise date (or, if less, the amount realized upon disqualifying disposition) over the participant’s tax basis in the Common Shares acquired. The Company will ordinarily be entitled to a deduction equal to the amount of the ordinary income resulting from a disqualifying disposition. Share Appreciation Rights Generally, a participant will not recognize taxable income upon the grant or vesting of a SAR, but will recognize ordinary income upon the exercise of a SAR in an amount equal to the cash amount received upon exercise (if the SAR is cash-settled) or the difference between the market value of our Common Shares received from the exercise of the SAR and the amount, if any, paid by the participant in connection with the exercise of the SAR. The participant will recognize ordinary income upon the exercise of a SAR regardless of whether our Common Shares acquired upon the exercise of the SAR are subject to further restrictions on sale or transferability. The participant’s basis in the Common Shares will be equal to the ordinary income attributable to the exercise and the amount, if any, paid in connection with the exercise of the SAR. The participant’s holding period for Common Shares acquired pursuant to the exercise of a SAR begins on the exercise date. Upon the exercise of a SAR, the Company will ordinarily be entitled to a deduction in the amount of the ordinary income recognized by the participant. Restricted Shares A participant generally will not be taxed at the time of a restricted share award but will recognize taxable income when the award vests or otherwise is no longer subject to a substantial risk of forfeiture. The amount of taxable income will be the market value of the Common Shares at that time. Participants may elect to be taxed at the time of grant by making an election under Section 83(b) of the Code within 30 days of the award date. If a restricted share award subject to the Section 83(b) election is subsequently canceled, no deduction will be allowed for the amount previously recognized as income, and no tax previously paid will be refunded. Unless a participant makes a Section 83(b) election, dividends paid to a participant on Common Shares of an unvested restricted share award will be taxable to the participant as ordinary income. If the participant made a Section 83(b) election, the dividends will be taxable to the participant as dividend income. The Company will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant. Unless a participant has made a Section 83(b) election, the Company will also be entitled to a deduction, for federal income tax purposes, for dividends paid on restricted share awards. Deferred Shares A participant will generally not recognize taxable income on a deferred share award until Common Shares subject to the award are distributed. The amount of this ordinary income will be the market value of our Common Shares at the time of distribution. Any dividend equivalents paid on deferred share awards are taxable as ordinary income when paid to the participant. The Company will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant. The Company will also be entitled to a deduction, for federal income tax purposes, on any dividend equivalent payments made to the participant. Share Units Awards of share units are treated, for federal income tax purposes, in substantially the same manner as deferred share awards. Share Awards A participant will generally recognize taxable income on the grant of unrestricted Common Shares, in an amount equal to the market value of the Common Shares on the grant date. The Company will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant. Withholding To the extent required by law, the Company will withhold from any amount paid in settlement of an Award amounts of withholding and other taxes due or take other action as the Company deems advisable to enable the Company and the participant to satisfy withholding and tax obligations related to any Awards. Cash Awards A participant will generally recognize taxable income upon the payment of a cash award, in an amount equal to the amount of the cash received. The Company will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant. PROPOSAL NO. 4 APPOINTMENT OF AUDITORS The Audit and Risk Committee recommended to the Board that PwC be put before the shareholders at the Annual Meeting for appointment as our auditors to serve until the close of the 20182021 Annual Meeting of Shareholders. The Board has accepted and endorsed this recommendation. Under the BCBCA, at each annual meeting of shareholders, shareholders of a corporation appoint, by a majority of votes cast in respect of that proposal, an auditor to hold office until the close of the next annual meeting of shareholders. Notwithstanding the foregoing, if an auditor is not appointed at a meeting of shareholders, the incumbent auditor continues in office until a successor is appointed. PwC currently serves as auditor of the Company and, therefore, shall continue to serve as the Company’s auditor in the event that this proposal is not adopted by the shareholders. Representatives of PwC will be present at the Annual Meeting and will have an opportunity to make a statement if desired. Further, the representatives will be available to respond to appropriate shareholder questions directed to him or her. A simple majority of votes cast at the Annual Meeting, whether in person, or by proxy or otherwise, will be required to appoint PwC. You may either vote “For” the appointment of PwC or “Withhold” your vote with respect to such appointment. If you vote “For” the appointment of PwC, your Common Shares will be voted accordingly. If you select “Withhold” with respect to the appointment of PwC, your vote will not be counted as a vote cast for the purposes of appointing PwC. As a shareholder of the Company, you are invited to vote with respect to the appointment of PwC as the auditors for the Company to hold office until the close of the 20182021 Annual Meeting of Shareholders and to authorize the Board to fix the auditors’ remuneration through the following resolution: Resolved, that the shareholders hereby appoint PwC as auditors for the Company to hold office until the close of the 20182021 Annual Meeting of Shareholders and the Board of Directors of the Company is hereby authorized to fix the auditors’ remuneration. The Board recommends that the shareholders vote FOR Proposal No. 4. AUDITOR FEES For fiscal years ended December 31, 20152019 and December 31, 2016,2018, PwC was our appointed auditor. Principal Auditor fee includes fees paid to PwC and affiliated PwC network firms through the world. The table below summarizes the fees (expressed in thousands of U.S. dollars)Dollars) paid by the Company and its consolidated subsidiaries to PwC during 20152019 and 2016.2018. | | | | 2015 | | | 2016 | | | 2019 | | | 2018 | | | | | ($) | | | (%) | | | ($) | | | (%) | | | ($) | | | (%) | | | ($) | | | (%) | | Audit Fees | | | 20,477 | | | | 82 | | | | 16,173 | | | | 77 | | | | 14,720 | | | | 84 | | | | 14,700 | | | | 76 | | Audit-Related Fees(1) | | | 271 | | | | 1 | | | | 1,687 | | | | 8 | | | Tax Fees(2) | | | 4,129 | | | | 17 | | | | 3,228 | | | | 15 | | | All Other Fees(3) | | | 2 | | | | * | | | | 2 | | | | * | | | Audit-Related Fees(1) | | | | 437 | | | | 3 | | | | 1,910 | | | | 10 | | Tax Fees(2) | | | | 2,298 | | | | 13 | | | | 2,495 | | | | 13 | | All Other Fees(3) | | | | 28 | | | | * | | | | 265 | | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 24,879 | | | | 100 | | | | 21,090 | | | | 100 | | | | 17,468 | | | | 100 | | | | 19,370 | | | | 100 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | * | Less than one percent.1%. |
| (1) | Audit-related services are generally related to audits of financial statements prepared for special purposes, assignments relating to due diligence investigations and procedures and employee benefit plan audits. |
| (2) | Tax services are professional services rendered by our auditors for tax compliance and tax consulting primarily related to international transfer pricing. |
| (3) | All other fees are amounts paid for miscellaneous permissible products and services. |
Audit Fees The aggregate fees billed for professional services rendered by PwC for the fiscal years ended December 31, 20152019 and December 31, 20162018 for the audit of our consolidated annual financial statements and the reviews of the financial statements included in our Forms10-Q, the audits of our internal control over financial reporting with the objective of obtaining reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects, services related to our financing activities, such as comfort letters and consents, or services that are normally provided by PwC in connection with statutory and regulatory filings or engagements in 20152019 and 2016,2018, were approximately $20.5$14.7 million and $16.2$14.7 million, respectively. The decrease between 2015 and 2016 is primarily a result of additional audit work performed in connection with the audit of our December 31, 2015 consolidated financial statements resulting from the Ad Hoc Committee’s review, identification of material weaknesses in internal control over financial reporting and the resulting delay in filing of the 2015 Form10-K. Audit-Related Fees The Audit and Risk Committee believes that the provision of thenon-audit services referenced above is compatible with maintaining PwC’s independence. Audit-related services are generally related to audits of financial statements prepared for special purposes, employee benefit plan audits and assignments relating to due diligence investigations and procedures. The aggregate fees billed for audit-related services rendered by PwC during the fiscal year ended December 31, 20152019 and December 31, 20162018 that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not included in “Audit Fees” above were approximately $0.3$0.4 million and $1.7$1.9 million, respectively. Tax Fees Tax services are professional services rendered by our auditors for tax compliance and tax consulting primarily related to international transfer pricing. The aggregate fees billed for tax services rendered by PwC during the fiscal years ended December 31, 20152019 and December 31, 20162018 were approximately $4.1$2.3 million and $3.2$2.5 million, respectively. All Other Fees There were insignificant amounts paid for miscellaneous permissible products and services as reported above to PwC during the fiscal years ended December 31, 20152019 and December 31, 2016.2018. PwC did not provide any financial information systems design or implementation services to the Company during 2015 and 2016.2019 or 2018. All fees described above were approved by the Audit and Risk Committee of our Board under itspre-approval policy. Audit and Risk Committee’sPre-Approval ofNon-Audit Services The Audit and Risk Committee chooses and appoints (through nomination to the Company’s shareholders) the Company’s auditors to audit our financial statements. The Audit and Risk Committeepre-approvesnon-audit services that may be provided to the Company and its subsidiaries by its auditors. The Audit and Risk Committee is not permitted to approve any engagement of the Company’s auditors if the services to be performed either fall into a category of services that are not permitted by applicable law or the services would be inconsistent with maintaining the auditors’ independence. OTHER SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 20182021 ANNUAL MEETING OF SHAREHOLDERS A shareholder who is entitled to vote at the 20182021 Annual Meeting of Shareholders may raise a proposal for consideration at such Annual Meeting of Shareholders. We will consider such proposal for inclusion in the proxy materials for the 20182021 Annual Meeting only if our Corporate Secretary receives such proposal (at 2150 Saint Elzear Blvd. West, Laval, Quebec, H7L 4A8, Canada, or by facsimile514-744-6272): (i) submitted pursuant to Rule14a-8 (“Rule14a-8”)of the General Rules and Regulations promulgated under the Exchange Act, on or before December 30, 2017,November 16, 2020, or (ii) submitted pursuant to Part 5, Division 7 of the BCBCA on or before February 2, 2018.January 28, 2021. The use of certified mail, return receipt, is advised. In addition, in the event the Company does not receive a shareholder proposal by March 15, 2018,January 28, 2021, the proxy to be solicited by the Board for the 20182021 Annual Meeting of Shareholders will confer discretionary authority on the holders of the proxy to vote the Common Shares if the proposal is presented at the 20182021 Annual Meeting of Shareholders without any discussion of the proposal in the proxy materials for that meeting. If the date of the 20182021 Annual Meeting of Shareholders is advanced or delayed more than 30 days from the date of the Annual Meeting, shareholder proposals intended to be included in the proxy statement for the 20182021 Annual Meeting of Shareholders must be received by us within a reasonable time before we begin to print and mail the proxy statement, or provide a notice to you with respect to accessing such proxy statement overon the Internet, for the 20182021 Annual Meeting of Shareholders. The Company’s Articles provide that shareholders seeking to nominate candidates for election as Directorsdirectors must provide timely notice in writing to the Company’s secretary by personal delivery or facsimile transmission at the number shown on the Company’s issuer profile on SEDAR atwww.sedar.com. The purpose of this advance notice requirement is to: (i) inform the Company of nominees for election at a shareholder meeting proposed by a shareholder sufficiently in advance of such meeting; (ii) provide an opportunity to inform all shareholders of any potential proxy contest and proposed Directordirector nominees sufficiently in advance of the applicable meeting; and (iii) enable the Board to make informed recommendations or present alternatives to shareholders. To be timely, a shareholder’s notice must be received by the Company: (i) in the case of an annual general meeting, not later than the close of business on the 50th day before the meeting date or, if the first public announcement of the date of such meeting is less than 60 days prior to the meeting date, the close of business on the 10th day following the day on which public announcement of the date of such annual general meeting was first made by the Company; and (ii) in the case of a special meeting called for the purpose of electing Directors,directors, not later than the close of business on the 15th day following the day on which public announcement of the date of the special meeting is first made by the Company. The Company’s Articles also prescribe the proper written form for a shareholder’s notice as well as additional requirements in connection with nominations. Shareholders who failed to comply with the advance notice requirements would not be entitled to make nominations for Directorsdirectors at the Annual General or Special Meeting of Shareholders. COMMUNICATION WITH THE BOARD OF DIRECTORS Shareholders and other interested parties may contact the Company’s Directorsdirectors or independent directors in writing, as a group or individually, by directing their correspondence to the attention of ValeantBausch Health Investor Relations, Valeant Pharmaceuticals International,Bausch Health Companies Inc., 2150 Saint Elzear Blvd. West, Laval, Quebec, H7L 4A8, Canada. Shareholders and other interested parties may also contact the Company’s Directorsdirectors by calling the Company’s helpline in the United States and Canada at (888)(888) 451-4510. Additional international telephone numbers are included in our Business Ethics Reporting Policy, which is available on our website atwww.valeant.com www.bauschhealth.com (under the tab “About”“Investors” and under the subtab “Corporate Governance”Governance- Governance Documents”). The Corporate Secretary will log incoming information and forward appropriate messages promptly to the Director(s)director(s). Communications are distributed to the Board or to any individual Directordirector or Directorsdirectors as appropriate, depending on the facts and circumstances outlined in the communication. Certain items that are unrelated to the duties and responsibilities of the Board will not be distributed to the Board, such as mass mailings, product complaints, product inquiries, new product suggestions, resumes and other forms of job inquiries, surveys and business solicitations or advertisements. In addition, material that is inappropriate or unsuitable will be excluded, with the provision that any communication that is excluded must be made available to anynon-employee Directordirector upon request. Communications that include information better addressed by the Audit and Risk Committee will be addressed directly by that Committee. ANNUAL REPORT AND ADDITIONAL INFORMATION Our financial information is contained in the Company’s consolidated annual financial statements and related MD&A for the fiscal year ended December 31, 2016.2019. Our Annual Report is available on the Internet at our website at www.valeant.comwww.bauschhealth.com (under the tab “Investors” and under the subtab “Annual Reports Archive”) or on SEDAR at www.sedar.com or through the SEC’s electronic data system, called EDGAR, at www.sec.gov. To request a printed copy of our Annual Report or consolidated financial statements and related MD&A as of and for the year ended December 31, 2016,2019, which we will provide to you without charge, either write to ValeantBausch Health Investor Relations at Valeant Pharmaceuticals International,Bausch Health Companies Inc., 2150 Saint Elzear Blvd. West, Laval, Quebec H7L 4A8, Canada, or send an email to ValeantBausch Health Investor Relations at ir@valeant.com.ir@bauschhealth.com. Neither the Annual Report nor the consolidated financial statements and related MD&A as of and for the year ended December 31, 20162019 form part of the material for the solicitation of proxies. Additional information relating to the Company may be found on SEDAR at www.sedar.com or on EDGAR at www.sec.gov. PROXY SOLICITATION We will bear the entire cost of solicitation, including the preparation, assembly, Internet hosting, maintaining a dedicated call line and printing and mailing the Proxy Statement and form of Proxy Card. In addition to soliciting proxies by telephone, Internet and mail, Directors,directors, officers or employees of the Company may, without special compensation, solicit proxies in person, by telephone, telegraph, courier service, advertisement, telecopier or other electronic means. We have retained D.F. King to assist in the solicitation of proxies. We will pay fees to D.F. King of $10,000, plus reasonableout-of-pocket expenses incurred by them. We will bear the entire cost of solicitation, including the preparation, assembly, Internet hosting, maintaining a dedicated call line, and printing and mailing the Proxy Statement and form of Proxy Card. We will pay those entities holding Common Shares in the names of their beneficial owners, such as brokers, nominees, fiduciaries and other custodians for their reasonable fees and expenses in forwarding solicitation material to their beneficial owners and for obtaining their instructions. HOUSEHOLDING OF PROXY MATERIALS Companies and intermediaries (e.g., brokers) are permitted under the SEC’s rules to satisfy the delivery requirements for proxy materials and annual reports with respect to two or more shareholders sharing the same address by delivering a single management proxy circular and proxy statement addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for shareholders and cost savings for companies. A number of brokers with account holders who are our shareholders “household” our proxy materials. A single management proxy circular and proxy statement or Notice Regarding Internet Availability of Proxy Materials, as applicable, will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If you prefer to receive multiple copies of the separate management proxy circular and proxy statement or Notice Regarding Internet Availability of Proxy Materials, as applicable, at the same address for the Annual Meeting or for any future Annual Meetings of Shareholders, additional copies will be provided promptly upon written or oral request to your broker, or by contacting us at Valeant Pharmaceuticals International,Bausch Health Companies Inc., Attn: Investor Relations, 2150 Saint Elzear Blvd. West, Laval, Quebec H7L 4A8, Canada, telephone514-744-6792.514-856-3855. Shareholders who currently receive multiple copies of the Proxy Statement or Notice Regarding Internet Availability of Proxy Materials at their address and would like to request “householding” of their communications should contact their broker. MISCELLANEOUS If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place in order to solicit additional proxies in favor of the recommendation of the Board, the designated proxyholders intend to vote the Common Shares represented by the Proxies appointing them on such matters in accordance with the recommendation of the Board and the authority to do so is included in the Proxy. As of the date this Proxy Statement, the Board knows of no other matters which are likely to come before the Annual Meeting. By Order of the Board of Directors,
| By Order of the Board of Directors, | | 
| Joseph C. Papa | Chairman of the Board and Chief Executive Officer |
Laval, Quebec March 23, 201716, 2020 WE WILL MAIL WITHOUT CHARGE UPON WRITTEN REQUEST A COPY OF OUR MOST RECENT ANNUAL REPORT, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO: CORPORATE SECRETARY, VALEANT PHARMACEUTICALS INTERNATIONAL,BAUSCH HEALTH COMPANIES INC., 2150 SAINT ELZEAR BLVD. WEST, LAVAL, QUEBEC H7L 4A8, CANADA. THE ANNUAL REPORT IS ALSO AVAILABLE FREE OF CHARGE ON THE COMPANY WEBSITE:WWW.VALEANT.COMWWW.BAUSCHHEALTH.COM. EXHIBIT A VALEANT PHARMACEUTICALS INTERNATIONAL,Bausch Health Companies Inc.
2014 OMNIBUS INCENTIVE PLAN (As Amended and Restated, Effective as of April 28, 2020) The purposes of the Amended and Restated 2014 Omnibus Incentive Plan (the “Plan”) are to (i) align the long-term financial interests of employees, directors, consultants, agents and other service providers of the Company and its Subsidiaries with those of the Company’s shareholders; (ii) attract and retain those individuals by providing compensation opportunities that are competitive with other companies; and (iii) provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company and its Subsidiaries. Bausch Health Companies Inc., a British Columbia corporation, adopted the 2014 Omnibus Incentive Plan (the “2014 Plan”) effective as of April 7, 2014, which was approved by the shareholders at the 2014 annual meeting. The 2014 Plan reserved approximately 18 million Common Shares for the issuance of Awards. On April 30, 2018, the shareholders approved an amendment to the 2014 Plan to increase the number of Common Shares authorized under the 2014 Plan by an additional 11,900,000 Common Shares. As of December 31, 2019, 9,864,096 Common Shares were available for further issuance. On February 11, 2020, the Talent and Compensation Committee of the Board of Directors approved an amendment and restatement of the 2014 Plan to increase the number of authorized Common Shares by an additional 13,500,000 Common Shares. The Plan, as amended and restated, has been adopted and approved by the Board (defined below) and shall be effective as of April 28, 2020 (the “Effective Date”), subject to the approval of shareholders. Subject to the right of the Board to amend or terminate the Plan at any time pursuant to Section 18 hereof, the Plan shall remain in effect until the earlier of (i) the date all Common Shares subject to the Plan have been purchased or acquired according to the Plan’s provisions or (ii) the tenth anniversary of the Effective Date. No Awards shall be granted under the Plan after such termination date, but Awards granted prior to such termination date shall remain outstanding in accordance with their terms. “Award” shall mean an Option, SAR, Share Award or Cash Award granted under the Plan. “Award Agreement” shall mean any written agreement, contract, or other instrument or document evidencing an Award. “Board” shall mean the Board of Directors of the Company. “Blackout Period” means a period self-imposed by the Company (within the meaning of Section 613(m) of the TSX Company Manual) when the Participant is prohibited from trading in the Company’s securities. “Business Day” means any day, other than a Saturday, Sunday or statutory or civic holiday, on which banks in Toronto, Ontario are open for business. “Cash Award” means cash awarded under Section 7(d) of the Plan, including cash awarded as a bonus or upon the attainment of Performance Criteria or otherwise as permitted under the Plan. “Cause” shall have the meaning set forth in the Participant’s employment agreement with the Company, as in effect on the date an Award is granted; provided that if no such agreement or definition exists, “Cause” shall mean, unless otherwise specified in the Award Agreement: (i) conviction of any felony or indictable offense (other than one related to a vehicular offense) or other criminal act involving fraud; (ii) willful misconduct that results in a material economic detriment to the Company; (iii) material violation of Company policies and directives, which is not cured after written notice and an opportunity for cure; (iv) continued refusal by the Participant to perform the Participant’s duties after written notice identifying the deficiencies and an opportunity for cure; (v) a material violation by the Participant of any material covenants to the Company and (vi) such other actions constituting cause under applicable common law. No action or inaction shall be deemed willful if not demonstrably willful and if taken or not taken by the Participant in good faith and with the understanding that such action or inaction was not adverse to the best interests of the Company. Reference in this definition to the Company shall also include direct and indirect Subsidiaries of the Company, and materiality shall be measured based on the action or inaction and the impact upon the Company taken as a whole. “Change of Control” shall have the meaning set forth in Section 10. “Code” shall mean the U.S. Internal Revenue Code of 1986, as amended, including any rules and regulations promulgated thereunder and any successor thereto. “Committee” shall mean the Board or a committee designated by the Board to administer the Plan. “Common Shares” shall mean the common shares of the Company, no par value per share. “Company” shall mean Bausch Health Companies Inc., a British Columbia corporation. “Deferred Shares” shall mean an Award payable in Common Shares at the end of a specified deferral period that is subject to the terms, conditions and limitations described or referred to in Section 7(c)(iv). “Disability” shall mean, unless otherwise provided in an Award Agreement, that the Participant is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company; provided, that, if applicable to the Award, “Disability” shall be determined in a manner consistent with Section 409A of the Code. “Eligible Recipient” shall mean (i) any employee (including any officer) of the Company or any Subsidiary, (ii) any director of the Company or any Subsidiary or (iii) any individual performing services for the Company or a Subsidiary in the capacity of a consultant, agent or otherwise. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder and any successor thereto. “Good Reason” shall have the meaning set forth in the Participant’s employment agreement with the Company, as in effect on the date an Award is granted; provided that if no such agreement or definition exists, “Good Reason” shall mean, unless otherwise specified in the Award Agreement, the occurrence of any of the events or conditions described in clauses (i) and (ii) immediately below which are not cured by the Company (if susceptible to cure by the Company) within thirty (30) days after the Company has received written notice from the Participant which notice must be provided by the Participant within ninety (90) days of the initial existence of the event or condition constituting Good Reason specifying the particular events or conditions which constitute Good Reason and the specific cure requested by the Participant: (i) any material reduction in the Participant’s duties or responsibilities as in effect immediately prior thereto; provided that diminution of responsibility shall not include any such diminution resulting from a promotion, death or Disability, the termination of the Participant’s employment for Cause, or the Participant’s termination of employment other than for Good Reason; and (ii) any reduction in the Participant’s base salary or target bonus opportunity which is not comparable to reductions in the base salary or target bonus opportunity of other similarly-situated employees at the Company. “Insider” shall mean a reporting insider, as defined in National Instrument55-104 — Insider Reporting Requirements and Exemptions of the Canadian Securities Administrators. “ISO” shall mean an Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the Code. “Market Price” shall mean, with respect to Common Shares, (i) the closing price per Common Share on the national securities exchange on which the Common Shares are principally traded (as of the Effective Date, the New York Stock Exchange), or (ii) if the Common Shares are not then listed on a national securities exchange but are then traded in anover-the-counter market, the average of the closing bid and asked prices for the Common Shares in suchover-the-counter market, or (iii) if the Common Shares are not then listed on a national securities exchange or traded in anover-the-counter market, such value as the Committee, using any reasonable method of valuation, shall determine. With respect to property other than Common Shares, the Market Price shall mean the fair market value of such other property determined by such methods or procedures as shall be established from time to time by the Committee. “Nonqualified Stock Option” shall mean an Option that is granted to a Participant that is not designated as an ISO. “Option” shall mean the right to purchase a specified number of Common Shares at a stated exercise price for a specified period of time subject to the terms, conditions and limitations described or referred to in Section 7(a). The term “Option” as used in the Plan includes the terms “Nonqualified Stock Option” and “ISO.” “Original Term” shall have the meaning set forth in Section 7(a). “Participant” shall mean an Eligible Recipient who has been granted an Award under the Plan. “Performance Criteria” shall mean performance criteria based on the attainment by the Company or any Subsidiary (or any division or business unit of such entity) of performance measurespre-established by the Committee in its sole discretion, including one or more of the following: | (i) | revenues, income before taxes and extraordinary items, net income, operating income, earnings before income tax, earnings before interest, taxes, depreciation and amortization, cash flow or a combination of any or all of the foregoing; |
| (ii) | after-tax orpre-tax profits including, without limitation, that attributable to continuing and/or other operations; |
| (iii) | the level of the Company’s bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company either in absolute terms or as it relates to a profitability ratio including operating income or EBITA; |
| (iv) | return on capital employed, return on assets, or return on invested capital; |
| (v) | after-tax orpre-tax return on stockholders’ equity; |
| (vi) | economic value added targets based on a cash flow return on investment formula; |
| (vii) | the Market Price of the Common Shares; |
| (viii) | the market capitalization or enterprise value of the Company, either in amount or relative to industry peers; |
| (ix) | the value of an investment in the Common Shares assuming the reinvestment of dividends; |
| (x) | the achievement of operating margin targets or other measures of improving profitability; |
| (xi) | the filing of one or more new drug application(s) (“NDA”) or one or more new drug submission(s) (“NDS”) or the approval of one or more NDA(s) or one or more NDS(s) by the U.S. Food and Drug Administration or the Canadian Therapeutic Products Directorate, as applicable; |
| (xii) | the achievement of, or progress toward, a launch of one or more new drug(s); |
| (xiii) | the achievement of research and development milestones; |
| (xiv) | the achievement of other strategic milestones including, without limitation, the achievement of specific synergy capture and cost savings realization relating to integrations and the successful creation or execution of a restructuring plan for a specific business or function; |
| (xv) | the successful completion of clinical trial phases; |
| (xvi) | licensing or acquiring new products or product platforms; |
| (xvii) | acquisition or divestiture of products or business; |
| (xviii) | the entering into new, or exiting from existing, geographic markets or industry segments; or |
| (xix) | the attainment of a certain level of, reduction of, or other specified objectives with regard to limiting the level in or increase in, all or a portion of controllable expenses or costs or other expenses or costs. |
For purposes of item (i) above, “extraordinary items” shall mean all items of gain, loss or expense for the fiscal year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to a corporate transaction (including, without limitation, a disposition or acquisition) or restructuring or related to a change in accounting principles, all as determined in accordance with standards established by Opinion No. 30 of the Accounting Principles Board. Each financial metric described in item (i) above may be on a business unit, geographic segment, total company orper-share basis, and on a GAAP ornon-GAAP adjusted basis. The Performance Criteria may be based upon the attainment of specified levels of performance under one or more of the measures described above relative to the performance of other entities. The Committee may designate additional business criteria on which the Performance Criteria may be based or adjust, modify or amend the aforementioned business criteria, including to take into account actions approved by the Board or a committee thereof that affect the achievement of the original performance criteria. Performance Criteria may include a threshold level of performance below which no Award will be earned, a level of performance at which the target amount of an Award will be earned and a level of performance at which the maximum amount of the Award will be earned. The Committee, in its sole discretion, shall make equitable adjustments to the Performance Criteria in recognition of unusual ornon-recurring events affecting the Company or any Subsidiary or the financial statements of the Company or any Subsidiary, in response to changes in applicable laws or regulations, including changes in generally accepted accounting principles, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles, as applicable. “Person” shall have the meaning set forth in Section 14(d)(2) of the Exchange Act. “Restricted Shares” shall mean an Award of Common Shares that is subject to the terms, conditions, restrictions and limitations described or referred to in Section 7(c)(iii). “SAR” shall mean a share appreciation right that is subject to the terms, conditions, restrictions and limitations described or referred to in Section 7(b). “Section 16(a) Officer” shall mean an Eligible Recipient who is subject to the reporting requirements of Section 16(a) of the Exchange Act. “Separation from Service” shall have the meaning set forth inSection 1.409A-1(h) of the Treasury Regulations. “Specified Employee” shall have the meaning set forth in Section 409A of the Code and the Treasury Regulations promulgated thereunder. “Share Award” shall have the meaning set forth in Section 7(c)(i). “Share Payment” shall mean a share payment that is subject to the terms, conditions, and limitations described or referred to in Section 7(c)(ii). “Share Unit” shall mean a share unit that is subject to the terms, conditions and limitations described or referred to in Section 7(c)(v). “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations (other than the last corporation) in the unbroken chain owns shares possessing fifty percent (50%) or more of the total combined voting power of all classes of shares in one of the other corporations in the chain (or such lesser percent as is permitted bySection 1.409A-1(b)(5)(iii)(E) of the Treasury Regulations). “Transferred Shares” shall have the meaning set forth in Section 6(a). “Treasury Regulations” shall mean the regulations promulgated under the Code by the United States Internal Revenue Service, as amended. | (a) | Committee Authority. Subject to applicable law, the Committee shall have full and exclusive power to administer and interpret the Plan, to grant Awards and to adopt such administrative rules, regulations, procedures and guidelines governing the Plan and the Awards as it deems appropriate, in its sole discretion, from time to time. The Committee’s authority shall include, but not be limited to, the authority to (i) determine the type of Awards to be granted under the Plan; (ii) select Award recipients and determine the extent of their participation; (iii) determine Performance Criteria; and (iv) establish all other terms, conditions, and limitations applicable to Awards, Award programs and, if applicable, the Common Shares issued pursuant thereto. The Committee may accelerate or defer the vesting or payment of Awards, cancel or modify outstanding Awards, waive any conditions or restrictions imposed with respect to Awards or the Common Shares issued pursuant to Awards and make any and all other determinations that it deems appropriate with respect to the administration of the Plan, subject to the limitations contained in Sections 6(d) and 18 of the Plan and applicable law and listing rules with respect to all Participants. |
| (b) | Administration of the Plan.The administration of the Plan shall be managed by the Committee. All determinations of the Committee shall be made by a majority of its members either present in person or participating by conference telephone at a meeting or by written consent. The Committee shall have the power to prescribe and modify the forms of Award Agreement, correct any defect, supply any omission or clarify any inconsistency in the Plan and/or in any Award Agreement and take such actions and make such administrative determinations that the Committee deems appropriate in its sole discretion. Any decision of the Committee in the administration of the Plan, as described herein, shall be final, binding and conclusive on all parties concerned, including the Company, its shareholders and Subsidiaries and all Participants. |
| (c) | Delegation of Authority.To the extent permitted by applicable law, the Committee may at any time delegate to one or more officers or directors of the Company some or all of its authority over the administration of the Plan, with respect to individuals who are not Section 16(a) Officers. |
| (d) | Indemnification.No member of the Committee or any other Person to whom any duty or power relating to the administration or interpretation of the Plan has been delegated shall be personally liable for any action or determination made with respect to the Plan, except for his or her own willful misconduct or as expressly provided by statute. The members of the Committee and its delegates, including any employee with responsibilities relating to the administration of the Plan, shall be entitled to indemnification and reimbursement from the Company, to the extent permitted by applicable law and theby-laws and policies of the Company. To the fullest extent permitted by the law, in the performance of its functions under the Plan, the Committee (and each member of the Committee and its delegates) shall be entitled to rely upon information and advice furnished by the Company’s officers, accountants, counsel and any other party they deem appropriate, and neither the Committee nor any such Person shall be liable for any action taken or not taken in reliance upon any such advice. |
| (a) | Eligible Recipients.Subject to applicable law and Section 7 hereof, the Committee shall determine, in its sole discretion, which Eligible Recipients shall be granted Awards under the Plan. Unless otherwise determined by the Committee, members of the Board shall generally not be eligible to receive SARs or Options. |
| (b) | Participation outside of the United States.In order to facilitate the granting of Awards to Employees who are foreign nationals or who are employed outside of the U.S., the Committee may provide for such special terms and conditions, including, without limitation, substitutes for Awards, as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. The Committee may approve any supplements to, or amendments, restatements or alternative versions of, this Plan as it may consider necessary or appropriate for the purposes of this Section 5(b) without thereby affecting the terms of this Plan as in effect for any other purpose, and the appropriate officer of the Company may certify any such documents as having been approved and adopted pursuant to properly delegated authority; provided, that no such supplements, amendments, restatements or alternative versions shall include any provisions that are inconsistent with the intent and purpose of this Plan, as then in effect; and further provided that any such action taken with respect to an Employee who is subject to Section 409A of the Code shall be taken in compliance with Section 409A of the Code. |
| 6. | Available Shares of Common Shares |
| (a) | Shares Subject to the Plan.Subject to the following provisions of this Section 6, the maximum number of Common Shares that may be issued to Participants pursuant to Awards (all of which may be granted as ISOs) shall be equal to the sum of (i) 30,268,825 Common Shares, (ii) 13,500,000 Common Shares and (iii) the number of Common Shares becoming available for reuse after awards are terminated, forfeited, cancelled, exchanged or surrendered following the Effective Date under the Company’s 2011 Omnibus Incentive Plan and the 2007 Equity Compensation Plan (the “Transferred Shares”). For the avoidance of doubt, the Transferred Shares shall no longer be available under the Company’s 2011 Omnibus Incentive Plan and the 2007 Equity Compensation Plan. Common Shares issued pursuant to Awards granted under the Plan may be shares that have been authorized but unissued, or have been purchased in open market transactions or otherwise. |
| (b) | Forfeited and Expired Awards.If any shares subject to an Award are forfeited, canceled, exchanged or surrendered, or if an Award terminates or expires without a distribution of Common Shares to the Participant, the shares with respect to such Award shall, to the extent of any such forfeiture, |
| cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan. Notwithstanding the foregoing, the shares surrendered or withheld as payment of either the exercise price of an Option (including shares otherwise underlying an Award of a SAR that are retained by the Company to account for the exercise price of such SAR) and/or withholding taxes in respect of an Award shall no longer be available for Awards under the Plan. |
| (c) | Other Items Not Included in Allocation.The maximum number of Common Shares that may be issued under the Plan as set forth in Section 6(a) shall not be affected by (i) the payment in cash of dividends or dividend equivalents in connection with outstanding Awards; (ii) the granting or payment of share-denominated Awards that by their terms may be settled only in cash, (iii) the granting of Cash Awards; or (iv) Awards that are granted in connection with a transaction between the Company or a Subsidiary and another entity or business in substitution or exchange for, or conversion adjustment, assumption or replacement of, awards previously granted by such other entity to any individuals who have become Eligible Recipients as a result of such transaction. |
| (d) | Other Limitations on Shares that May be Granted under the Plan.Subject to Section 6(e), (i) the number of Common Shares issuable to Insiders, at any time, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding Common Shares of the Company; (ii) the number of Common Shares issued to Insiders, within any one year period, under all security-based compensation arrangements of the Company, cannot exceed 10% of issued and outstanding securities; (iii) the number of Common Shares issuable tonon-employee members of the Board, at any time, under all security-based compensation arrangements of the Company, cannot exceed 1% of issued and outstanding Common Shares of the Company; and (iv) the aggregate number of Common Shares that were granted prior to November 2, 2017 to any “covered employee” under Section 162(m) of the Code during a calendar year in the form of Options, Share Appreciation Rights, and/or Share Awards and intended to qualify as “performance-based compensation” under Section 162(m) of the Code was not permitted to exceed the number of Common Shares initially authorized for grant. |
| (e) | Adjustments.In the event of any change in the Company’s capital structure, including, but not limited to, a change in the number of Common Shares outstanding, on account of (i) any stock dividend, stock split, reverse stock split or any similar equity restructuring or (ii) any combination or exchange of equity securities, merger, consolidation, recapitalization, reorganization, or divesture or any other similar event affecting the Company’s capital structure, to reflect such change in the Company’s capital structure, the Committee shall make appropriate equitable adjustments to the maximum number of Common Shares that may be issued under the Plan as set forth in Section 6(a) and to the maximum number of shares that may be granted to any single individual pursuant to Section 6(d). In the event of any extraordinary dividend, divestiture or other distribution (other than ordinary cash dividends) of assets to shareholders, or any transaction or event described above, to the extent necessary to prevent the enlargement or diminution of the rights of Participants, the Committee shall make appropriate equitable adjustments to the number or kind of shares subject to an outstanding Award, the exercise price applicable to an outstanding Award, and/or any measure of performance that relates to an outstanding Award, including any applicable Performance Criteria. Any adjustment to ISOs under this Section 6(e) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code. With respect to Awards subject to Section 409A of the Code, any adjustments under this Section 6(e) shall conform to the requirements of Section 409A of the Code. Notwithstanding anything set forth herein to the contrary, the Committee may, in its discretion, decline to adjust any Award made to a Participant, if it determines that such adjustment would violate applicable law or result in adverse tax consequences to the Participant or to the Company. If, as a result of any adjustment under this section 6(e), a Participant would become entitled to a fractional Common Share, the Participant has the right to acquire only the adjusted number of full Common Shares and no payment or other adjustment will be made with respect to the fractional Common Shares so disregarded. Adjustments under this Section 6(e) are subject to any applicable regulatory approvals. |
Awards under the Plan may be granted as Options, SARs, Share Awards or Cash Awards as described below. Awards may be granted singly, in combination or in tandem as determined by the Committee, in its sole discretion. | (a) | Options.Options granted under the Plan shall be designated as Nonqualified Stock Options or ISOs. Options shall expire after such period, not to exceed a maximum of ten years, as may be determined by the Committee (the “Original Term”). If an Option is exercisable in installments, such installments or portions thereof that become exercisable shall remain exercisable until the Option expires or is otherwise canceled pursuant to its terms. Notwithstanding anything to the contrary in this Section 7(a), if the Original Term of an Option held by a Participant expires during a Blackout Period, the term of such Option shall be extended until the tenth Business Day following the end of the Blackout Period, at which time any unexercised portion of the Option shall expire. Except as otherwise provided in this Section 7(a), Options shall be subject to the terms, conditions, restrictions, and limitations determined by the Committee, in its sole discretion, from time to time. |
| (i) | Exercise Price.The Committee shall determine the exercise price per share for each Option, which shall not be less than 100% of the Market Price (as of the date of grant) of the Common Shares subject to the Option. |
| (ii) | Exercise of Options.Upon satisfaction of the applicable conditions relating to vesting and exercisability, as determined by the Committee, and upon provision for the payment in full of the exercise price and applicable taxes due, the Participant shall be entitled to exercise the Option and receive the number of Common Shares issuable in connection with the Option exercise. The Common Shares issued in connection with the Option exercise may be subject to such conditions and restrictions as the Committee may determine, from time to time. The exercise price of an Option and applicable withholding taxes relating to an Option exercise may be paid by methods permitted by the Committee from time to time including, but not limited to, (1) a cash payment; (2) tendering (either actually or by attestation) Common Shares owned by the Participant (for any minimum period of time that the Committee, in its discretion, may specify), valued at the Market Price at the time of exercise; (3) arranging to have the appropriate number of Common Shares issuable upon the exercise of an Option withheld or sold; or (4) any combination of the above. Additionally, the Committee may provide that an Option may be “net exercised,” meaning that upon the exercise of an Option or any portion thereof, the Company shall deliver the number of whole Common Shares equal to (A) the difference between (x) the aggregate Market Price of the Common Shares subject to the Option (or the portion of such Option then being exercised) and (y) the aggregate exercise price for all such Common Shares under the Option (or the portion thereof then being exercised) plus (to the extent it would not give rise to adverse accounting consequences pursuant to applicable accounting principles or to adverse tax consequences to the Participants under Canadian federal, provincial or territorial tax laws) the amount of withholding tax due upon exercise divided by (B) the Market Price of a Common Share on the date of exercise. Any fractional share that would result from such equation shall be canceled. |
| (iii) | ISOs.The terms and conditions of ISOs granted hereunder shall be subject to the provisions of Section 422 of the Code and the terms, conditions, limitations and administrative procedures established by the Committee from time to time in accordance with the Plan. At the discretion of the Committee, ISOs may be granted only to an employee of the Company, its “parent corporation” (as such term is defined in Section 424(e) of the Code) or a Subsidiary. |
| (1) | ISO Grants to 10% Shareholders.Notwithstanding anything to the contrary in this Section 7(a), if an ISO is granted to a Participant who owns shares representing more than ten percent of the voting power of all classes of shares of the Company, its “parent corporation” (as such term is defined in Section 424 (e) of the Code) or a Subsidiary, the term of the |
| Option shall not exceed five years from the time of grant of such Option and the exercise price shall be at least 110 percent of the Market Price (as of the date of grant) of the Common Shares subject to the Option. |
| (2) | $100,000 Per Year Limitation for ISOs.To the extent the aggregate Market Price (determined as of the date of grant) of the Common Shares for which ISOs are exercisable for the first time by any Participant during any calendar year (under all plans of the Company) exceeds $100,000, such excess ISOs shall be treated as Nonqualified Stock Options. |
| (3) | Disqualifying Dispositions.Each Participant awarded an ISO under the Plan shall notify the Company in writing immediately after the date he or she makes a “disqualifying disposition” of any Common Shares acquired pursuant to the exercise of such ISO. A “disqualifying disposition” is any disposition (including any sale) of such Common Shares before the later of (i) two years after the date of grant of the ISO and (ii) one year after the date the Participant acquired the Common Shares by exercising the ISO. The Company may, if determined by the Committee and in accordance with procedures established by it, retain possession of any Common Shares acquired pursuant to the exercise of an ISO as agent for the applicable Participant until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such shares. |
| (iv) | No Option will be eligible for the payment of dividends or dividend equivalents. |
| (b) | Share Appreciation Rights.A SAR represents the right to receive a payment in cash, Common Shares, or a combination thereof, in an amount equal to the product of (1) the excess of the Market Price per Common Share on the date the SAR is exercised over the exercise price per Common Share of such SAR (which exercise price shall be no less than 100% of the Market Price of the Common Shares subject to the SAR as of the date the SAR was granted) and (2) the number of Common Shares subject to the portion of the SAR being exercised. If a SAR is paid in Common Shares, the number of Common Shares to be delivered will equal the amount determined to be payable in accordance with the prior sentence divided by the Market Price of a Common Share at the time of payment. The Committee shall establish the Original Term of a SAR, which shall not exceed a maximum of ten years. Notwithstanding anything to the contrary in this Section 7(b), if the Original Term of a SAR held by the Participant expires during a Blackout Period, the term of such SAR shall be extended until the tenth Business Day following the end of the Blackout Period, at which time any unexercised portion of the SAR shall expire. Except as otherwise provided in this Section 7(b), SARs shall be subject to the terms, conditions, restrictions and limitations determined by the Committee, in its sole discretion, from time to time. A SAR may only be granted to an Eligible Recipient to whom an Option could be granted under the Plan. No SAR will be eligible for the payment of dividends or dividend equivalents. |
| (i) | Form of Awards.The Committee may grant Awards that are payable in Common Shares or denominated in units equivalent in value to Common Shares or are otherwise based on or related to Common Shares (“Share Awards”), including, but not limited to, Share Payments, Restricted Shares, Deferred Shares, and Share Units. Share Awards shall be subject to such terms, conditions (including, without limitation, service-based and performance-based vesting conditions), restrictions and limitations as the Committee may determine to be applicable to such Share Awards, in its sole discretion, from time to time. |
| (ii) | Share Payment.If not prohibited by applicable law, the Committee may issue unrestricted Common Shares in such amounts and subject to such terms and conditions as the Committee shall from time to time in its sole discretion determine. A Share Payment may be granted as, or in payment of, a bonus, or to provide incentives or recognize special achievements or contributions. |
| (iii) | Restricted Shares.Restricted Shares shall be subject to the terms, conditions, restrictions, and limitations determined by the Committee, in its sole discretion, from time to time. The number of Restricted Shares allocable to an Award under the Plan shall be determined by the Committee in its sole discretion. |
| (iv) | Deferred Shares.Subject to Code Section 409A to the extent applicable, Deferred Shares shall be subject to the terms, conditions, restrictions and limitations determined by the Committee, in its sole discretion, from time to time. A Participant who receives an Award of Deferred Shares shall be entitled to receive the number of Common Shares allocable to his or her Award, as determined by the Committee in its sole discretion, from time to time, at the end of a specified deferral period determined by the Committee. Awards of Deferred Shares represent only an unfunded, unsecured promise to deliver shares in the future and shall not give Participants any greater rights than those of an unsecured general creditor of the Company. |
| (v) | Share Units.A Share Unit is an Award denominated in Common Shares that may be settled either in Common Shares or in cash, in the discretion of the Committee, and, subject to Code Section 409A to the extent applicable, shall be subject to such other terms, conditions, restrictions and limitations determined by the Committee from time to time in its sole discretion. |
| (vi) | Blackout Period.In the event that any Share Unit is scheduled by its terms to be delivered (the “Original Distribution Date”) during a Blackout Period, then, if the Participant is restricted from selling Shares during the Blackout Period, such shares subject to the Share Unit shall not be delivered on such Original Distribution Date and shall instead be delivered as soon as practicable following the expiration of the Blackout Period;provided, however, that in no event shall the delivery of the shares be delayed pursuant to this provision beyond the latest date on which such delivery could be made without violating Code Section 409A. |
| (d) | Cash Awards.The Committee may grant Awards that are payable to Participants solely in cash, as deemed by the Committee to be consistent with the purposes of the Plan, and, except as otherwise provided in this Section 7(d), such Cash Awards shall be subject to the terms, conditions, restrictions, and limitations determined by the Committee, in its sole discretion, from time to time. Awards granted pursuant to this Section 7(d) may be granted with value and payment contingent upon the achievement of Performance Criteria. The maximum amount that any Participant (other than anon-employee director of the Company) may receive with respect to a Cash Award granted pursuant to this Section 7(d) in respect of any annual performance period is $10,000,000 and for any other performance period, such amount multiplied by a fraction, the numerator of which is the number of months in the performance period and the denominator of which is twelve. Payments earned hereunder may be decreased or increased in the sole discretion of the Committee based on such factors as it deems appropriate. |
| (e) | Unless the applicable Award Agreement provides otherwise or the Committee determines otherwise, vesting with respect to an Award will cease upon termination of a Participant’s employment or service with the Company, and unvested Awards shall be forfeited upon such termination. In the case of termination for Cause, vested Awards shall also be forfeited. |
| (f) | Non-Employee Director Limitations.Subject to adjustment in accordance with Section 6(e), in any calendar year, no Participant who is anon-employee director of the Company shall be granted Options, Share Appreciation Rights, Share Awards, Cash Awards or any other compensation with an aggregate fair market value as of the grant date (as determined in accordance with applicable accounting standards) or payment date, as applicable, in excess of $750,000. |
| 8. | Dividends and Dividend Equivalents |
The Committee may, in its sole discretion, provide that Share Awards shall earn dividends or dividend equivalents, as applicable. Such dividends or dividend equivalents may be credited to an account maintained on the books of the Company. Any payment or crediting of dividends or dividend equivalents will be subject to such terms, conditions, restrictions and limitations as the Committee may establish, from time to time, in its sole discretion, including, without limitation, reinvestment in additional Common Shares or common share equivalents; provided, however, if the payment or crediting of dividends or dividend equivalents is in respect of a Share Award that is subject to Code Section 409A, then the payment or crediting of such dividends or dividend equivalents shall conform to the requirements of Code Section 409A and such requirements shall be specified in writing. Notwithstanding the foregoing, dividends or dividend equivalents (i) shall have the same vesting dates and shall be paid in accordance with the same terms as the Award to which they relate and (ii) with respect to any Award subject to the achievement of Performance Criteria, shall not be paid unless and until the relevant Performance Criteria have been satisfied, and then only to the extent determined by the Committee, as specified in the Award Agreement. Awards granted under the Plan, and during any period of restriction on transferability, Common Shares issued in connection with the exercise of an Option or a SAR, may not be sold, pledged, hypothecated, assigned, margined or otherwise transferred in any manner other than by will or the laws of descent and distribution, unless and until the shares underlying such Award have been issued, and all restrictions applicable to such shares have lapsed or have been waived by the Committee. No Award or interest or right therein shall be subject to the debts, contracts or engagements of a Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, lien, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy and divorce), and any attempted disposition thereof shall be null and void, of no effect, and not binding on the Company in any way. Notwithstanding the foregoing, the Committee may, in its sole discretion, permit (on such terms, conditions and limitations as it may establish) Nonqualified Stock Options and/or shares issued in connection with an Option or a SAR exercise that are subject to restrictions on transferability, to be transferred to a member of a Participant’s immediate family or to a trust or similar vehicle for the benefit of a Participant’s immediate family members. During the lifetime of a Participant, all rights with respect to Awards shall be exercisable only by such Participant or, if applicable pursuant to the preceding sentence, a permitted transferee. | (a) | Unless otherwise determined in an Award Agreement, in the event of a Change of Control: |
| (i) | With respect to each outstanding Award that is assumed or substituted in connection with a Change of Control, in the event of a termination of a Participant’s employment or service without Cause or by the Participant for Good Reason during the12-month period following such Change of Control, (i) such Award shall become fully vested and exercisable, (ii) the restrictions, payment conditions, and forfeiture conditions applicable to any such Award granted shall lapse, and (iii) any performance conditions imposed with respect to Awards shall be deemed to be achieved at target performance levels. |
| (ii) | With respect to each outstanding Award that is not assumed or substituted in connection with a Change of Control immediately upon the occurrence of the Change of Control, (x) such Award (including both time-based and performance-based Awards) shall become fully vested and exercisable based on a fraction, the numerator of which is the number of days between the grant date and the date of the Change of Control and the denominator of which is the number of days during the period beginning on the grant date of the Award and ending on the date of vesting of the Award, (y) the restrictions, payment conditions, and forfeiture conditions applicable to any such Award granted shall lapse, and (z) any performance conditions imposed with respect to performance-based Awards shall be deemed to be achieved at target performance levels (for the avoidance of doubt, prorated in accordance with clause (x)). |
| (iii) | For purposes of this Section 10, an Award shall be considered assumed or substituted for if, following the Change of Control, the Award remains subject to the same terms and conditions that were applicable to the Award immediately prior to the Change of Control except that, if the Award related to Common Shares, the Award instead confers the right to receive common shares of the acquiring entity. |
| (iv) | Notwithstanding any other provision of the Plan, in the event of a Change of Control, the Committee (a) may, in its discretion provide that each Option and each SAR which may, by its terms, only be settled in shares shall, immediately prior to the occurrence of a Change of Control, be deemed to have been exercised on a “net exercise” basis; and (b) may, in its discretion, except as would otherwise result in adverse tax consequences under Code Section 409A, provide that each Award, other than Options and SARs which may, by their terms, only be settled in shares, shall, immediately upon the occurrence of a Change of Control, be cancelled in exchange for a payment in cash or securities in an amount equal to (i) the excess of the consideration paid per Common Share in the Change of Control over the purchase price (if any) per Common Share subject to the Award multiplied by (ii) the number of Common Shares then outstanding under the Award. |
| (b) | For purposes of this Agreement and, except to the extent as would result in a violation of Code Section 409A, a “Change of Control” shall be deemed to occur if and when the first of the following occurs: |
| (i) | the acquisition (other than from the Company), by any person (as such term is defined in Section 13(d) or 14(d) of the Exchange Act) of beneficial ownership (within the meaning of Rule13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities; |
| (ii) | the individuals who, as of the date hereof, are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least a majority of the Board, unless the election, or nomination for election by the Company’s shareholders, of any new director was approved by a vote of at least a majority of the Incumbent Board, and such new director shall be considered as a member of the Incumbent Board; |
| (iii) | the closing of an amalgamation or similar business combination (each, an “Amalgamation”) involving the Company if (i) the shareholders of the Company, immediately before such Amalgamation, do not, as a result of such Amalgamation, own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the entity resulting from such Amalgamation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Company outstanding immediately before such Amalgamation or (ii) immediately following the Amalgamation, the individuals who comprised the Board immediately prior thereto do not constitute at least a majority of the board of directors of the entity resulting from such Amalgamation (or, if the entity resulting from such Amalgamation is then a subsidiary, the ultimate parent thereof); |
| (iv) | a complete liquidation or dissolution of the Company or the closing of an agreement for the sale or other disposition of all or substantially all of the assets of the Company. |
| (c) | Notwithstanding the foregoing, a Change of Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries or (ii) any corporation which, immediately prior to such acquisition, is owned directly or indirectly by the shareholders of the Company in the same proportion as their ownership of shares in the Company immediately prior to such acquisition. In addition, notwithstanding the foregoing, solely to the extent required by Section 409A, a Change of |
| Control shall be deemed to have occurred only if a change in the ownership or effective control of the Company or a change in ownership of a substantial portion of the assets of the Company shall also be deemed to have occurred under Section 409A. |
Awards granted under the Plan are subject to any policy the Company adopts regarding the recovery of incentive compensation and any additional clawback provisions as required by law and applicable listing rules. Each Award under the Plan shall be evidenced by an Award Agreement (as such may be amended from time to time) that sets forth the terms, conditions, restrictions and limitations applicable to the Award, including, but not limited to, the provisions governing vesting, exercisability, payment, forfeiture, and termination of employment, all or some of which may be incorporated by reference into one or more other documents delivered or otherwise made available to a Participant in connection with an Award. Participants shall be solely responsible for any applicable taxes (including, without limitation, income, payroll and excise taxes) and penalties, and any interest that accrues thereon, which they incur in connection with the receipt, vesting or exercise of an Award. The Company and its Subsidiaries shall have the right to require payment of, or may deduct from any payment made under the Plan or otherwise to a Participant, or may permit shares to be tendered or sold, including Common Shares delivered or vested in connection with an Award, in an amount sufficient to cover withholding of any federal, state, provincial, territorial, local, foreign or other governmental taxes or charges required by law or such greater amount of withholding as the Committee shall determine from time to time and to take such other action as may be necessary to satisfy any such withholding obligations. It shall be a condition to the obligation of the Company to issue Common Shares upon the exercise of an Option, or SAR, or upon settlement of a Share Award, that the Participant pay to the Company, on demand, such amount as may be requested by the Company for the purpose of satisfying any tax withholding liability. If the amount is not paid, the Company may refuse to issue shares. | 14. | Other Benefit and Compensation Programs |
Awards received by Participants under the Plan shall not be deemed a part of a Participant’s regular, recurring compensation for purposes of calculating payments or benefits from any Company benefit plan or severance program unless specifically provided for under the plan or program. Unless specifically set forth in an Award Agreement, Awards under the Plan are not intended as payment for compensation that otherwise would have been delivered in cash, and even if so intended, such Awards shall be subject to such vesting requirements and other terms, conditions and restrictions as may be provided in the Award Agreement. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. The Plan shall not establish any fiduciary relationship between the Company and any Participant or other Person. To the extent any Participant holds any rights by virtue of an Award granted under the Plan, such rights shall constitute general unsecured liabilities of the Company and shall not confer upon any Participant or any other Person any right, title, or interest in any assets of the Company. | 16. | Rights as a Shareholder |
Unless the Committee determines otherwise, a Participant shall not have any rights as a shareholder with respect to Common Shares covered by an Award until the date the Participant becomes the holder of record with respect to such shares. No adjustment will be made for dividends or other rights for which the record date is prior to such date, except as provided in Section 8. No Eligible Recipient shall have any claim or right to be granted an Award under the Plan. There shall be no obligation of uniformity of treatment of Eligible Recipients under the Plan. Further, the Company and its Subsidiaries may adopt other compensation programs, plans or arrangements as deemed appropriate or necessary. The adoption of the Plan, or grant of an Award, shall not confer upon any Eligible Recipient any right to continued employment or service in any particular position or at any particular rate of compensation, nor shall it interfere in any way with the right of the Company or a Subsidiary to terminate the employment or service of Eligible Recipients at any time, free from any claim or liability under the Plan. | 18. | Amendment and Termination |
| (a) | The Plan and any Award may be amended, suspended or terminated at any time by the Board, provided that no amendment shall be made without shareholder approval if such shareholder approval is required in order to comply with applicable law or the rules of the New York Stock Exchange, the rules of the Toronto Stock Exchange, or any other securities exchange on which the Common Shares are traded or quoted. Except as otherwise provided in Section 10(a), no termination, suspension or amendment of the Plan or any Award shall adversely affect the right of any Participant with respect to any Award theretofore granted, as determined by the Committee, without such Participant’s written consent. |
| (b) | Notwithstanding Section 18(a), the Company shall obtain shareholder approval for: (i) except as provided in Section 6(e), a reduction in the exercise price or purchase price of an Award (or the cancellation andre-grant of an Award resulting in a lower exercise price or purchase price); (ii) the extension of the Original Term of an Option; (iii) any amendment to remove or to exceed the participation limits described in Section 6(d), including but not limited to those applicable to Insiders; (iv) an increase to the maximum number of Common Shares issuable under the Plan pursuant to Section 6(a) (other than adjustments in accordance with Section 6(e)); (v) amendments to this Section 18 other than amendments of a clerical nature; and (vi) any amendment that permits Awards to be transferable or assignable other than for normal estate settlement purposes or for other purposes not involving the receipt of monetary consideration. |
| 19. | Option and SAR Repricing |
Except as provided in Section 6(e) and without limiting Section 18(b)(i), the Committee may not, without shareholder approval, seek to effect anyre-pricing of any previously granted “underwater” Option or SAR by: (i) amending or modifying the terms of the Option or SAR to lower the exercise price; (ii) cancelling the underwater Option or SAR and granting either (A) replacement Options or SARs having a lower exercise price or (B) Restricted Shares, Share Units, or Other Share Awards in exchange; or (iii) cancelling or repurchasing the underwater Options or SARs for cash or other securities. An Option or SAR will be deemed to be “underwater” at any time when the Market Value of the Common Shares covered by such Award is less than the exercise price of the Award. | 20. | Successors and Assigns |
The Plan and any applicable Award Agreement shall be binding on all successors and assigns of a Participant, including, without limitation, the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors. The Plan and all agreements entered into under the Plan shall be governed, construed and administered in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. The Plan is designed and intended, to the extent applicable, to provide for grants and other transactions which are exempt under Rule16b-3, and all provisions hereof shall be construed in a manner to so comply. Awards under the Plan are also intended to comply with Code Section 409A to the extent subject thereto, and the Plan and all Awards shall be interpreted in accordance with Code Section 409A and Treasury Regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the effective date of the Plan. Notwithstanding any provision in the Plan to the contrary, no payment or distribution under this Plan that constitutes an item of deferred compensation under Code Section 409A and becomes payable by reason of a Participant’s termination of employment or service with the Company shall be made to such Participant until such Participant’s termination of employment or service constitutes a Separation from Service. For purposes of this Plan, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Code Section 409A. If a participant is a Specified Employee, then to the extent necessary to avoid the imposition of taxes under Code Section 409A, such Participant shall not be entitled to any payments upon a termination of his or her employment or service until the earlier of: (i) the expiration of the six (6)-month period measured from the date of such Participant’s Separation from Service or (ii) the date of such Participant’s death. Upon the expiration of the applicable waiting period set forth in the preceding sentence, all payments and benefits deferred pursuant to this Section 22 (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such deferral) shall be paid to such Participant in a lump sum as soon as practicable, but in no event later than sixty (60) calendar days, following such expired period, and any remaining payments due under this Plan will be paid in accordance with the normal payment dates specified for them herein. Notwithstanding any provision of the Plan to the contrary, in no event shall the Company or any affiliate be liable to a Participant on account of an Award’s failure to (i) qualify for favorable U.S. or foreign tax treatment or (ii) avoid adverse tax treatment under U.S. or foreign law, including, without limitation, Code Section 409A. EXHIBIT B BAUSCH HEALTH COMPANIES INC. CHARTER OF THE BOARD OF DIRECTORS The board of directors (the “Board”) of Valeant Pharmaceuticals International,Bausch Health Companies Inc. (the “(“CompanyBausch Health”) is elected by shareholders and is responsible for the stewardship of the activities and affairs of Valeant.Bausch Health. The Board seeks to discharge such responsibility by reviewing, discussing and approving Valeant’sBausch Health’s strategic planning and organizational structure and supervising management to oversee that the strategic planning and organizational structure preserve and enhance the business of ValeantBausch Health and Valeant’sBausch Health’s underlying value. DUTIES OF DIRECTORS The Board discharges its responsibility for overseeing the management of Valeant’sBausch Health’s business by delegating to Valeant’sBausch Health’s senior officers the responsibility forday-to-day management of Valeant.Bausch Health. The Board discharges its responsibilities both directly and by delegation through its committees, the Audit and Risk Committee, the Nominating and Corporate Governance Committee, the Talent and Compensation Committee and the Finance and Transactions Committee.committees. In addition to these regular committees, the Board may appointad hoc committees periodically to address certain issues of a more short-term nature. The Board’s primary roles are overseeing Valeant’sBausch Health’s performance and the quality, depth and continuity of management needed to meet Valeant’sBausch Health’s strategic objectives. Other principal duties, which may be carried out directly or via one or more committees, include, but are not limited to the following categories: Appointment of Management | 1. | The Board is responsible for approving the appointment of the chief executive officer (the “CEO”) and all other senior management. |
| 2. | In approving the appointment of the chief executive officerCEO and all other senior management, the Board will, to the extent feasible, satisfy itself as to the integrity of these individuals and that they create a culture of integrity throughout Valeant.Bausch Health. |
| 3. | The Board from time to time delegates to senior management the authority to enter into certain types of transactions, including financial transactions, subject to specified limits. Investments and other expenditures above the specified limits, and material transactions outside the ordinary course of business are reviewed by and are subject to the prior approval of the Board. |
| 4. | The Board oversees that succession planning programs are in place, including programs to train and develop management. |
| 5. | The Board assesses and revises the Corporation’sBausch Health’s executive compensation policy to, among other things, better align management’s interests with those of the shareholders. This includes establishing minimum shareholding requirements for senior management. |
Board Organization | 6. | The Board will receive recommendations from the Nominating and Corporate Governance Committee (the “NCG Committee”), but retains responsibility for managing its own affairs by giving its approval for its composition and size, the selection of the chairChairperson of the Board, the selection of the lead directorLead Independent Director of the Board, if applicable, candidates nominated for election to the Board, committee and committee chairchairperson appointments, committee charters and director compensation. |
| 7. | The Board may establish committees of the Board, where required or prudent, and define their mandate. The Board may delegate to Board committees matters it is responsible for, including the approval of compensation of the Board and management, the conduct of performance evaluations and oversight of internal controls systems, but the Board retains its oversight function and ultimate responsibility for these matters and all other delegated responsibilities. |
| 8. | The Board will oversee orientation and education program for new directors and ongoing educational opportunities for continuing directors. |
Strategic Planning | 9. | The Board has oversight responsibility to participate directly, and through its committees, in reviewing, questioning and approving the mission of ValeantBausch Health and its objectives and goals. |
| 10. | The Board is responsible for participating in the development of, and reviewing and approving, the business, financial and strategic plans by which it is proposed that ValeantBausch Health may reach those goals. |
Monitoring of Financial Performance and Other Financial Reporting Matters | 11. | The Board is responsible for enhancing congruence between shareholder expectations, CompanyBausch Health’s plans and management performance. |
| 12. | The Board is responsible for adopting processes for monitoring Valeant’sBausch Health’s progress toward its strategic and operational goals, and to revise and alter its direction to management in light of changing circumstances affecting Valeant.Bausch Health. |
| 13. | The Board is responsible for approving the audited financial statements, interim financial statements and the notes and management’s discussion and analysis accompanying such financial statements.statements and the annual earnings press release. |
| 14. | The Board is responsible for reviewing the quarterly financial statements, management’s discussion and analysis accompanying such financial statements and the quarterly earnings press release. |
| 15. | The Board is responsible for reviewing and approving material transactions outside the ordinary course of business and those matters which the Board is required to approve under the articles of incorporation and other governing documents of Valeant,Articles, including the payment of dividends, purchase and redemptions of securities, acquisitions and dispositions. |
Risk Management 15.16. | The Board is responsible for overseeing the identification of the principal risks of Valeant’sBausch Health’s business, including cybersecurity risks, and the implementation of appropriate systems to effectively monitor and manage such risks with a view to the long-term viability of ValeantBausch Health and achieving a proper balance between the risks incurred and the potential return to Valeant’sBausch Health’s shareholders. |
Policies and Procedures 16.17. | The Board is responsible for: |
| | (a)a) | approving and assessing compliance with all significant policies and procedures by which ValeantBausch Health is operated; and |
| | (b)b) | approving policies and procedures designed to ensure that ValeantBausch Health operates at all times within applicable laws and regulations. |
17.18. | The Board is responsible for supporting a corporate culture of integrity and responsible stewardship. |
18.19. | The Board shall enforce its policy respecting confidential treatment of Valeant’sBausch Health’s proprietary information and the confidentiality of Board deliberations. |
Communications and Reporting 19.20. | The Board is responsible for: |
| | (a)a) | overseeing the accurate reporting of the financial performance and condition of ValeantBausch Health to shareholders, other securityholders and regulators on a timely and regular basis; |
| | (b)b) | encouraging effective and adequate communication with shareholders, other stakeholders and the public; and |
| | (c)c) | ensuring the integrity and adequacy of internal controls and management information systems. |
Certain Individual Responsibilities of the Members of the Board 20.21. | Each member of the Board is expected to attend all meetings of the Board, unless adequate notification of absence is provided. |
21.22. | Each member of the Board is expected to have reviewed all materials provided in connection with a meeting in advance of such meeting and be prepared to discuss such materials at the meeting. |
REVIEW AND DISCLOSURE The Board shall review and reassess the adequacy of this Charter for the Board of Directors (the “Charter”) periodically and otherwise as it deems appropriate and amend it accordingly. The performance of the Board shall be evaluated with reference to this Charter. The Board shall ensure that this Charter is disclosed on the Corporation’sBausch Health’s website and that this Charter or a summary of it which has been approved by the Nominating and Corporate GovernanceNCG Committee is disclosed in accordance with all applicable securities laws or regulatory requirements. Dated July 30, 2019 | | | Valeant Pharmaceuticals International,Bausch Health Companies Inc.
Reconciliation of GAAP EPS to Adjusted EPSNon-GAAP Information
For the Twelve Months Ended December 31, 2016 (unaudited)
| | Appendix 1 |
ThisUse of Adjusted EBITDA(non-GAAP)
To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), in this Proxy Statement, includes the presentation and discussion of adjusted earnings per shareCompany uses certainnon-GAAP (“financial measures, including, Adjusted EPSEBITDAnon-GAAP”)(non-GAAP), that differs from earnings per share reportedwhich does not have any standardized meaning under GAAP (“GAAP EPS”).GAAP. Management uses Adjusted EPSthisnon-GAAP for strategic decision making, forecasting futuremeasure as a key metric in the evaluation of our Company’s performance and consolidated financial results and evaluating current performance.to forecast results as part of its guidance. Adjusted EBITDA(non-GAAP) is intended to show our unleveraged,pre-tax operating results and therefore reflects our financial performance based on operational factors. In addition, cash bonuses for the Company’s executive officers and other key employees are based, in part, on the achievement of certain Adjusted EPSEBITDA(non-GAAP) targets. Adjusted EPSThe Company believes thisnon-GAAP excludesmeasure is useful to investors in their assessment of our operating performance and the impactvaluation of certain items (notedour Company. In addition, thisnon-GAAP measure addresses questions the Company routinely receives from analysts and investors and, in order to assure that all investors have access to similar data, the Company has determined that it is appropriate to make this data available to all investors. However, other companies may use similarly titlednon-GAAP financial measures that are calculated differently from the way we calculate such measures and accordingly, our calculation of Adjusted EBITDA(non-GAAP) may not be comparable to such similarly titlednon-GAAP measures. The reconciliation of Adjusted EBITDA(non-GAAP) to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, is shown in the table below) that may obscure trends in the Company’s underlying performance. By disclosing thisnon-GAAP measure, management intends to provide the reader with a meaningful, consistent comparison of the Company’s operating results and trends for the periods presented. Below is a reconciliation of Adjusted EPSnon-GAAP to GAAP EPS.below. Readers are encouraged to review this reconciliation and should consider thisnon-GAAP measure as a supplement to, not a substitute for, or superior to, the corresponding measure calculated in accordance with GAAP. | | | | | | | | Twelve
Months Ended
December 31, | | | (In millions) | | 2016 | | Net income (loss) attributable to Valeant Pharmaceuticals International, Inc. | | $ | (2,409 | ) | | | Non-GAAP adjustments: | | | | | Acquisition-related adjustments excluding amortization of finite-lived intangible assets | | | 33 | | Amortization of finite-lived intangible assets | | | 2,673 | | Goodwill impairment | | | 1,077 | | Restructuring and integration costs | | | 132 | | In-process research and development costs | | | 34 | | Asset Impairments | | | 422 | | Othernon-GAAP charges | | | 208 | | | | | | | | | | 4,579 | | Amortization of deferred financing costs and debt discounts | | | 118 | | Loss on extinguishment of debt | | | — | | (Gain) loss on investments, net | | | — | | Foreign exchange and other | | | 14 | | Tax effect ofnon-GAAP adjustments | | | (386 | ) | | | | | | Totalnon-GAAP adjustments | | | 4,325 | | Adjusted net incomenon-GAAP attributable to Valeant Pharmaceuticals International, Inc. | | $ | 1,916 | | | | | | | GAAP (loss) earnings per share — diluted | | $ | (6.94 | ) | | | | | | Adjusted earnings per sharenon-GAAP — diluted | | $ | 5.47 | | | | | | | Shares used in diluted per share calculation — GAAP earnings per share | | | 347.3 | | | | | | | Shares used in diluted per share calculation — Adjusted earnings per sharenon-GAAP | | | 350.1 | | | | | | |
| | | Valeant Pharmaceuticals International, Inc.
Reconciliation of GAAP Revenue toNon-GAAP
For the Twelve Months Ended December 31, 2016
| | Appendix 2 |
This Proxy Statement includes the presentation and discussion of Adjusted RevenueEBITDA(non-GAAP) (“is net loss attributable to the Company, the most directly comparable financial measure calculated and presented in accordance with GAAP, adjusted for: interest expense, net, benefit from income taxes, and depreciation and amortization.
Adjusted Revenue(non-GAAP)”) that differs from revenue reported under GAAP (“GAAP Revenue”). Management uses Adjusted RevenueEBITDA(non-GAAP) for strategic decision making, forecasting future results and evaluating current performance. In addition, cash bonusesis EBITDA(non-GAAP) adjusted for the Company’s executive officers are based, in part, on the achievement of certain Adjusted Revenuefollowing items: (non-GAAP) targets. Adjusted Revenue(non-GAAP) excludesAsset impairments: The Company has excluded the impact of impairments of finite-lived and indefinite-lived intangible assets, as well as impairments of assets held for sale, as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions and divestitures. The Company believes that the adjustments of these items correlate with the sustainability of the Company’s operating performance. Although the Company excludes intangible impairments in measuring the performance of the Company and the business, the Company believes that it is important for investors to understand that intangible assets contribute to revenue generation.
Goodwill impairments: The Company has excluded the impact of goodwill impairment. When the Company has made acquisitions where the consideration paid was in excess of the fair value of the net assets acquired, the remaining purchase price is recorded as goodwill. For assets that we developed ourselves, no goodwill is recorded. Goodwill is not amortized but is tested for impairment. In January 2017, new accounting guidance was issued which simplifies the subsequent measurement of an impairment to goodwill. Under the new guidance, which the Company early adopted effective Jan. 1, 2018, the amount of goodwill impairment is measured as the excess of a reporting unit’s carrying value over its fair value. Management excludes these charges in measuring the performance of the Company and the business. Restructuring and integration costs: The Company has incurred restructuring costs as it implemented certain items (notedstrategies, which involved, among other things, improvements to its infrastructure and operations, internal reorganizations and impacts from the divestiture of assets and businesses. In addition, in connection with its acquisition of certain assets of Synergy Pharmaceuticals Inc. (“Synergy”), the Company has incurred certain severance and integration costs which were not essential to complete, close or report the acquisition. With regard to infrastructure and operational improvements which the Company has taken to improve efficiencies in the table below)businesses and facilities, these tend to be costs intended to right size the business or organization that may obscure trendsfluctuate significantly between periods in amount, size and timing, depending on the improvement project, reorganization or transaction. With regard to the severance and integration costs associated with the acquisition of certain assets of Synergy, these costs are specific to the acquisition itself and provided no benefit to the ongoing operations of the Company. As a result, the Company does not believe that such costs (and their impact) are truly representative of its underlying business. The Company believes that the adjustments of these items provide supplemental information with regard to the sustainability of the Company’s operating performance, allow for a comparison of the financial results to historical operations and forward-looking guidance and, as a result, provide useful supplemental information to investors. Acquisition-related costs and adjustments (excluding amortization of intangible assets): The Company has excluded the impact of acquisition-related costs and fair value inventorystep-up resulting from acquisitions as the amounts and frequency of such costs and adjustments are not consistent and are impacted by the timing and size of its acquisitions. In addition, the Company has excluded the impact of acquisition-related contingent considerationnon-cash adjustments due to the inherent uncertainty and volatility associated with such amounts based on changes in assumptions with respect to fair value estimates, and the amount and frequency of such adjustments is not consistent and is significantly impacted by the timing and size of the Company’s acquisitions, as well as the nature of the agreed-upon consideration. Loss on extinguishment of debt: The Company has excluded loss on extinguishment of debt as this represents a cost of refinancing our existing debt and is not a reflection of our operations for the period. Further, the amount and frequency of such charges are not consistent and are significantly impacted by the timing and size of debt financing transactions and other factors in the Company’s underlying performance. Thisdebt market out of management’s control. non-GAAP information is provided herein because Adjusted Revenue(non-GAAP) was a performance metric used in determiningShare-based compensation: The Company has excluded the impact of costs relating to share-based compensation. The Company believes that the exclusion of share-based compensation as describedexpense assists investors in the CD&A section. Below iscomparisons of operating results to peer companies. Share-based compensation expense can vary significantly based on the timing, size and nature of awards granted.
Other adjustments: The Company has excluded certain other amounts including: legal and other professional fees incurred in connection with recent legal and governmental proceedings, investigations and information requests respecting certain of our distribution, marketing, pricing, disclosure and accounting practices, litigation and other matters, and net (gain)/loss on sale of assets. The Company has also excluded expenses associated with acquiredin-process research and development, as these amounts are inconsistent in amount and frequency and are significantly impacted by the timing, size and nature of acquisitions. Furthermore, as these amounts are associated with research and development acquired, the Company does not believe that they are a reconciliationrepresentation of the Company’s research and development efforts during any given period. The Company has also excluded IT infrastructure investment and charges for litigation and other matters that are the result of other,non-comparable events to measure operating performance. These events arise outside of the ordinary course of continuing operations. Given the unique nature of the matters relating to these costs, the Company believes these items are not normal operating expenses. For example, legal settlements and judgments vary significantly, in their nature, size and frequency, and, due to this volatility, the Company believes the costs associated with legal settlements and judgments are not normal operating expenses. In addition, as opposed to more ordinary course matters, the Company considers that each of the recent proceedings, investigations and information requests, given their nature and frequency, are outside of the ordinary course and relate to unique | circumstances. The Company believes that the exclusion of suchout-of-the-ordinary-course amounts provides supplemental information to assist in the comparison of the financial results of the Company from period to period and, therefore, provides useful supplemental information to investors. However, investors should understand that many of these costs could recur and that companies in our industry often face litigation. |
Finally, to the extent not already adjusted for above, Adjusted RevenueEBITDA (non-GAAP) to GAAP Revenue. Readers are encouraged to review this reconciliation. Adjusted Revenue(non-GAAP) should be viewed as a supplement to, not a substitute reflects adjustments for or superior to, GAAP Revenue.interest, taxes, depreciation and amortization. Bausch Health Companies Inc. (unaudited) | | | | | | | | | | | | | | | | 2016
GAAP | | | 2016 currency
impact & other (a) | | | 2016 excluding
currency impact
& other
Non-GAAP | | Total revenues | | $ | 9,674.0 | | | $ | 159.0 | | | $ | 9,833.0 | |
| | | | | | | | | | | | Years Ended,
December 31, | | | (in millions) | | 2019 | | | 2018 | | Net loss attributable to Bausch Health Companies Inc. | | $ | (1,788 | ) | | $ | (4,148 | ) | Interest expense, net | | | 1,600 | | | | 1,674 | | Benefit from income taxes | | | (54 | ) | | | (10 | ) | Depreciation and amortization | | | 2,075 | | | | 2,819 | | | | | | | | | | | EBITDA(non-GAAP) | | | 1,833 | | | | 335 | | Adjustments: | | | | | | | | | Asset impairments | | | 75 | | | | 568 | | Goodwill impairments | | | — | | | | 2,322 | | Restructuring and integration costs | | | 31 | | | | 22 | | Acquisition-related costs and adjustments (excluding amortization of intangible assets) | | | 25 | | | | (9 | ) | Loss on extinguishment of debt | | | 42 | | | | 119 | | Share-based compensation | | | 102 | | | | 87 | | Other adjustments: | | | | | | | | | IT infrastructure investment | | | 24 | | | | — | | Legal and other professional fees(a) | | | 35 | | | | 52 | | Litigation and other matters(b) | | | 1,401 | | | | (27 | ) | Net (gain) loss on sale of assets | | | (31 | ) | | | 6 | | Acquiredin-process research and development costs | | | 41 | | | | 1 | | Other | | | (7 | ) | | | (2 | ) | | | | | | | | | | Adjusted EBITDA(non-GAAP) | | $ | 3,571 | | | $ | 3,474 | | | | | | | | | | |
| (a) | Currency effect for constant currency salesLegal and other professional fees are incurred in connection with legacy legal and governmental proceedings, investigations and information requests related to, among other matters, our distribution, marketing, pricing, disclosure and accounting practices.
|
| (b) | In 2019, Litigation and other matters of $1,401 million includes the settlement of a legacy U.S. securities class action matter (which is determined by comparing 2016 reported amounts adjustedsubject to exclude currency impact, calculated using 2015 monthly average exchange rates,final court approval). In 2018, Litigation and other matters of $27 million includes a favorable adjustment of $40 million related to the actual 2015 reported amounts. “Other” shows product sales of $2 million that represent Philidor Rx Services, LLC sales through the deconsolidation as of January 31, 2016.Salix legacy litigation matter. |
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VALEANT PHARMACEUTICALS INTERNATIONAL,BAUSCH HEALTH COMPANIES INC.
ATTN: CHRISTINA M. ACKERMANN 2150 SAINT ELZEAR BLVD. WEST LAVAL, QUEBEC H7L 4A8 CANADA | | VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, United States. To be effective, your proxy card must be received by Broadridge not later than 11:59 p.m. (Eastern Daylight Time) on April 28, 2017.24, 2020. VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. (Eastern Daylight Time) on April 28, 2017.24, 2020. Have your proxy card in hand when you access the website and then follow the instructions. When voting online, you may not appoint a person as proxyholder other than the nominees specified in this proxy card. VOTE BY TELEPHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your instructions up until 11:59 p.m. (Eastern Daylight Time) on April 28, 2017.24, 2020. Have your proxy card in hand when you call and then follow the instructions. When voting by telephone, you may not appoint a person as proxyholder other than the nominees specified in this proxy card. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by the Company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive proxy materials electronically in future years. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M58430-Z60108E95406-P32863 KEEP THIS PORTION FOR YOUR RECORDS
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —— — — — — — | | | | | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | | DETACH AND RETURN THIS PORTION ONLY |
| | | | | | | | | | | | | VALEANT PHARMACEUTICALS INTERNATIONAL,BAUSCH HEALTH COMPANIES INC.
| The Board of Directors recommends you vote FOR proposals 1, 2, 3 and 4 and EVERY YEAR with respect to proposal 3 below.4. | 1. Election of Directors | | For | | | | Withhold | | | | | 1a. Richard U. DeSchutterDe Schutter | | ☐ | | | | ☐ | | | | | 1b. Dr. Frederic N. EshelmanD. Robert Hale | | ☐ | | | | ☐ | | | | | 1c. D. Robert Hale 1d. Dr. Argeris (Jerry) N. Karabelas
1e. Sarah B. Kavanagh
1f. Joseph C. Papa
1g. Robert N. Power
1h. Russel C. Robertson
1i. Thomas W. Ross, Sr.
1j. Amy B. Wechsler, M.D.
| | ☐
☐
☐
☐
☐
☐
☐
☐ | | | | ☐ | | | | | 1d. Sarah B. Kavanagh | | ☐ | | | | ☐ | | | | | 1e. Joseph C. Papa | | ☐ | | | | ☐ | | | | | 1f. John A. Paulson | | ☐ | | | | ☐ | | | | | 1g. Robert N. Power | | ☐ | | | | ☐ | | | | | 1h. Russel C. Robertson | | ☐ | | | | ☐ | | | | | 1i. Thomas W. Ross, Sr. | | ☐ | | | | ☐ | | | | | 1j. Andrew C. von Eschenbach, M.D. | | ☐ | | | | ☐ | | | | | 1k. Amy B. Wechsler, M.D. | | ☐ | | | | ☐ |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For | | | Against | | | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | | 2. | | The approval, in an advisory resolution,vote, of the compensation of our Named Executive Officers as disclosed inOfficers. | | ☐ | | ☐ | | ☐ | | | | | | | | | 3. | | The approval of an amendment to the Compensation DiscussionCompany’s Amended and Analysis section, executive compensation tables and accompanying narrative discussions contained inRestated 2014 Omnibus Incentive Plan to increase the Management Proxy Circular and Proxy Statement.number of Common Shares authorized under such plan. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | One
Year | | Two
Years
| | Three
Years
| | Abstain | 3. | | To vote, in a non-binding advisory vote, on the frequency of advisory resolution, of the compensation of our Named Executive Officers as disclosed in the Compensation Discussion and Analysis section, executive compensation tables and accompanying narrative discussions contained in the Management Proxy Circular and Proxy Statement. | | ☐
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| | | | | | | | For | | | | For | | | | Withhold | | | | 4. | | To appoint PricewaterhouseCoopers LLP as the auditors for the Company to hold office until the close of the 20182021 Annual Meeting of Shareholders and to authorize the Company’s Board of Directors to fix the auditors’ remuneration. | | ☐ | | | | ☐ | | |
Without limiting the general powers hereby conferred, the undersigned hereby directs the proxyholder to vote or withhold from voting the Common Shares represented by this proxy in the manner set forth above. THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF THE COMPANY.THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED, WHERE THE SHAREHOLDER HAS GIVEN A CHOICE, AS DIRECTED OR, IF NO DIRECTION IS GIVEN,FOR EACH OF 1, 2, 3 AND 4 AND EVERY YEAR WITH RESPECT TO PROPOSAL 3.4. THE PERSON OR PERSONS APPOINTED UNDER THIS PROXY ARE CONFERRED WITH DISCRETIONARY AUTHORITY WITH RESPECT TO AMENDMENTS OR VARIATIONS OF THOSE MATTERS SPECIFIED IN THIS PROXY AND THE NOTICE OF MEETING AND WITH RESPECT TO ANY OTHER MATTERS WHICH MAY BE PROPERLY BROUGHT BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF WHETHER OR NOT THE AMENDMENT, VARIATION OR OTHER MATTER IS OR IS NOT ROUTINE OR CONTESTED. THIS FORM OF PROXY SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND MANAGEMENT PROXY CIRCULAR AND PROXY STATEMENT. The undersigned hereby revokes any prior proxies. | | | | | | | | | | | | | Signature (PLEASE[PLEASE SIGN WITHIN BOX)BOX] | | Date | | |
| | | | | | | | | | | | | | Signature (Joint Owners) | | Date | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice of Annual Meeting of Shareholders and Management Proxy Circular, and Proxy Statement and Annual Report are available at www.proxyvote.com. — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — M58431-Z60108— — —— — — E63159-P18039 | | | | | | |
VALEANT PHARMACEUTICALS INTERNATIONAL,BAUSCH HEALTH COMPANIES INC.
INSTRUMENT OF
PROXY FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON TUESDAY, MAY 2, 2017APRIL 28, 2020
| | The undersigned hereby appoints Joseph C. Papa and Christina M. Ackermann, or instead of either of the foregoing,as proxyholder of the undersigned, with full power of substitution, to attend, vote and act for and on behalf of the undersigned at the Annual Meeting (the “Meeting”) of the shareholdersShareholders (the ““Shareholders”Shareholders”) of Valeant Pharmaceuticals International,Bausch Health Companies Inc. (the ““Company”Company”) to be held on May 2, 2017April 28, 2020 at 9:00 a.m. (local time) at 2150 Saint Elzear Blvd. West, Laval, Quebec H7L 4A8, Canada and at any adjournment of the Meeting, and on every ballot that may take place in consequence thereof to the same extent and with the same powers as if the undersigned were personally present at the Meeting, with authority to vote at the proxyholder’s discretion except as otherwise specified on the reverse side. | NOTES: | | | | |
| | | | | | | | 1. | | A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON OR COMPANY, WHO NEED NOT BE A SHAREHOLDER, TO ATTEND AND ACT ON ITS, HIS OR HER BEHALF AT THE MEETING OTHER THAN THE PERSONS DESIGNATED IN THIS FORM OF PROXY. THIS RIGHT MAY BE EXERCISED BY INSERTING SUCH OTHER PERSON’SPERSONS’ OR COMPANY’S NAME IN THE BLANK SPACE PROVIDED FOR THAT PURPOSE IN THE PARAGRAPH ABOVE OR BY COMPLETING ANOTHER PROPER FORM OF PROXY AND, IN EITHER CASE, BY DELIVERING THE COMPLETED FORM OF PROXY TO THE COMPANY AS INDICATED ON THE REVERSE SIDE. | 2. | | This form of proxy must be dated and executed by the Shareholder (using exactly the same name in which the Common Sharesshares are registered) or by his or her attorney authorized in writing or, if the Shareholder is a corporate body, corporate, by a duly authorized officer or attorney thereof. A copy of any such authorization should accompany this form of proxy. Persons signing as executors, administrators, trustees, etc. should so indicate. If the Common Shares are registered in the name of more than one owner, then all these registered owners should sign this form of proxy. If this form of proxy is not dated, it will be deemed to bear the date on which it was mailed to the Shareholder by the Company. | 3. | | In order for this form of proxy to be effective, it must be signed and deposited with Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, United States, so that it arrives prior to 11:59 p.m. (Eastern Daylight Time) on April 28, 201724, 2020 or, in the case of any adjournment of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the rescheduled Meeting. |
| | | Request for Quarterly reports
The Company’s quarterly reports to shareholders are available on EDGAR at www.sec.gov and on SEDAR at www.sedar.com, but if you wish to receive quarterly reports and interim financial statements with accompanying MD&A for the 2016 fiscal year by mail, please mark this box. If you do not mark this box and return this form, you will not receive these documents by mail. ☐
| | Annual Report Waiver
Mark this box if, for fiscal year 2016, you do not want to receive the Annual Report of the Company containing the annual financial statements and accompanying MD&A. If you do not mark this box, the Annual Report will be sent to you by mail. ☐
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