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Exhibit 10.1
AGREEMENT
This Agreement ("Agreement") is dated as of __________, and is
entered into by and between "Name" ("Employee"), and Allergan, Inc., a
Delaware corporation (the "Company").
RECITALS
The Company believes that because of its position in the
industry, financial resources and historical operating results there is a
possibility that the Company may become the subject of a Change in Control (as
defined below), either now or at some time in the future.
The Company believes that it is in the best interest of the
Company and its stockholders to foster Employee's objectivity in making
decisions with respect to any pending or threatened Change in Control of the
Company and to assure that the Company will have the continued dedication and
availability of Employee as an employee of the Company or one of its
affiliates, notwithstanding the possibility, threat or occurrence of a Change
in Control. The Company believes that these goals can be accomplished by
alleviating certain of the risks and uncertainties with regard to Employee's
financial and professional security that would be created by a pending or
threatened Change in Control and that inevitably would distract Employee and
could impair his or her ability to objectively perform his or her duties for
and on behalf of the Company. Accordingly, the Company believes that it is
appropriate and in the best interest of the Company and its stockholders to
provide to Employee compensation arrangements upon a Change in Control that
lessen Employee's financial risks and uncertainties and that are competitive
with those of other corporations.
With these and other considerations in mind, the Board of
Directors of the Company, acting through its Organization and Compensation
Committee, has authorized the Company to enter into this Agreement with
Employee to provide the protections set forth herein for Employee's financial
security following a Change in Control.
NOW, THEREFORE, in consideration of the foregoing, it is hereby
agreed as follows:
1. Term of Agreement. This Agreement shall be effective from
the date first written above until December 31, 199___. The Company may, in
its sole discretion and for any reason, provide written notice of termination
(effective as of the then applicable expiration date) to Employee no later than
60 days before the expiration date of this Agreement. If written notice is not
so provided, this Agreement shall be automatically extended for an additional
period of 12 months past the expiration date. This Agreement shall continue to
be automatically
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extended for an additional 12 months at the end of such 12-month period and
each succeeding 12-month period unless notice is given in the manner described
in this Section. No termination of this Agreement shall affect Employee's
rights hereunder with respect to a Change in Control which has occurred prior
to such termination.
2. Purpose of Agreement. The purpose of this Agreement is to
provide that, in the event of a "Change in Control," Employee may become
entitled to receive certain additional benefits, as described herein, in the
event of his or her termination.
3. Change in Control. As used in this Agreement, the phrase
"Change in Control" shall mean the following and shall be deemed to occur if
any of the following events occur:
(a) Any "person," as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined
voting power of the Company's then outstanding voting securities;
(b) Individuals who, as of the date hereof, constitute
the Board of Directors of the Company (the "Incumbent Board"), cease for
any reason to constitute at least a majority of the Board of Directors,
provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
stockholders, is approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) shall, for
the purposes of this Agreement, be considered as though such person were
a member of the Incumbent Board of the Company;
(c) The stockholders of the Company approve a merger or
consolidation with any other corporation, other than
(1) a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of another entity) more than 50% of the combined
voting power of the voting securities of the Company or such
other entity outstanding immediately after such merger or
consolidation, and
(2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no
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person acquires 20% or more of the combined voting power of the
Company's then outstanding voting securities; or
(d) The stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
other disposition by the Company of all or substantially all of the
Company's assets.
Notwithstanding the preceding provisions of this Section, a Change in Control
shall not be deemed to have occurred (1) if the "person" described in the
preceding provisions of this Section is an underwriter or underwriting
syndicate that has acquired the ownership of 20% or more of the combined voting
power of the Company's then outstanding voting securities solely in connection
with a public offering of the Company's securities, or (2) if the "person"
described in the preceding provisions of this Section is an employee stock
ownership plan or other employee benefit plan maintained by the Company (or any
of its affiliated companies) that is qualified under the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
4. Effect of a Change in Control. In the event of a Change in
Control, Sections 6 through 10 of this Agreement shall become applicable to
Employee. These Sections shall continue to remain applicable until the second
anniversary of the date upon which the Change in Control occurs. At that
point, so long as the employment of Employee has not been terminated on account
of a Qualifying Termination, as defined in Section 5, this Agreement shall
terminate and be of no further force. If Employee's employment with the
Company and its affiliated companies is terminated on account of a Qualifying
Termination on or before such date, this Agreement shall remain in effect until
Employee receives the various benefits to which he or she has become entitled
under the terms of this Agreement.
5. Qualifying Termination. If, subsequent to a Change in
Control Employee's employment with the Company and its affiliated companies is
terminated, such termination shall be considered a Qualifying Termination
unless:
(a) Employee voluntarily terminates his or her
employment with the Company and its affiliated companies. Employee,
however, shall not be considered to have voluntarily terminated his or
her employment with the Company and its affiliated companies if,
following the Change in Control, Employee's overall compensation is
reduced or adversely modified in any material respect or Employee's
duties are materially changed, and subsequent to such reduction,
modification or change, Employee elects to terminate his or her
employment with the Company and its affiliated companies. For such
purposes, Employee's duties shall be considered to have been "materially
changed" if, without Employee's express written consent, there is any
substantial diminution or adverse modification in Employee's overall
position, responsibilities or reporting relationship, or if, without
Employee's express written consent, Employee's job location is
transferred to a site more than 50
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miles away from his or her place of employment prior to the Change in
Control.
(b) The termination is on account of Employee's death
or Disability. For such purposes, "Disability" shall mean a physical or
mental incapacity as a result of which Employee becomes unable to
continue the performance of his or her responsibilities for the Company
and its affiliated companies and which, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician
agreed to by the Company and Employee, or in the event of Employee's
inability to designate a physician, Employee's legal representative. In
the absence of agreement between the Company and Employee, each party
shall nominate a qualified physician and the two physicians so nominated
shall select a third physician who shall make the determination as to
Disability.
(c) Employee is involuntarily terminated for "cause."
For this purpose, "cause" shall be limited to only three types of
events:
(1) the willful refusal of Employee to comply
with a lawful, written instruction of the Board so long as the
instruction is consistent with the scope and responsibilities of
Employee's position prior to the Change in Control;
(2) dishonesty by Employee which results in a
material financial loss to the Company (or to any of its
affiliated companies) or material injury to its public
reputation (or to the public reputation of any of its affiliated
companies); or
(3) Employee's conviction of any felony
involving an act of moral turpitude.
6. Severance Payment. If Employee's employment is terminated
as a result of a Qualifying Termination, the Company shall pay Employee within
30 days after the Qualifying Termination a cash lump sum equal to "oftimes"
Employee's "Compensation" (the "Severance Payment").
(a) For purposes of this Agreement, Employee's
"Compensation" shall equal the sum of (i) Employee's highest annual
salary rate within the five-year period ending on the date of Employee's
Qualifying Termination plus (ii) a "Management Bonus Increment." The
Management Bonus Increment shall equal the average of the two highest of
the last five bonuses paid to Employee under the Management Bonus Plan
or any successor thereto.
(b) In lieu of a cash lump sum, Employee may elect to
receive the Severance Payment provided by this Section in equal annual
installments over two (2) or three (3) years at Employee's election.
Such installments shall be paid to Employee on each anniversary of the
date of Employee's Qualifying
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Termination, beginning with the first such anniversary and continuing on
each such anniversary thereafter until fully paid. Such election to
receive the Severance Payment in installments, and the number of
installments to receive, may be made and/or revoked by Employee at any
time prior to the occurrence of a Change in Control by written notice to
the Secretary of the Company. Upon the occurrence of a Change in
Control, any such election to receive the Severance Payment in
installments that has been made and not revoked prior to the Change in
Control shall be irrevocable and binding on both the Company and
Employee. In the event that at the time of a Change in Control there is
not in effect an election by Employee to receive the Severance Payment
in installments, such Severance Payment shall be paid to Employee in a
single cash lump sum as provided above.
(c) If Employee has not participated in the Management
Bonus Plan (including any successor thereto) for at least two full plan
years, then the missing bonus component(s) will be computed, for
purposes of calculating the Management Bonus Increment under this
Agreement, by reference to the guideline percentage for officers at
Employee's grade level for the most recently completed bonus period,
assuming a 100% target bonus for both corporate and individual
objectives.
(d) The Severance Payment hereunder is in lieu of any
severance payment that Employee might otherwise be entitled to from the
Company under the Company's applicable severance pay policies.
7. Incentive Compensation Grants. Employee may have received
stock option grants, grants of restricted stock or other incentive compensation
awards under the Allergan, Inc. 1989 Incentive Compensation Plan or other
incentive compensation plans of the Company (collectively the "Incentive
Plans"). In the event of a Qualifying Termination, the Company agrees that any
and all such stock options, restricted stock and other incentive compensation
awards that are outstanding at the time of such termination and that have not
previously become exercisable, payable or free from restrictions, as the case
may be, shall immediately become exercisable, payable or free from restrictions
(other than restrictions required by applicable law or any national securities
exchange upon which any securities of the Company are then listed), as the case
may be, in their entirety, and that the exercise period of any stock option or
other incentive award granted pursuant to any of the Incentive Plans shall
continue for the length of the exercise period specified in the grant of the
award determined without regard to Employee's termination of employment.
8. Retirement Plan. In addition to any retirement benefits
that might otherwise be due Employee under the Allergan, Inc. Pension Plan or
any successor qualified defined benefit plan maintained by the Company (the
"Retirement Plan") or under the Allergan, Inc. Retirement Income Plan and the
Allergan, Inc. Supplemental Executive Benefit Plan or any successor
supplemental employee retirement plan(s) maintained by the Company
(collectively the "SERP"), Employee
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shall receive additional payments from the Company calculated as set forth in
this Section if Employee is terminated on account of a Qualifying Termination.
(a) At the time that Employee (or Employee's
beneficiary) first begins to receive benefits under the Retirement Plan,
there shall be calculated the difference between the benefit that
Employee or Employee's beneficiary has begun to receive under the
Retirement Plan and/or the SERP and the benefit that would have been
received if Employee had worked for another years~ subsequent to the
date of the Qualifying Termination. For the purpose of the preceding
sentence, Employee shall be deemed to have received "Earnings" under the
Retirement Plan and the SERP for the period subsequent to the Qualifying
Termination at an annual rate equal to his or her Compensation, as
calculated under Section 6(a) of this Agreement. This difference shall
be paid by the Company as a supplemental payment to Employee or
Employee's beneficiary for the period of time that he or she is entitled
to the payment that is being supplemented.
(b) Notwithstanding the preceding subsection, Employee
shall not be treated under this Section as if he or she had continued
employment with the Company once Employee elects to commence to receive
benefits under the Retirement Plan. For example, if Employee elects to
commence to receive benefits one year after his or her Qualifying
Termination, then Employee shall be credited with only one year's
additional employment under this Section, even if Employee is entitled
to receive a Severance Payment equal to three times his or her
Compensation.
(c) If Employee is not a participant in the Retirement
Plan, Employee will be provided with the benefits contemplated by the
provisions of this Section 8 as part of the retirement plan provided by
the affiliate of the Company in which Employee is employed.
9. Additional Benefits. In the event of a Qualifying
Termination, Employee shall be entitled to continue to participate in all of
the employee benefit programs available to Employee before the Qualifying
Termination, including but not limited to, group medical insurance, group
dental insurance, group-term life insurance, disability insurance, automobile
allowance, gasoline allowance, and a full allowance for club dues and tax and
financial planning. In addition, Employee shall receive Executive Outplacement
benefits of a type and duration generally provided to executives at Employee's
level. These programs shall be continued at no cost to Employee, except to the
extent that tax rules require the inclusion of the value of such benefits in
Employee's income. The programs shall be continued in the same way and at the
same level as immediately prior to the Qualifying Termination. If Employee is
employed by an affiliate of the Company that does not provide the additional
benefits enumerated, Employee shall be entitled to continue to participate in
the employee benefit programs in which Employee had been participating prior to
the Qualifying Termination. The programs shall continue for "years".
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10. Indemnification for Excise Tax. In the event that Employee
becomes entitled to receive a Severance Payment in accordance with the
provisions of Section 6 above, and such Severance Payment or any other benefits
or payments (including transfers of Property) that Employee receives, or is to
receive, pursuant to this Agreement or any other agreement, plan or arrangement
with the Company in connection with a Change in Control of the Company ("Other
Benefits") shall be subject to the tax imposed pursuant to Section_4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any successor
thereto) or any comparable provision of state law (an "Excise Tax"), the
following rules shall apply:
(a) The Company shall pay to Employee, within 30 days
after Employee's Qualifying Termination, an additional amount (the
"Gross-Up Payment") such that the net amount retained by Employee, after
deduction of any Excise Tax with respect to the Severance Payments or
the Other Benefits and any federal, state and local income tax and
Excise Tax upon such Gross-Up Payment, is equal to the amount that would
have been retained by Employee if such Excise Tax were not applicable.
It is intended that Employee shall not suffer any loss or expense
resulting from the assessment of any Excise Tax or the Company's
reimbursement of Employee for payment of any such Excise Tax.
(b) For purposes of determining whether any of the
Severance Payments or Other Benefits will be subject to an Excise Tax
and the amount of such Excise Tax, (i) any other payment or benefits
received or to be received by Employee in connection with a Change in
Control of the Company or Employee's termination of employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any person whose actions result in a
Change in Control or any person affiliated with the Company or such
person) shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code (or any successor thereto), and all
"excess parachute payments" within the meaning of Section 280G(b)(1) of
the Code (or any successor thereto) shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to Employee such other
payments or benefits (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code (or any successor
thereto), (ii) the amount of the Severance Payments and Other Benefits
which shall be treated as subject to the Excise Tax shall be equal to
the lesser of (A) the total amount of the Severance Payments or Other
Benefits or (B) the amount of excess parachute payments within the
meaning of Sections 280G(b)(1) and (4) of the Code (or any successor or
successors thereto), after applying clause (i), above, and (iii) the
value of any non-cash benefits or any deferred payment or benefit shall
be determined by the Company's independent auditors in accordance with
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Principles of Sections 280G(d)(3) and (4) of the Code (or any successor
or successors thereto).
(c) For purposes of determining the amount of the
Gross-Up Payment, Employee shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rates of taxation in the state and
locality of Employee's residence on the date of Employee's Qualifying
Termination, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes.
(d) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time of Employee's Qualifying Termination, Employee shall repay to
the Company, at the time that the amount of such reduction in Excise Tax
is finally determined, the portion of the Gross-Up Payment attributable
to such reduction plus interest on the amount of such repayment at the
rate provided in Section_1274(b)(2)(B) of the Code (or any successor
thereto) (the "Applicable Rate"). In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time
of such Qualifying Termination (including by reason of any payment the
existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess (plus interest, determined at the Applicable
Rate, payable with respect to such excess) at the time that the amount
of such excess is finally determined.
11. Rights and Obligations Prior to a Change in Control. Prior
to a Change in Control, the rights and obligations of Employee with respect to
his or her employment by the Company shall be determined in accordance with the
policies and procedures adopted from time to time by the Company and the
provisions of any written employment contract in effect between the Company and
Employee from time to time. This Agreement deals only with certain rights and
obligations of Employee subsequent to a Change in Control, and the existence of
this Agreement shall not be treated as raising any inference with respect to
what rights and obligations exist prior to a Change in Control. Unless
otherwise expressly set forth in a separate employment agreement between
Employee and the Company, the employment of Employee is at-will, and Employee
or the Company may terminate Employee's employment with the Company at any time
and for any reason, with or without cause, provided that if such termination
occurs within two years after a Change in Control and constitutes a Qualifying
Termination (as defined in Section 5 above) the provisions of this Agreement
shall govern the payment of the Severance Payment and certain other benefits as
provided herein.
12. Non-Exclusivity of Rights. Subject to Section_6(d)above,
nothing in this Agreement shall prevent or limit Employee's continuing or
future participation in any benefit, bonus, incentive or other plan or program
provided by the Company
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or any of its affiliated companies and for which Employee may qualify, nor
shall anything herein limit or otherwise affect (except as provided in Section
7 above) such rights as Employee may have under any stock option or other
agreements with the Company or any of its affiliated companies. Except as
otherwise provided in Section 6(d)above, amounts which are vested benefits or
which Employee is otherwise entitled to receive under any plan or program of
the Company or any of its affiliated companies at or subsequent to the date of
any Qualified Termination shall be payable in accordance with such plan or
program.
13. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counter-claim,
recoupment, defense or other claim, right or action which the Company may have
against Employee or others. In no event shall Employee be obligated to seek
other employment or to take any other action by way of mitigation of the
amounts payable to Employee under any of the provisions of this Agreement. The
Company agrees to pay, to the full extent permitted by law, all legal fees and
expenses which Employee may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by
Employee about the amount of any payment pursuant to Section 10 of this
Agreement), plus in each case interest at the Applicable Rate (as defined in
Section 10 above).
14. Successors.
(a) This Agreement is personal to Employee, and without
the prior written consent of the Company shall not be assignable by
Employee other than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by
Employee's legal representatives.
(b) The rights and obligations of the Company under
this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of the Company.
15. Governing Law. This Agreement is made and entered into in
the State of California, and the laws of California shall govern its validity
and interpretation in the performance by the parties hereto of their respective
duties and obligations hereunder.
16. Entire Agreement. This Agreement constitutes the entire
agreement between the parties respecting the benefits due Employee in the event
of a Change in Control followed by a Qualifying Termination, and there are no
representations, warranties or commitments, other than those set forth herein,
which relate to such benefits. This Agreement may be amended or modified only
by an instrument in writing executed by all of the parties hereto.
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17. Dispute Resolution.
(a) Any controversy or dispute between the parties
involving the construction, interpretation, application or performance of
the terms, covenants, or conditions of this Agreement or in any way
arising under this Agreement (a "Covered Dispute") shall, on demand by
either of the parties by written notice served on the other party in the
manner prescribed in Section 18 hereof, be referenced pursuant to the
procedures described in California Code of Civil Procedure ("CCP")
Sections 638, et seq., as they may be amended from time to time (the
"Reference Procedures"), to a retired Judge from the Superior Court for
the County of Los Angeles or the County of Orange for a decision.
(b) The Reference Procedures shall be commenced by
either party by the filing in the Superior Court of the State of
California for the County of Orange of a petition pursuant to CCP
Section 638(1) (a "Petition").
Said Petition shall designate as a referee a Judge from the list of
retired Los Angeles County and Orange County Superior Court Judges who
have made themselves available for trial or settlement of civil
litigation under said Reference Procedures. If the parties hereto are
unable to agree on the designation of a particular retired Los Angeles
County or Orange County Superior Court Judge or the designated Judge is
unavailable or unable to serve in such capacity, request shall be made
in said Petition that the Presiding or Assistant Presiding Judge of the
Orange County Superior Court appoint as referee a retired Los Angeles
County or Orange County Superior Court Judge from the aforementioned
list.
(c) Except as hereafter agreed by the parties, the
referee shall apply the law of California in deciding the issues
submitted hereunder. Unless formal pleadings are waived by agreement
among the parties and the referee, the moving party shall file and serve
its complaint within 15 days from the date a referee is designated as
provided herein, and the other party shall have 15 days thereafter in
which to plead to said complaint. Each of the parties reserves its
respective rights to allege and assert in such pleadings all claims,
causes of action, contentions and defenses which it may have arising out
of or relating to the general subject matter of the Covered Dispute that
is being determined pursuant to the Reference Procedures. Reasonable
notice of any motions before the referee shall be given, and all matters
shall be set at the convenience of the referee. Discovery shall be
conducted as the parties agree or as allowed by the referee. Unless
waived by each of the parties, a reporter shall be present at all
proceedings before the referee.
(d) It is the parties' intention by this Section 17
that all issues of fact and law and all matters of a legal and equitable
nature related to any Covered Dispute will be submitted for
determination by a referee designated as provided herein. Accordingly,
the parties hereby stipulate that a referee
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designated as provided herein shall have all powers of a Judge of the
Superior Court including, without limitation, the power to grant
equitable and interlocutory and permanent injunctive relief.
(e) Each of the parties specifically (i) consents to
the exercise of jurisdiction over his or her person by a referee
designated as provided herein with respect to any and all Covered
Disputes; and (ii) consents to the personal jurisdiction of the
California courts with respect to any appeal or review of the decision
of any such referee.
(f) Each of the parties acknowledges that the decision
by a referee designated as provided herein shall be a basis for a
judgment as provided in CCP Section_644 and shall be subject to
exception and review as provided in CCP Section_645.
18. Notices. Any notice or communications required or
permitted to be given to the parties hereto shall be delivered personally, sent
via facsimile or via an overnight courier service or be sent by United States
registered or certified mail, postage prepaid and return receipt requested, and
addressed or delivered as follows, or as such other addresses the party
addressed may have substituted by notice pursuant to this Section:
(a) If to the Company: Allergan, Inc.
2525 Dupont Drive
Irvine, California 92612
Attn: General Counsel
(b) If to Employee: "First address"
"Second address"
"Third address"
"City state zip"
19. Captions. The captions of this Agreement are inserted for
convenience and do not constitute a part hereof.
20. Severability. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein and there shall be deemed substituted
for such invalid, illegal or unenforceable provision such other provision as
will most nearly accomplish the intent of the parties to the extent permitted
by the applicable law. In case this Agreement, or any one or more of the
provisions hereof, shall be held to be invalid, illegal or unenforceable within
any governmental jurisdiction or subdivision thereof, this Agreement or any
such provision thereof shall not as a consequence thereof be
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deemed to be invalid, illegal or unenforceable in any other governmental
jurisdiction or subdivision thereof.
21. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall together constitute one in the same Agreement.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first written above.
Dated: , 1996. ALLERGAN, INC.
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By:
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William C. Shepherd
Chairman and
Chief Executive Officer
Dated: , 1996.
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"Name"
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