ACTAVIS PLC - DEF 14A

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

(RULE 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

 

 Filed by the Registrant  Filed by a Party other than the Registrant

 

Check the appropriate box:
Preliminary Proxy Statement
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to §240.14a-12

 

 

 

Actavis plc

 

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

N/A

 

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Notice of 2015 Annual General
Meeting of Shareholders

 

June 5, 2015

8:30 a.m. local time

 

1 Grand Canal Square, Docklands, Dublin 2, Ireland

 

You are hereby notified that the 2015 Annual General Meeting of Shareholders (the “Annual Meeting”) of Actavis plc (the “Company”) will be held at 1 Grand Canal Square, Docklands, Dublin 2, Ireland, at 8:30 a.m. local time, on June 5, 2015, for the following purposes:

 

  1. To elect Paul M. Bisaro, Nesli Basgoz, M.D., James H. Bloem, Christopher W. Bodine, Christopher J. Coughlin, Michael R. Gallagher, Catherine M. Klema, Peter J. McDonnell, M.D., Patrick J. O’Sullivan, Brenton L. Saunders, Ronald R. Taylor, and Fred G. Weiss as members of the Board of Directors to hold office until the 2016 Annual Meeting or until each of their respective successors is duly elected and qualified.  
  2. To approve, in a non-binding vote, Named Executive Officer compensation;  
  3. To ratify, in a non-binding vote, the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015 and to authorize, in a binding vote, the Board of Directors, acting through the Audit and Compliance Committee, to determine PricewaterhouseCoopers LLP’s remuneration;  
  4. To pass a special resolution to approve, subject to the approval of the Registrar of Companies in Ireland, the change in name of the Company from Actavis plc to Allergan plc;  
  5. To approve the Amended and Restated 2013 Incentive Award Plan of Actavis plc;  
  6. To consider two shareholder proposals, if properly presented at the meeting;  
  7. To receive the Company’s Irish Statutory Accounts for the fiscal year ended December 31, 2014 and the reports of the directors and auditors thereon, and to review the affairs of the Company; and  
  8. To transact such other business as may properly come before the Annual Meeting or any adjournment, postponement or continuation thereof.  

 

The Board of Directors has fixed the close of business on April 10, 2015 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. Only shareholders of record at the close of business on April 10, 2015 will be entitled to notice of and to vote at the Annual Meeting or any adjournment, postponement or continuation thereof. Your attention is directed to the Proxy Statement for more complete information regarding the matters to be acted upon at the Annual Meeting.

 

The Proxy Statement, 2014 Annual Report to Shareholders and 2014 Irish Statutory accounts are available at www.proxyvote.com.

 

You may vote your shares in person at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, we encourage you to vote your shares: (i) by accessing the Internet site described in the Notice Regarding the Availability of Proxy Materials previously provided to you, (ii) by calling the toll-free telephone number listed on the Internet site, voter instruction form, proxy card or Notice Regarding the Availability of Proxy Materials, or (iii) by marking, dating and signing any proxy card or voter instruction form provided to you and returning it in the accompanying postage paid envelope as quickly as possible.

 

April 24, 2015

Dublin, Ireland

 

By Order of the Board of Directors

 

 

 

A. Robert D. Bailey

Chief Legal Officer and Secretary

 

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April 24, 2015

 

To Our Shareholders:

 

You are cordially invited to attend the 2015 Annual Meeting of Shareholders of Actavis plc. The annual meeting will be held at 1 Grand Canal Square, Docklands, Dublin 2, Ireland, on June 5, 2015 at 8:30 a.m. local time.

 

In connection with the annual meeting, we have prepared a Notice of Annual Meeting of Shareholders, a proxy statement, and our 2014 Annual Report to Shareholders, which provides detailed information relating to our activities and operating performance. The proxy statement describes the matters to come before the annual meeting. During the annual meeting, we will also review the Company’s 2014 Irish Statutory accounts.

 

Pursuant to the rules of the Securities and Exchange Commission, we are furnishing our proxy materials to shareholders over the Internet.

 

We appreciate your continued interest and support as an Actavis plc shareholder. We hope that you will be able to attend the annual meeting in person, and we look forward to seeing you.

 

It is important that your shares be represented and voted whether or not you plan to attend the annual meeting in person. If you are viewing the proxy statement on the Internet, you may grant your proxy electronically via the Internet by following the instructions on the Notice Regarding the Availability of Proxy Materials previously mailed to you or the instructions listed on the Internet site. If you have received a paper copy of the proxy statement and proxy card, you may grant a proxy to vote your shares by completing and mailing the proxy card enclosed with the proxy statement, or you may grant your proxy electronically via the Internet or by telephone by following the instructions on the proxy card. If your shares are held in “street name,” which means shares held of record by a broker, bank, or other nominee, you should review the Notice Regarding the Availability of Proxy Materials or voting instruction form your broker provided to you to determine whether and how you will be able to vote by telephone or over the Internet. Voting over the Internet, by telephone or by mailing a proxy card, will ensure your shares are represented at the annual meeting. Your vote is important, regardless of the number of shares that you own.

 

Sincerely,

 

 

Brenton L. Saunders

President, Chief Executive Officer and Director

 

Paul M. Bisaro

Executive Chairman and Director

 

Recent changes in Irish accounting regulations require the Company to adopt a new accounting framework for its parent entity Irish statutory accounts for the financial year starting 1 January 2015. The transition date for the purpose of preparing a prior year comparative will be 1 January 2014. The Board of Directors considers it to be in the best interests of the Company to adopt either FRS 101 or FRS 102 (Reduced Disclosure Framework) for the financial year starting 1 January 2015. Whichever of these options we select, the Company will utilise the disclosure exemptions available. No disclosures in the current US GAAP financial statements would be omitted on adoption of either FRS 101 or FRS 102 (Reduced Disclosure Framework).

 

A shareholder or shareholders having an aggregate holding of 5% of more of the total allotted shares in the Company may serve objections in writing to the use of the disclosure exemptions to the Company Secretary at Actavis plc, 1 Grand Canal Square, Docklands, Dublin 2, Ireland before May 22, 2015

 

Table of Contents

 

PROPOSAL NO. 1 ELECTION OF DIRECTORS 10
   
CORPORATE GOVERNANCE 14
   
BOARD OF DIRECTORS AND COMMITTEES 16
   
COMPENSATION DISCUSSION AND ANALYSIS 20
   
COMPENSATION COMMITTEE REPORT 35
   
SUMMARY COMPENSATION TABLE 36
   
2014 GRANTS OF PLAN-BASED AWARDS 38
   
2014 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 40
   
2014 OPTION EXERCISES AND STOCK VESTED 42
   
2014 NONQUALIFIED DEFERRED COMPENSATION 42
   
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL 43
   
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 53
   
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS 54
   
PROPOSAL NO. 2 NON-BINDING VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY VOTE”) 55
 
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PROPOSAL NO. 3 NON-BINDING RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS AND BINDING AUTHORIZATION OF THE BOARD TO DETERMINE ITS REMUNERATION 57
     
AUDIT FEES 58
     
REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE 59
   
PROPOSAL NO. 4 CHANGE OF COMPANY NAME 60
     
PROPOSAL NO. 5 APPROVAL OF AMENDMENT TO AMENDED AND RESTATED 2013 INCENTIVE AWARD PLAN 61
     
PROPOSAL NO. 6 SUSTAINABILITY REPORTING 69
     
BOARD OF DIRECTORS’ RESPONSE TO SHAREHOLDER PROPOSAL 6 71
   
PROPOSAL NO. 7 EXECUTIVES TO RETAIN SIGNIFICANT STOCK 73
     
BOARD OF DIRECTORS’ RESPONSE TO SHAREHOLDER PROPOSAL 7 75
   
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 76
   
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 77
   
SHAREHOLDERS’ PROPOSALS FOR THE 2016 ANNUAL GENERAL MEETING 78
   
OTHER BUSINESS 78
     
APPENDIX A-THE AMENDED AND RESTATED 2013 INCENTIVE AWARD PLAN OF ACTAVIS plc A-1
 
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ACTAVIS PLC

1 Grand Canal Square, Docklands

Dublin 2, Ireland

 

PROXY STATEMENT

 

General

 

Your proxy is solicited by the Board of Directors of Actavis plc (“Actavis,” the “Company,” “we,” “us” and “our”) for use at the 2015 Annual Meeting of Shareholders (the “Annual Meeting”) to be held at 1 Grand Canal Square, Docklands, Dublin 2, Ireland, at 8:30 a.m. local time on June 5, 2015 for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders.

 

In connection with the Annual Meeting, we have prepared a Notice of Annual Meeting of Shareholders, a Proxy Statement, and our 2014 Annual Report to Shareholders, which provides detailed information relating to our activities and operating performance. Under Securities and Exchange Commission (“SEC”) rules, we have elected to make our proxy materials available to the majority of our shareholders via the Internet rather than mailing paper copies of those materials to each shareholder. On or about April 24, 2015, we mailed a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) directing shareholders to a website where they can access this Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2014 and view instructions on how to vote via the Internet or by telephone. If you receive an Internet Notice by mail, you will not receive a printed copy of our proxy materials unless you specifically request one. If you received the Internet Notice only and would like to receive a paper copy of the proxy materials, please follow the instructions printed on the Internet Notice to request that a paper copy be mailed to you. We expect to mail this Proxy Statement, our 2014 Annual Report to Shareholders and related proxy materials to certain of our shareholders on or about April 24, 2015. We believe electronic delivery to the majority of our shareholders will expedite the receipt of materials, while lowering costs and reducing the environmental impact of our Annual Meeting by reducing printing and mailing of our proxy materials.

 

As disclosed in our public filings with the SEC, the Company became the successor registrant to Actavis, Inc. (f/k/a Watson Pharmaceuticals, Inc.) on October 1, 2013. References throughout to “we,” “our,” “us,” the “Company” or “Actavis” refer to financial information and transactions of Watson Pharmaceuticals, Inc. prior to January 23, 2013, Actavis, Inc. from January 23, 2013 until October 1, 2013 and Actavis plc subsequent to October 1, 2013. On July 1, 2014, the Company completed its acquisition of Forest Laboratories, Inc (“Forest” and such transaction, the “Forest Transaction”). On March 17, 2015, the Company completed its acquisition of Allergan, Inc. (“Allergan”).

 

Who Can Vote

 

Only shareholders of record of our ordinary shares at the close of business on April 10, 2015, the record date for the Annual Meeting, are entitled to receive notice of and to vote their shares at the Annual Meeting. As of that date, there were 392,769,263 ordinary shares outstanding. Most of our shareholders hold their shares through a broker, bank or other nominee rather than directly in their own name. Certain distinctions between shares held of record and those owned beneficially are summarized below:

 

Shareholder of Record. If your ordinary shares are registered directly in your name with our transfer agent, Computershare, you are considered the shareholder of record with respect to those shares and these proxy materials are being sent to you directly by the Company. As the shareholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the Annual Meeting.

 

Beneficial Owner. If your shares are held in a brokerage account or by another nominee, you are considered to be the beneficial owner of shares held in “street name,” and these proxy materials, together with a voting instruction card, are being forwarded to you by your broker, bank or other nominee. As the beneficial owner of the shares, you have the right to direct your broker, bank or other nominee how to vote and are also invited to attend the Annual Meeting. If you are a beneficial owner whose shares are held in street name, you are not the shareholder of record and you may not vote your shares in person at the Annual Meeting unless you obtain a legal proxy giving you the right to vote your shares at the Annual Meeting from the broker, bank or other nominee holding your shares in street name. If your shares are held in street name, your broker, bank or other nominee has enclosed or provided voting instructions for you to use in directing the broker, bank or other nominee how to vote your shares.

 

Each ordinary share is entitled to one vote on each matter properly brought before the Annual Meeting.

 

 

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How to Vote

 

Your vote is very important and we encourage you to vote your shares and to submit your proxy regardless of whether or not you plan to attend the Annual Meeting. If you properly give your proxy and submit it to us in time to vote, one of the individuals named as your proxy will vote your shares as you have directed.

 

Shareholders of Record

 

If you are a shareholder of record, you may vote in one of the following ways:

 

By Telephone or on the Internet. You may vote by calling the toll-free telephone number noted on your proxy card or Internet Notice. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern time on June 3, 2015. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. You also may choose to vote on the Internet. The website for Internet voting is noted on your proxy card or Internet Notice. Internet voting also is available 24 hours a day and will be accessible until 11:59 p.m. Eastern time on June 3, 2015. As with telephone voting, you may confirm that your instructions have been properly recorded. Shareholders who vote through the Internet or telephone should be aware that they may incur costs to access the Internet, such as usage charges from telephone companies or Internet service providers, and that these costs must be borne by the shareholder.

 

By Mail. If you received a paper copy of the proxy card by mail and choose to vote by mail, please mark your proxy card, date and sign it, and promptly return it in the postage-paid envelope provided.

 

In Person at the Annual Meeting. You may vote in person by attending the Annual Meeting and submitting a ballot.

 

 

Shares must be voted either in person, by telephone, on the Internet or by completing and returning a proxy card. Shares cannot be voted by marking, writing on and/or returning an Internet Notice. Any Internet Notice that is returned will not be counted as a vote.

 

If your proxy is properly completed, the shares it represents will be voted at the Annual Meeting as you instructed. If you submit your proxy, but do not provide instructions, your proxy will be voted in accordance with the Board’s recommendations as set forth in this Proxy Statement.

 

Beneficial Owners

 

If you are a beneficial owner of shares held in street name, then your broker, bank or other nominee will include instructions on how to vote your shares. Your broker, bank or nominee may allow you to deliver your voting instructions over the Internet and may also permit you to submit your voting instructions by telephone. In addition, you may request additional paper copies of the Proxy Statement and voting instruction form from your broker, bank or nominee by following the instructions on the proxy materials provided by your broker, bank or nominee. If you hold your shares in street name, you will need to obtain a legal proxy from your bank, broker or nominee in order for you to vote in person at the Annual Meeting and submit the legal proxy along with your ballot at the Annual Meeting.

 

Revoking Your Proxy

 

You have the right to revoke your proxy at any time before it is voted at the Annual Meeting by (1) filing a written notice with our Corporate Secretary, (2) delivering a new proxy bearing a later date, (3) granting a later proxy through telephone or Internet voting, or (4) attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not, by itself, revoke a proxy.

 

Any such notices and new proxies that are sent by mail should be sent to Actavis plc, Corporate Secretary, 1 Grand Canal Square, Docklands, Dublin 2, Ireland.

 

Persons who hold their shares through a bank, brokerage firm or other nominee, may change their voting instructions by following the requirements of their bank or broker, or may vote in person at the Annual Meeting by obtaining a legal proxy from their bank or broker and submitting the legal proxy along with their ballots.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON JUNE 5, 2015

 

The Notice of Annual Meeting, this Proxy Statement, the 2014 Annual Report to Shareholders and the 2014 Irish Statutory accounts are available at www.proxyvote.com.

 

You are encouraged to review all of the important information contained in the proxy materials before voting.

 

Solicitation of Proxies

 

We have retained the services of a proxy solicitation firm, MacKenzie Partners Inc. (“MacKenzie”), to solicit proxies for the Annual Meeting from our shareholders. We will bear the entire cost of our and MacKenzie’s solicitations, including the payment of fees of approximately $25,000 to MacKenzie for their services, and the cost of preparation, assembly, printing and mailing of this Proxy Statement, the Internet Notice, the proxy card and any additional information furnished to shareholders. In addition to the use of the mail, our directors, officers and employees may solicit proxies on our behalf by telephone, facsimile, electronic mail or personal solicitation. Our directors, officers and employees will receive no additional compensation for such services. We will reimburse brokers, custodians and nominees for the reasonable expenses they incur furnishing proxy solicitation and other required Annual Meeting materials to street-name holders who beneficially own those shares on the record date.

 

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Quorum and Voting

 

At the close of business on April 10, 2015, 392,769,263 ordinary shares were outstanding and entitled to vote at the Annual Meeting. Votes cast by proxy (including through the Internet or by telephone) or in person at the Annual Meeting will be tabulated by the election inspector appointed for the Annual Meeting who will determine whether or not a quorum is present. The presence, in person or by proxy, of the holders of a majority of our outstanding ordinary shares and entitled to vote at the Annual Meeting is necessary in order to constitute a quorum for the conduct of business at the Annual Meeting.

 

If your ordinary shares are held by a broker in street name, under the rules of the New York Stock Exchange (“NYSE”) your broker may vote your shares on certain matters if you do not provide your broker with voting instructions. Proposal No. 3, the ratification of the selection of our independent registered public accountants and the authorization of the Board of Directors, acting through the Audit and Compliance Committee, to determine its remuneration, is considered a routine matter upon which brokerage firms may vote on behalf of their clients even if no voting instructions are provided. A “broker non-vote” occurs when a broker holding your shares in street name does not vote on a particular matter because you did not provide the broker voting instructions and the broker lacks discretionary voting authority to vote the shares because the matter is non-routine.

 

The non-routine matters on the agenda for this year’s Annual Meeting are (i) the election of directors, (ii) an advisory vote to approve the compensation of our Named Executive Officers, (iii) the passing of a special resolution to approve of the change in name of the Company, (iv) the approval of the Amended and Restated 2013 Incentive Award Plan (the “Equity Plan Proposal”) and (v) the two shareholder proposals. Accordingly, with respect to the proposals other than Proposal No. 3 (ratification of the selection of our independent registered public accountants and authorization of the Board of Directors, acting through the Audit and Compliance Committee, to determine its remuneration), your broker will not be able to vote your shares without specific instructions from you.

 

If a proxy is received but marked “abstain” or if a broker non-vote occurs, those shares will be considered as present and entitled to vote for purposes of determining the presence of a quorum.

 

A properly submitted proxy (including through the Internet or by telephone) that is received before the polls are closed at the Annual Meeting and that is not revoked will be voted in the manner directed by the shareholder submitting the proxy. If no direction is made, such proxy will be voted:

 

FOR the election of Paul M. Bisaro, Nesli Basgoz, M.D., James H. Bloem, Christopher W. Bodine, Christopher J. Coughlin, Michael R. Gallagher, Catherine M. Klema, Peter J. McDonnell, M.D., Patrick J. O’Sullivan, Brenton L. Saunders, Ronald R. Taylor, and Fred G. Weiss as our directors;
   
FOR the approval, on a non-binding basis, of our Named Executive Officer compensation;
   
FOR the ratification, on a non-binding basis, of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015 and the authorization, on a binding basis, of the Board of Directors, acting through the Audit and Compliance Committee, to determine its remuneration;
   
FOR the approval as a special resolution, subject to the approval of the Registrar of Companies in Ireland, of a change in name of the Company from Actavis plc to Allergan plc;
   
FOR the approval of the Equity Plan Proposal;
   
AGAINST the shareholder proposal described in Proposal No. 6; and
   
AGAINST the shareholder proposal described in Proposal No. 7.

 

As of the date of this Proxy Statement, the Board of Directors knows of no other business that will be presented for consideration at the Annual Meeting. However, if other proper matters are presented at the Annual Meeting, or any continuations, adjournments or postponements of the Annual Meeting, it is the intention of the proxy holders named in our form of proxy to vote the proxies held by them in accordance with their best judgment.

 

The proxy for the Annual Meeting gives each of Brenton L. Saunders, Paul M. Bisaro and A. Robert D. Bailey discretionary authority to vote your shares in accordance with his best judgment with respect to all additional matters that might come before the Annual Meeting.

 

“Householding”

 

In an effort to reduce printing costs and postage fees, we have adopted a practice approved by the SEC called “householding.” Under this practice, non-registered shareholders who have the same address and last name will receive only one copy of the Internet Notice and, upon request, our proxy materials, unless one or more of these non-registered shareholders notifies us that he or she wishes to receive individual copies. If you share an address with another non-registered shareholder and prefer to receive separate copies of the Internet Notice, please mail your request to Actavis plc, Investor Relations, Morris Corporate Center III, 400 Interpace Parkway, Parsippany, NJ 07054, or call our investor relations department at 1-862-261-7488.

 

Information on Our Website

 

Information on our website, other than our Proxy Statement and form of proxy, or any other website referred to in this Proxy Statement, is not part of the proxy soliciting material and is not incorporated into this Proxy Statement by reference.

 

Assistance

 

If you need assistance in submitting your proxy or have questions regarding the Annual Meeting, please contact our investor relations department at 1-862- 261-7488 or investor.relations@actavis.com or write to: Investor Relations, Actavis plc, Morris Corporate Center III, 400 Interpace Parkway, Parsippany, NJ 07054.

 

 

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PRESENTATION OF IRISH STATUTORY ACCOUNTS

 

The Company’s Irish Statutory Accounts for the fiscal year ended December 31, 2014, including the reports of the directors and auditors thereon, will be presented at the Annual Meeting. There is no requirement under Irish law that such accounts be approved by shareholders, and no such approval will be sought at the Annual Meeting. The Company’s 2014 Irish Statutory Accounts are available with the Proxy Statement, the 2014 Annual Report to Shareholders and other proxy materials at www.proxyvote.com.

 

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PROPOSAL NO. 1   ELECTION OF DIRECTORS

 

Under the Company’s Articles of Association, the Board of Directors must consist of between five and fourteen directors, with the exact number determined by the Board of Directors. On February 5, 2015, the Board of Directors approved a reduction in the size of the Board of Directors from fourteen to twelve, which became effective on March 17, 2015 upon the closing of the Company’s acquisition of Allergan. In order to effectuate the reduction in the size of the Board of Directors, and to accommodate the appointment of two members of the Allergan board of directors to the Board of Directors (as discussed below), each of Tamar D. Howson, John A. King, Jiri Michal and Andrew L. Turner agreed to resign from the Board of Directors, effective upon the earlier of the closing of the Company’s acquisition of Allergan and the Annual Meeting.

 

Therefore, at the Annual Meeting, twelve directors are to be elected to serve until the 2015 Annual Meeting or until their successors are duly elected and qualified.

 

Based upon the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has nominated Paul M. Bisaro, Nesli Basgoz, M.D., James H. Bloem, Christopher W. Bodine, Christopher J. Coughlin, Michael R. Gallagher, Catherine M. Klema, Peter J. McDonnell, M.D., Patrick J. O’Sullivan, Brenton L. Saunders, Ronald R. Taylor, and Fred G. Weiss for reelection as directors to serve until the 2016 Annual Meeting or until their successors are duly elected and qualified.

 

Other than as set forth below, no director nominee was selected pursuant to an arrangement or understanding between such nominee and any other person.

 

In connection with the Forest Transaction, the board appointed Nesli Basgoz, M.D., Christopher J. Coughlin and Brenton L. Saunders to serve as members of the board until the 2015 annual meeting of Actavis shareholders or such director’s earlier resignation, removal or death. Dr. Basgoz and Messrs. Coughlin and Saunders were appointed pursuant to the terms of the merger agreement between the Company and Forest, which required the Company to take action necessary to cause Mr. Saunders and two other Forest directors to become members of the Actavis board immediately after the Forest Transaction. As an executive officer of Actavis, Mr. Saunders does not serve on any of the board’s committees.
   
Pursuant to the Allergan Merger Agreement, the Company was required to take such actions as would be necessary to cause two (2) individuals who were members of the board of directors of Allergan to become members of the Company Board of the Directors immediately after the closing of the merger between the Company and Allergan. Effective March 17, 2015, the Board of Directors appointed Michael R. Gallagher and Peter J. McDonnell, M.D., to the Board of Directors.

 

Information about each director nominee is set forth in the following paragraphs and is based on information provided to us as of March 30, 2015. The Board of Directors knows of no reason why any of the following nominees will be unavailable to serve, but in the event of any such unavailability, the proxies received will be voted for such substitute nominees as the Board of Directors may recommend, unless the number of directors constituting a full Board of Directors is reduced.

 

DIRECTOR NOMINEES FOR ELECTION AT THE ANNUAL MEETING:

 

Paul M. Bisaro

Director of Actavis, Inc. since 2007 and the Company since 2013

 

Mr. Bisaro, age 54, has served as Executive Chairman of our Board of Directors since July 2014. He previously served as our President and Chief Executive Officer and as chairman of our Board of Directors since October 2013; prior to being chairman he served on the Board of Directors of Actavis, Inc. since September 2007. Prior to joining Actavis, Mr. Bisaro was President, Chief Operating Officer and a member of the Board of Directors of Barr Pharmaceuticals, Inc., a global specialty pharmaceutical company (“Barr”), from 1999 to 2007. Between 1992 and 1999, Mr. Bisaro served as General Counsel of Barr, and from 1997 to 1999 served in various additional capacities including Senior Vice President — Strategic Business Development. Prior to joining Barr, he was associated with the law firm Winston & Strawn and a predecessor firm, Bishop, Cook, Purcell and Reynolds from 1989 to 1992. Mr. Bisaro also currently serves on the Boards of Visitors of the Catholic University of America’s Columbus School of Law and Zimmer Holdings, Inc. Mr. Bisaro holds an undergraduate degree in General Studies from the University of Michigan and a Juris Doctor from Catholic University of America in Washington, D.C. The Board concluded that Mr. Bisaro should serve on the Board because of his experience as a senior executive in our industry, his knowledge of our Company and its day-to-day operations and his strong strategic vision for the Company.

 

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Nesli Basgoz, M.D.

Director of the Company since 2014

 

Dr. Basgoz, age 57, joined the Board of Directors in July 2014. She previously served as a member of the Board of Directors of Forest Laboratories, Inc. since 2006. Dr. Basgoz is the Associate Chief for Clinical Affairs, Division of Infectious Diseases at Massachusetts General Hospital (MGH) and serves on the hospital’s Board of Trustees. In addition, Dr. Basgoz is an Associate Professor of Medicine at Harvard Medical School. Previously, she served as Clinical Director in the Infectious Diseases Division of MGH for six years. Dr. Basgoz earned her M.D. Degree and completed her residency in internal medicine at Northwestern University Medical School. She also completed a fellowship in the Infectious Diseases Division at the University of California at San Francisco. She is board certified in both infectious diseases and internal medicine. The Board concluded that Dr. Basgoz should serve on the Board because of her extensive experience in infectious diseases, one of our specialty areas.

 

James H. Bloem

Director of the Company since 2013

 

Mr. Bloem, age 64, joined the Board of Directors in October 2013. He previously served as a member of the Warner Chilcott plc (“Warner Chilcott”) Board of Directors since 2006 and was a member of the board of one of Warner Chilcott’s predecessor companies from 1996 to 2000. Mr. Bloem retired on December 31, 2013, after 13 years as Senior Vice President, Chief Financial Officer and Treasurer of Humana Inc. (“Humana”), one of the nation’s largest health benefit companies. He joined Humana in 2001 and had responsibility for all of the Humana’s accounting, actuarial, analytical, financial, tax, risk management, treasury and investor relations activities. Mr. Bloem also serves as Chairman of the Board of Directors of ResCare, Inc., as well as a director of Rotech Healthcare, Inc. The Board concluded that Mr. Bloem should serve on the Board because of his extensive experience in the healthcare industry, including as an executive officer of Humana, as well as his leadership skills and financial knowledge, which enable him to serve as a financial expert on our Audit and Compliance Committee.

 

Christopher W. Bodine

Director of Actavis, Inc. since 2009 and the Company since 2013

 

Mr. Bodine, age 59, served as a member of Actavis, Inc.’s Board of Directors since 2009 and joined our Board of Directors in October 2013. Mr. Bodine retired from CVS Caremark in January 2009 after 24 years with CVS. Prior to his retirement, Mr. Bodine served as President, Healthcare Services of CVS Caremark Corporation, where he was responsible for strategy, business development, trade relations, sales and account management, pharmacy merchandising, marketing, information technology and Minute Clinic. Prior to the merger of CVS Corporation and Caremark Rx, Inc. in March 2007, Mr. Bodine served for several years as Executive Vice President — Merchandising and Marketing of CVS Corporation. Mr. Bodine is active in the pharmaceutical industry, having served on a number of boards and committees, including the Healthcare Leadership Council, RI Quality Institute, National Retail Federation, National Association of Chain Drug Stores (NACDS), and the NACDS Pharmacy Affairs and Leadership Committees. Mr. Bodine also previously served as a director with Nash Finch. The Board concluded that Mr. Bodine should serve on the Board because of his extensive industry experience and knowledge of the needs and operations of our major customers.

 

Christopher J. Coughlin

Director of the Company since 2014

 

Mr. Coughlin, 62, joined the Board of Directors in July 2014. He previously served as a member of the Board of Directors of Forest Laboratories, Inc. since 2011. Since 2012, Mr. Coughlin has served as a senior advisor to McKinsey & Co. Mr. Coughlin served as an advisor to Tyco International from 2010 until September 30, 2012. He was Executive Vice President and Chief Financial Officer of Tyco International from 2005 to 2010. During his tenure, he played a central role in the separation of Tyco into five independent, public companies and provided financial leadership surrounding major transactions, including the $2 billion acquisition of Broadview Security, among many other responsibilities and accomplishments. Prior to joining Tyco, he worked as the Chief Operating Officer of the Interpublic Group of Companies from June 2003 to December 2004, as Chief Financial Officer from August 2003 to June 2004 and as a director from July 2003 to July 2004. Previously, Mr. Coughlin was Executive Vice President and Chief Financial Officer of Pharmacia Corporation from 1998 until its acquisition by Pfizer in 2003. Prior to that, he was Executive Vice President of Nabisco Holdings and President of Nabisco International. From 1981 to 1996 he held various positions, including Chief Financial Officer, at Sterling Drug. Mr. Coughlin is currently serving as the Chairman of the Board of Dun & Bradstreet, where he is a former member of the Audit Committee, chairs the Board Affairs Committee, and is a member of the Compensation and Benefits Committee. He also serves on the board of Alexion Pharmaceuticals where he is a member of the Audit Committee and the Pharmaceutical Compliance and Quality Committee. In addition, Mr. Coughlin previously served on the boards of Covidien, Dipexium, the Interpublic Group of Companies, Monsanto Company and Perrigo Company. Mr. Coughlin has a B.S. in accounting from Boston College. The Board concluded that Mr. Coughlin’s depth of experience in executive leadership roles within complex corporate organizations and his audit committee service on public company boards contributes critical risk oversight and management insight to our Board and therefore Mr. Coughlin should serve on the Board.

 

Michael R. Gallagher

Director of the Company since 2015

 

Mr. Gallagher, age 69, served on the Allergan, Inc. Board of Directors from 1998 until our acquisition of Allergan in March 2015, and served as its Lead Independent Director and Chair of the Organization and Compensation Committee. In 2004, Mr. Gallagher retired as Chief Executive Officer and as a Director of Playtex Products, Inc. Prior to joining Playtex in 1995, Mr. Gallagher was Chief Executive Officer of North America for Reckitt & Colman plc; President and Chief Executive Officer of Eastman Kodak’s subsidiary, L&F Products; President of the Lehn & Fink Consumer Products Division at Sterling Drug, General Manager of the Household Products Division of the Clorox Company, and Brand Manager of The Procter & Gamble Company. Mr. Gallagher is a member and past Chairman of the Board of Advisors of the Haas School of Business, University of California, Berkeley. The Board has concluded that, with more than three decades of experience in key leadership roles at public and private personal care and consumer products companies, including as the former Chief Executive Officer of Playtex Products, Mr. Gallagher provides our Board with a wealth of business and management experience, as well as invaluable broad-based personal care and consumer products experience and therefore should serve as one of our directors.

 

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Catherine M. Klema

Director of Actavis, Inc. since 2004 and the Company since 2013

 

Ms. Klema, age 56, served as a member of Actavis, Inc.’s Board of Directors since 2004 and joined our Board of Directors in October 2013. She is currently President of Nettleton Advisors LLC, a consulting firm established by Ms. Klema in 2001. Prior to establishing her firm, Ms. Klema served as Managing Director, Healthcare Investment Banking, at SG Cowen Securities from 1997 to 2001. Ms. Klema also served as Managing Director, Healthcare Investment Banking, at Furman Selz LLC from 1994 until 1997, and was employed by Lehman Brothers from 1987 until 1994. Ms. Klema served as a director of Pharmaceutical Product Development, Inc., a global contract research organization, from 2000 to 2011. In March 2012, Ms. Klema was appointed to the Montefiore Medical Center Board of Trustees. The Board concluded that Ms. Klema’s qualifications for service on our Board include her background in healthcare investment banking and her knowledge of the business of pharmaceutical research and development.

 

Peter J. McDonnell, M.D.

Director of the Company since 2015

 

Dr. McDonnell, age 57, served as a member of the Allergan, Inc. Board of Directors from 2013 until our acquisition of Allergan in March 2015, and served on its Corporate Governance and Compliance Committee and the Science and Technology Committee. Dr. McDonnell is the Director and William Holland Wilmer Professor of the Wilmer Eye Institute of the Johns Hopkins University School of Medicine since 2003. Dr. McDonnell also serves as the Chief Medical Editor of Ophthalmology Times since 2004, and has served on the editorial boards of numerous ophthalmology journals. Dr. McDonnell also served as the Assistant Chief of Service at the Wilmer Institute from 1987 to 1988. He served as a consultant to the United States Department of Health and Human Services in 1996. Dr. McDonnell served as a full-time faculty at the University of Southern California from 1988 until 1999, where he advanced to the rank of professor in 1994. The Board has concluded that Dr. McDonnell should serve as one of our directors because he provides our Board with wide-ranging expertise in ophthalmology and is widely recognized as an international leader in corneal transplantation, laser refractive surgery and the treatment of dry eye.

 

Patrick J. O’Sullivan

Director of the Company since 2013

 

Mr. O’Sullivan, age 73, previously served as a member of Warner Chilcott’s Board of Directors since 2009 and joined our Board of Directors in October 2013. Prior to his retirement in 2006, Mr. O’Sullivan served in positions of increasing responsibility with LEO Pharma A/S (“LEO”) for more than 30 years, most recently as the Chief Executive Officer of LEO Pharma Ireland and as a director of LEO. He also served as a director of LEO Pharmaceuticals Ltd. UK, LEO Pharma SA France and The LEO Foundation. Mr. O’Sullivan is a registered pharmacist, a member and honorary fellow of the Pharmaceutical Society of Ireland and a Knight of the Order of the Dannebrog. Currently, Mr. O’Sullivan is a pharmaceutical business consultant and serves on the Board of Directors of Amarin Corporation plc, where he is a member of the audit committee, nominating committee and corporate governance committee. The Board concluded that Mr. O’Sullivan should serve on the Board because of his demonstrated management ability at senior levels within the pharmaceutical industry, his knowledge of the financial, operational and strategic requirements of a successful international business, which he developed as Chief Executive Officer of LEO Pharma Ireland, and his understanding of the fundamentals of the healthcare industry.

 

Brenton L. Saunders

Director of the Company since 2014

 

Mr. Saunders, 45, has served as a member of our Board and as President and Chief Executive Officer since July 2014. He was previously President and Chief Executive Officer of Forest Laboratories, Inc. since October 2013 and a member of the board of directors of Forest since 2011. Mr. Saunders served as Chief Executive Officer and as a board member of Bausch + Lomb Incorporated from March 2010 until August 2013, and as a senior executive with Schering-Plough from 2003 to 2010, most recently as President of Global Consumer Health Care. He also served as Head of Integration for both Schering-Plough’s merger with Merck & Co. and for Schering-Plough’s $16 billion acquisition of Organon BioSciences. Before joining Schering-Plough, Mr. Saunders was a Partner and Head of the Compliance Business Advisory Group at PricewaterhouseCoopers LLP from 2000 to 2003. Prior to that, he was Chief Risk Officer at Coventry Health Care between 1998 and 1999 and a co-founder of the Health Care Compliance Association in 1995. Mr. Saunders began his career as Chief Compliance Officer for the Thomas Jefferson University Health System. In addition to the Bausch + Lomb board, he served on the board of ElectroCore LLC. He is also the former Chairman of the New York chapter of the American Heart Association. He currently is on the board of the Overlook Hospital Foundation and is also a member of the Board of Trustees of the University of Pittsburgh, The Business Council and PhRMA. He received a B.A. from the University of Pittsburgh, an M.B.A. from Temple University School of Business, and a J.D. from Temple University School of Law. The Board concluded that, based on Mr. Saunders’ leadership experience as CEO of two global healthcare companies and deep pharmaceutical experience, Mr. Saunders provides deep management and operational experience, as well as invaluable senior compliance experience and broad regulatory expertise, and therefore should serve as one of our directors.

 

Ronald R. Taylor

Director of Actavis, Inc. since 1994 and the Company since 2013

 

Mr. Taylor, age 67, served as a member of the Actavis, Inc. Board of Directors since 1994 and joined our Board of Directors in October 2013. Mr. Taylor is the President of Tamarack Bay, LLC, a private consulting firm. He has been a director of ResMed Inc., a medical device manufacturer, since 2005. Prior to forming Tamarack Bay, Mr. Taylor was a general partner of Enterprise Partners Venture Capital, a venture capital firm, from 1998 until 2001. The Board concluded that Mr. Taylor should serve on the Board because of his experience as a founder of a successful business and his expertise in evaluating and investing in healthcare companies.

 

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Fred G. Weiss

Director of Actavis, Inc. since 2000 and the Company since 2013

 

Mr. Weiss, age 73, served as a member of Actavis, Inc.’s Board of Directors since 2000 and joined our Board of Directors in October 2013. Mr. Weiss is currently the managing director of the consulting firm FGW Consultancy LLC and was previously the managing director of FGW Associates, Inc., a position he held since 1997. Prior to that he served as an executive for Warner-Lambert for nearly 20 years, most recently as Vice President, Planning, Investment and Development. Mr. Weiss is also an Independent Vice-Chairman of the Board and Chairman of the Audit Committee of numerous BlackRock-sponsored mutual funds. In this capacity, and pursuant to BlackRock’s policies, Mr. Weiss has oversight responsibility for finance and accounting matters, and has no responsibility for, or discretion concerning, any of BlackRock’s equity investment decisions. Additionally, Mr. Weiss has been a Director of the Michael J. Fox Foundation for Parkinson’s Research since 2000 and serves as the Chair of the Finance Committee. The Board concluded that Mr. Weiss is qualified to serve as a member of our Board of Directors because of, among other factors, his financial expertise and experience in strategic planning and corporate development.

 

The Board of Directors knows of no reason why any of the foregoing nominees will be unavailable to serve, but in the event of any such unavailability, the proxies received will be voted for such substitute nominees as the Board of Directors may recommend.

 

REQUIRED VOTE

 

Persons nominated to serve on our Board of Directors in an uncontested election must receive a greater number of votes cast “FOR” than votes cast “AGAINST” in order to be elected, or re-elected, to the Board of Directors. Accordingly, abstentions will not affect the outcome of the election of directors. Proxies cannot be voted for a greater number of persons or different persons than the nominees named.

 

Please note that if your broker holds your ordinary shares in “street name,” your broker will not vote your shares on the election of directors, and broker non-votes will result, unless you provide your voting instructions to your broker. Broker non-votes will not affect the outcome of the election of directors.

 

The Board of Directors unanimously recommends a vote FOR the election of Paul M. Bisaro, Nesli Basgoz, M.D., James H. Bloem, Christopher W. Bodine, Christopher J. Coughlin, Michael R. Gallagher, Catherine M. Klema, Peter J. McDonnell, M.D., Patrick J. O’Sullivan, Brenton L. Saunders, Ronald R. Taylor, and Fred G. Weiss.

 

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Corporate Governance

 

CORPORATE GOVERNANCE GUIDELINES AND CODE OF CONDUCT

 

Our Board of Directors has adopted Corporate Governance Guidelines. These guidelines address the make-up and functioning of the Board of Directors and its committees, which include determining director independence, criteria for Board membership, and authority to retain independent advisors.

 

Our Board of Directors has also adopted a Code of Conduct (the “Code”), which applies to all of our Board members and all of our officers and employees. The Code sets forth and summarizes certain of our policies related to legal compliance and honest and ethical business practices. The Code is intended to comply with the standards set forth in Section 303A.10 of the NYSE’s Listed Company Manual and SEC rules and regulations. Any amendments to, or waivers from, provisions of the Code that apply to our directors or executive officers, including our Chief Executive Officer (“CEO”) and Chief Financial Officer and persons performing similar functions, will be promptly posted on our website at http://www.Actavis.com.

 

You can find links to our Corporate Governance Guidelines and our Code of Conduct under the “Investors — Corporate Governance” section of our website at http://www.Actavis.com. Copies of these materials are available to shareholders without charge upon request sent to Investor Relations at Actavis plc, Morris Corporate Center III, 400 Interpace Parkway, Parsippany, NJ 07054.

 

DIRECTOR INDEPENDENCE

 

On an annual basis our Board of Directors reviews the independence of all directors and affirmatively makes a determination as to the independence of each director. For a director to be considered independent, the Board must determine that the director does not have any direct or indirect material relationship with Actavis. To assist in making this determination, the Board has adopted Director Independence Standards, which are designed to conform to, or be more exacting than, the independence requirements set forth in the listing standards of the NYSE. You may find these standards at Exhibit A of our Corporate Governance Guidelines discussed above, which may be found under the “Investors — “Corporate Governance” section of our website at www.Actavis.com. In addition to applying these Director Independence Standards, the Board considers any and all additional relevant facts and circumstances in making an independence determination.

 

Our Board has determined that at least a majority of its directors has no direct or indirect material relationship with us (other than as our director) and such directors are independent within the meaning of the independence standards promulgated by the SEC and the NYSE. The Board determined, based on our Director Independence Standards and the NYSE standards for independence, that Nesli Basgoz, M.D., James H. Bloem, Christopher W. Bodine, Christopher J. Coughlin, Catherine M. Klema, Patrick J. O’Sullivan, Ronald R. Taylor and Fred G. Weiss, have no material relationship with us and are independent directors. Messrs. Bisaro and Saunders were determined to be not independent because they are our Executive Chairman and Chief Executive Officer and President, respectively. As discussed above, pursuant to the Allergan Merger Agreement, the Company agreed to appoint two directors of Allergan to the Board of Directors and the Board of Directors has nominated Michael R. Gallagher and Peter J. McDonnell, M.D. to serve on the Board of Directors. In connection with the appointment of Mr. Gallagher and Dr. McDonnell, the Board determined, based on our Director Independence Standards and the NYSE standards for independence, that neither Mr. Gallagher nor Dr. McDonnell has a material relationship with us and each is an independent director.

 

In making its independence determinations, the Board reviewed transactions and relationships between each director, or any member of his or her immediate family, and us or one of our subsidiaries or affiliates based on information provided by the director, our records and publicly available information. Each of the reviewed transactions and arrangements were entered into in the ordinary course of business and none of the business transactions, donations or grants involved an amount that exceeded the greater of $1 million or 2% of either company’s revenues with respect to transactions where a director served as an employee or general partner of the entity party to the transaction or any member of his or her immediate family or spouse served as an executive officer or general partner of any such entity.

 

In making its independence determinations, the Board considered the fact that many of our independent directors currently serve or have previously served within the last three years as a professor, trustee, director, or member of a board, council or committee for one or more charitable organizations (including research or scientific institutions), hospitals, for profit corporations or any other entity with which Actavis has business transactions or to which Actavis may make grants. These business transactions may include, among other things, purchases of services and supplies, licensing transactions, healthcare sponsorships and programs, research and development and clinical trials, activities, and limited consulting services.

 

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None of our non-employee directors directly or indirectly provides any professional or consulting services to us and none of our directors currently has or has had any direct or indirect material interest in any of the above transactions and arrangements.

 

The Board has determined that these transactions were made in the ordinary course and did not affect the independence of the directors involved.

 

RISK OVERSIGHT

 

Risk is inherent in every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including economic risks, financial risks, legal and regulatory risks, and others, such as the impact of competition and reputational risks. Management is responsible for the day-to-day management of the risks that we face, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board is responsible for satisfying itself that the risk management processes designed and implemented by management are adequate and functioning as designed.

 

While the Board is ultimately responsible for risk oversight at Actavis, various committees of the Board are actively involved in the oversight of risks facing us.

 

A committee of the Board receives regular reports from members of senior management on areas of material risk to the Company. When a committee receives the report, the Chairman of the relevant committee reports on the discussion to the full Board during the next Board meeting. This enables the Board and its committees to coordinate their oversight of risk and identify risk interrelationships. Pursuant to its charter, the Audit and Compliance Committee is responsible for discussing with management the Company’s major areas of financial risk exposure, and reviewing the Company’s risk assessment and risk management policies. As discussed in more detail in the Assessment of Compensation Risk section of this Proxy Statement, the Compensation Committee reviews our compensation programs to ensure that these programs do not lead to excessive risk-taking by our employees. The Board does not believe that its role in the oversight of the Company’s risk affects the Board’s leadership structure.

 

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Board of Directors and Committees

 

EXECUTIVE SESSIONS

 

We schedule regular executive sessions in which non-management directors meet without management participation. During 2014, Mr. Turner was our lead independent director until May 2014, after which the Board designated Ms. Klema to serve as our lead independent director. We also schedule regular executive sessions in which only independent directors meet.

 

COMMUNICATIONS WITH THE BOARD OF DIRECTORS

 

Any interested party, including any shareholder, wishing to contact the Board of Directors, the presiding director of the non-management director meetings, or any other individual director may do so in writing by sending a letter to:

 

Chairman, Nominating and Corporate Governance Committee

c/o Corporate Secretary

Actavis plc

1 Grand Canal Square, Docklands

Dublin 2, Ireland

 

Our Corporate Secretary reviews all such written correspondence and regularly forwards to the Board of Directors a summary of all correspondence and copies of correspondence that, in the opinion of the Corporate Secretary, deal with the functions of the Board of Directors or its committees, or that the Corporate Secretary otherwise determines requires Board attention.

 

LEADERSHIP STRUCTURE

 

Our Board currently has no policy as to whether the roles of Chairman of the Board and Chief Executive Officer should be filled by separate individuals.

 

Immediately following the closing of the Forest Transaction, on July 1, 2014, Paul M. Bisaro (formerly the Chairman and Chief Executive Officer of the Company) became the Executive Chairman, and Brenton L. Saunders (formerly the Chief Executive Officer and President of Forest) became Chief Executive Officer, President, and a member of the Board of Directors of the Company. Our Board has determined this leadership structure to be appropriate for the Company at this time, as Mr. Bisaro possesses deep knowledge of the Company, its management and operations, and has extensive experience with integrating complex pharmaceutical enterprises. Separating the roles of Executive Chairman and Chief Executive Officer enables the Board to aid in the oversight of management. Additionally, the separation of roles ensures that Mr. Saunders is able to focus on the ongoing operations of the Company, strategic mergers and acquisitions and driving the integration of our business in light of recent significant acquisitions. Additionally, the Board believes having a lead independent director provides a well functioning and effective balance between strong Company leadership and appropriate safeguards and oversight by independent directors.

 

DIRECTOR NOMINATION PROCESS

 

The Nominating and Corporate Governance Committee considers director candidates from diverse sources, including suggestions from shareholders. From time to time, the Nominating and Corporate Governance Committee may engage a third party for a fee to assist in identifying potential director candidates. The Nominating and Corporate Governance Committee looks for candidates who represent a diverse mix of backgrounds and experiences that will enhance the quality of the board’s deliberations and decisions. The backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. Specifically, this committee seeks candidates who (a) bring not only direct experience, but also a variety of experience and background, both professionally and personally, (b) will represent the best interests of the shareholders as a whole rather than special interest groups or particular constituencies, (c) have a reputation for integrity and (d) satisfy the independence requirements of the NYSE, our Director Independence Standards and applicable law. The Nominating and Corporate Governance Committee’s goal is to have a diverse, balanced and engaged board whose members possess the skills and background necessary to maximize shareholder value in a manner consistent

 

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with all legal requirements and the highest ethical standards. Our Corporate Governance Guidelines specify that the value of diversity on the Board should be considered by the Nominating and Corporate Governance Committee in the director identification and nomination process. This committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The Nominating and Corporate Governance Committee’s Charter and our Corporate Governance Guidelines, which are published on our website at http://www.Actavis.com under the Investors section, set forth in further detail the criteria that guide this committee in assessing potential candidates for the Board of Directors.

 

In determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee considers the director’s contributions to the Board and the committees on which such person serves, participation in and attendance at meetings, and any changes in employment status, health, community activity or other factors that may affect the director’s continuing contributions to the Board. The Nominating and Corporate Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending a group of candidates that can best ensure the long-term success of the business and represent shareholder interests through the exercise of sound judgment using its depth and diversity of experience.

 

The Nominating and Corporate Governance Committee initially evaluates a candidate for nomination to the Board based on information supplied by the party recommending the candidate and any additional public information that may be available. If the initial evaluation is favorable, the Nominating and Corporate Governance Committee gathers additional information on the candidate’s qualifications, availability, probable level of interest and any potential conflicts of interest. If the subsequent evaluation is also favorable, the Nominating and Corporate Governance Committee contacts the candidate directly to better determine each party’s level of interest in pursuing the candidacy and checks the candidate’s references. If, after discussions and meetings, the candidate and the Nominating and Corporate Governance Committee establish a mutual interest in pursuing the candidacy, the committee will make a final recommendation to the Board to nominate the candidate for election by the shareholders (or to select the candidate to fill a vacancy, as applicable). The Nominating and Corporate Governance Committee employs the same process for evaluating all candidates, including those properly recommended by shareholders and will consider shareholder recommendations of candidates on the same basis as it considers all other candidates.

 

Shareholders wishing to recommend a director candidate for consideration by the Nominating and Corporate Governance Committee may do so by sending the candidate’s name, biographical information and qualifications, together with a consent in writing signed by the recommended nominee that he or she is willing to be considered as a nominee and, if nominated and elected, he or she will serve as a director, to the Chair of the Nominating and Corporate Governance Committee in care of the Corporate Secretary, Actavis plc, 1 Grand Canal Square, Docklands, Dublin 2, Ireland. The submission of a recommendation by a shareholder in compliance with these procedures does not guarantee the selection of the shareholder’s candidate or the inclusion of the candidate in our Proxy Statement. However, the Nominating and Corporate Governance Committee will consider any such candidate in accordance with the procedures and guidelines as described above and as set forth in the Charter of our Nominating and Corporate Governance Committee and in our Corporate Governance Guidelines.

 

BOARD MEETINGS

 

During the fiscal year ended December 31, 2014, the Board of Directors of Actavis plc held 17 meetings. Each incumbent director attended at least 75 percent of the combined total of (i) all Board of Directors and (ii) all meetings of committees of which the director was a member. We do not have a policy with regard to board members’ attendance at annual meetings. All members of the Board then in office attended our 2014 Annual Meeting of Shareholders.

 

COMMITTEES

 

The Board of Directors has created four standing committees: the Audit and Compliance Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Operations and Innovation Committee. The Board of Directors has adopted a charter for each of the four committees. The charters for each committee and other materials related to corporate governance are available under the Investors section of our website at http://www.Actavis.com. A copy is also available to shareholders upon request sent to Investor Relations at Actavis plc, Morris Corporate Center III, 400 Interpace Parkway, Parsippany, NJ 07054.

 

THE AUDIT AND COMPLIANCE COMMITTEE

 

We have an Audit and Compliance Committee currently composed of Catherine Klema, James H. Bloem, Patrick J. O’Sullivan and Fred G. Weiss.

 

Mr. Weiss serves as the Chairman of the Audit and Compliance Committee. All of the members of the Audit and Compliance Committee have been determined by the Board of Directors to

 

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be “independent” and meet the audit committee independence requirements of the NYSE listing standards and SEC Rule 10A-3. The Board of Directors has determined that three of the current members of the Audit and Compliance Committee qualify as “audit committee financial experts” within the meaning of the SEC rules, and are financially literate as required under the NYSE listing standards. The functions of the Audit and Compliance Committee and its activities during fiscal 2014 are described below under the heading “Report of the Audit and Compliance Committee.”

 

The Audit and Compliance Committee is directly responsible for the engagement, compensation and oversight of the work of PricewaterhouseCoopers LLP (including resolution of disagreements, if any, between management and PricewaterhouseCoopers LLP regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. During the fiscal year ended December 31, 2014, the Audit and Compliance Committee of Actavis plc met 8 times.

 

THE COMPENSATION COMMITTEE

 

We have a Compensation Committee currently composed of Christopher W. Bodine, Christopher J. Coughlin and Ronald R. Taylor. Messrs. Bodine and Taylor and Tamar D. Howson served on the Compensation Committee throughout fiscal year 2014 and Mr. Coughlin was appointed to the Compensation Committee in July 2014. Effective March 17, 2015, Ms. Howson resigned from the Board and its committees.

 

Mr. Taylor serves as the Chairman of the Compensation Committee. All of the members of the Compensation Committee have been determined by the Board of Directors to be “independent” and meet the independence requirements of the NYSE listing standards. Our Board has determined that all current Compensation Committee members qualify as “non-employee directors” within the meaning of Section 16 of the Exchange Act and as “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code. The primary purpose of the Compensation Committee is to: (1) evaluate the performance and determine the compensation of our chief executive officer and Executive Chairman; (2) review and determine the compensation payable to our executive officers; (3) oversee and administer our equity compensation and other incentive compensation plans; (4) oversee the use of senior executive employment agreements and severance plans; (5) review compensation programs and policies for features that may encourage excessive risk taking, and determine the extent to which there may be a connection between compensation and risk; and (6) review and approve the Compensation Discussion and Analysis to be included in the Proxy Statement for our annual meetings.

 

The Compensation Committee engaged Frederic W. Cook & Co., Inc. (“F.W. Cook”), an independent compensation consulting firm, to advise the Compensation Committee during 2014. F.W. Cook reported directly to the Compensation Committee and the Compensation Committee retains the right to terminate or replace the consultant at any time. F.W. Cook provides no services to the Company or management. Additional information about the Compensation Committee’s processes and procedures for consideration of executive compensation, including the role of our chief executive officer, are addressed in the Compensation Discussion and Analysis beginning on page 20. The Compensation Committee of Actavis plc met 6 times during the fiscal year ended December 31, 2014.

 

Each year the Compensation Committee reviews the independence of its compensation consultant and other advisors. In performing its analysis, the Compensation Committee considers the factors set forth in SEC rules and NYSE listing standards. After review and consultation with F.W. Cook, the Compensation Committee has determined that F.W. Cook is independent and there are no conflicts of interest raised by the work of F.W. Cook currently nor were any conflicts of interest raised by the work performed during the year ended December 31, 2014.

 

ASSESSMENT OF COMPENSATION RISK

 

The Compensation Committee, with the assistance of senior management and our independent compensation consultant, generally reviews the elements of our executive compensation programs to determine whether they encourage excessive risk taking. Among other things, it considers the following:

 

A significant portion of executives’ compensation is tied to the achievement of longer-term operational goals and sustained stock price performance, which is intended to encourage a long-term perspective and discourage short-term risk taking.
   
Goals are appropriately set to be sufficiently challenging but also reasonably achievable with strong performance.
   
The design of our short- and long-term incentives avoids steep payout cliffs at certain performance levels that may encourage short-term business decisions to meet payout thresholds.
   
To reduce the tendency of formulae and other objective financial performance measures to encourage short-term or excessive risk-taking, compensation decisions are not based solely on the Company’s financial performance, but also on subjective considerations, which account for non-financial performance and judgment.
   
The Company has stock ownership guidelines to further align the interests of our executives with shareholders, as well as clawback policies that require the recoupment of incentive compensation paid based on inaccurate financial statements.

 

Based on the above, management has determined that risks arising from these policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company.

 

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THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

 

We have a Nominating and Corporate Governance Committee currently composed of Christopher W. Bodine, James H. Bloem, Christopher J. Coughlin, Catherine M. Klema, Ronald R. Taylor and Fred G. Weiss. With the exception of Messrs. Coughlin and Bloem, each member of the Nominating and Corporate Governance Committee served as such throughout fiscal year 2014. Mr. Bodine serves as the Chairperson of the Nominating and Corporate Governance Committee. All of the members of the Nominating and Corporate Governance Committee have been determined by the Board of Directors to be “independent” and meet the independence requirements of the NYSE listing standards. The key functions of the Nominating and Corporate Governance Committee are to identify and present qualified candidates to the Board of Directors for election or re-election as directors of the Company, ensure that the size and composition of the Board of Directors and its committees best serve our practices and objectives, develop and recommend to the Board of Directors a set of corporate governance guidelines and principles and periodically review and recommend changes to such guidelines and principles as deemed appropriate, oversee the evaluation of the Board of Directors and senior management, make recommendations to the board of directors regarding the compensation payable to members of the Board of Directors and make recommendations to the Board regarding governance matters, including our Amended and Restated Memorandum and Articles of Association. The Nominating and Corporate Governance Committee of Actavis plc met 5 times during the fiscal year ended December 31, 2014.

 

THE OPERATIONS AND INNOVATION COMMITTEE

 

We have an Operations and Innovation Committee currently composed of Nesli Basgoz, M.D. and Patrick J. O’Sullivan. Ms. Howson, Dr. King and Messrs. Michal, O’Sullivan and Turner served on the committee throughout fiscal year 2014. Dr. Basgoz was appointed to the Operations and Innovation Committee in July 2014. As discussed above, effective March 17, 2015, Ms. Howson, Dr. King and Messrs. Michal and Turner resigned from our Board. The Operations and Innovation Committee assists the Board of Directors with the Board’s oversight responsibilities regarding our compliance with applicable legal and regulatory requirements related to product safety and quality and environmental, health and safety matters. Mr. Michal served as the Chairman of the Operations and Innovation Committee during the fiscal year 2014. The Operations and Innovation Committee met 3 times during the fiscal year ended December 31, 2014.

 

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Compensation Discussion and Analysis

 

In this section, we discuss and analyze the material elements of compensation paid to each of our Named Executive Officers (or “NEOs”) in 2014.

 

Currently Employed Named Executive Officers

 

Brenton L. Saunders President and Chief Executive Officer
Paul M. Bisaro Former Chief Executive Officer; Current Executive Chairman
Maria Teresa Hilado Executive Vice President and Chief Financial Officer 
Robert A. Stewart Executive Vice President and Chief Operating Officer
David A. Buchen Executive Vice President, North American Generics and International
William Meury Executive Vice President, North American Brands

 

Former Named Executive Officers

 

R. Todd Joyce* Former Chief Financial Officer
Sigurdur Olafsson** Former President – Actavis Pharma

* Mr. Joyce retired from the Company on January 9, 2015. Details of his departure can be found on pg. 47.
** Mr. Olafsson left the Company on June 30, 2014. Details of his departure can be found on pg. 47.

 

The Executive Summary that follows provides an overview of our performance and its relationship with our compensation decisions and practices. Following the Executive Summary, we will review each element of compensation. This Compensation Discussion and Analysis should be read together with the information in the Summary Compensation Table and other executive compensation tables below.

 

EXECUTIVE SUMMARY

 

In 2014, we continued the dynamic transformation of our company, highlighted by our ability to drive and achieve strong growth and sustainable value creation across our businesses, while simultaneously executing business development initiatives that will propel our Company to create a new model in the industry – Growth Pharma.

 

COMPANY PERFORMANCE HIGHLIGHTS FOR 2014

 

Top Line / Bottom Line Results:

 

 

*Adjusted EBITDA is a metric used in our 162(m) plan, as discussed under “Annual Incentive Awards” below.

 

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Commercial Segment Performance:
     
North American Brands:
     
  Net revenue increased 336% compared to 2013 (driven primarily due to the results from the Forest Laboratories, Inc. and Warner Chilcott plc acquisitions, which did not account for any sales in 2013).
     
North American Generics & International
     
  Net revenue for the segment increased 5% compared to 2013
     
  Further strengthened U.S. Generics market position -- $4.0 billion in sales
     
Anda
     
  Delivered most successful year in its history with net revenues increasing 41% versus 2013.
Key Research & Development Achievements:
     
Brands
     
  FDA approval of Namzaric; positive Ad Comm for Avycaz; submitted NDA filings for Cariprazine, Eluxadoline and Liletta; submitted sNDA filings for Saphris® and Teflaro®; received positive CHMP opinion for Xydalba
     
Generics
     
  Filed 44 ANDAs; 220+ ANDAs pending; industry-leading 65+ first to files; more than 1,200 MAAs outside US.
Business Development:
     
Announced $66 billion acquisition of Allergan, Inc., which closed on March 17, 2015.
     
Closed $28 billion acquisition of Forest Laboratories, which significantly expanded our branded pharmaceutical business.
     
Entered into other significant transactions including (1) the acquisitions of Silom Medical Company, Furiex Pharmaceuticals and Durata Therapeutics; and (2) the exclusive option to acquire Rhythm Health, Inc.

 

SHARE PERFORMANCE

 

The information in the graph below pertaining to our performance relative to the S&P 500 Index and the NYSE ARCA DRG Index is being furnished but not filed with the SEC, and as such, the information is neither subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934.

 

The following chart compares the five-year cumulative total returns of holders of Actavis’ ordinary shares (formerly Class A common shares of Actavis, Inc.) with the cumulative total returns of the S&P 500 index and the NYSE ARCA DRG Index. The chart tracks the performance of a $100 investment in our ordinary shares and in each of the comparator groups (with reinvestment of all dividends, if any) for the applicable time frames.

 

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS*

Among Actavis plc, the S&P 500 Index and the NYSE ARCA DRG Index

 

 

*$100 invested on 12/31/09 in stock or index, including reinvestment of dividends. Fiscal year ending December 31, 2014.

 

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OUR NEW EXECUTIVE COMPENSATION FRAMEWORK

 

In connection with our transformational merger with Forest Laboratories, we adopted a new executive compensation framework focused on the following key objectives (the objectives of our broader executive compensation framework are described below):

 

Creating unambiguous long-term shareholder alignment by linking a substantial portion of executives’ pay to share price appreciation;
   
Delivering sustainable top- and bottom-line growth;
   
Over-achieving our merger commitments;
   
Creating a unified management team aligned to a shared set of objectives; and
   
Retaining key executive talent.

 

Component   Key change   Purpose
Pay Mix (see page 24 for additional details)   Reduced base salaries for CEO (by 23%) and other senior executives (by 5%). Ensure substantial portion of compensation is performance-based and tied to financial and share price performance.
New Performance Share Unit (PSU) Program (see page 29 for additional details)   New performance share unit (PSU) program with payouts dependent solely upon the achievement of certain share price compound annual growth rate targets during the period from July 1, 2014 through September 1, 2017. Additional service-based vesting feature provides for final payouts in 2019. Create unambiguous long-term shareholder alignment and enhanced retention of key executives.
Stock Options (see page 30 for additional details)   Stock option grants with a longer vesting horizon (20% per year over five years) replace time-vested restricted stock units. Create additional alignment between pay and long-term share price performance.
Front-Loading of Equity Grants (see page 28 for additional details)   Front-loaded three years’ of equity grants  for our executives. Create strong focus on sustained growth and immediate shareholder alignment by emphasizing performance in critical first years immediately following the Forest Merger.
Merger Success Awards (see page 30 for additional details)  

Special cash-based long-term incentive award with a performance period from July 1, 2014 through December 31, 2017.

  Fifty percent of the award is earned based on the achievement of synergy savings related to the Forest Merger.

 

  Fifty percent of the award is earned based on the achievement of above median shareholder returns relative to our peers.

Focus executives on delivering on our Forest Merger commitments while maintaining industry leading shareholder returns.

 

Create enhanced retention of executives during the critical integration process.

 

 

OBJECTIVES OF BROADER EXECUTIVE COMPENSATION FRAMEWORK

 

Our compensation programs for our executives are designed to achieve the following objectives:

 

Attract and retain top contributors to ensure that we have high caliber executives;
   
Create and maintain a performance-driven organization by providing upside compensation opportunity for outstanding performance and downside compensation risk in the event of performance below expectations;
   
Align the interests of our executives and shareholders by motivating executives to increase shareholder value along with the achievement of other key corporate goals and objectives and rewarding executives when shareholder value increases;
   
Encourage teamwork and cooperation while recognizing individual contributions by linking variable compensation to Company and individual performance based on position, responsibilities and ability to influence financial and organizational results;
   
Provide flexibility and allow for Compensation Committee judgment in applying our compensation principles in order to appropriately reflect individual circumstances as well as changing business conditions and priorities;
   
Motivate our executives to manage our business to meet and appropriately balance our short- and long-term objectives, and reward them for meeting these objectives; and
   
Reinforce our entrepreneurial culture.

 

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KEY GOVERNANCE FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAMS

 

At-risk compensation and pay for performance. As illustrated by the charts on page 24, we link a significant portion of each Named Executive Officer’s total compensation to the achievement of specific, rigorous performance goals. We consider such portion of each executive’s compensation to be “at-risk.”

 

Appropriate choice and use of peer groups. We have thoughtfully selected a peer group of companies with similar market capitalization or scope of operations to us to review relevant market competitiveness data and to ensure our Named Executive Officers’ compensation remains competitive. We set executive total compensation at levels the Compensation Committee believes are appropriate relative to the total compensation paid to similarly situated executives of our peer companies, giving consideration to market and other factors as well as relative company performance.

 

Equity compensation best practices. Our equity plans prohibit option re-pricing or replacement of underwater options. Our equity incentives generally vest over a period of three to five years to ensure that our executives maintain a long-term view of shareholder value creation and to encourage retention.

 

No supplemental retirement plans. We do not maintain any supplemental retirement plans.

 

Caps on incentive awards. Our annual cash incentive awards and payouts under all of our equity- and cash-based long-term incentive awards are capped.

 

Limited gross-ups. Mr. Joyce’s employment agreement, which was entered into prior to 2010, was our only NEO employment agreement which provides for a gross-up of excise taxes in connection with a change in control.

 

Limited perquisites and personal benefits. We provide our NEOs with only limited perquisites and personal benefits in addition to the regular benefits offered to all employees. We believe that each of these perquisites has an important business purpose, as explained below.

 

No single-trigger change in control benefits. Our change in control arrangements, which include payment of cash severance benefits under the NEOs’ employment agreements or our change in control severance pay plan, as applicable, and accelerated vesting of long-term incentive awards, are “double-trigger” in that they are payable only if an NEO’s employment is terminated following a change of control.

 

Independent Compensation Committee consultant. F.W. Cook, the Compensation Committee’s compensation consultant, reports directly to the Compensation Committee and provides no services to the Company or management.

 

Risk mitigation. As described in further detail above on page 18 of this Proxy Statement, the mix and design of our compensation programs serve to mitigate operational, financial, legal and regulatory, and strategic and reputational risks. In addition, our share ownership guidelines and clawback policies help mitigate risk.

 

Share ownership requirements and anti-hedging and anti-pledging policies. Our executive officers are subject to minimum share ownership requirements intended to reflect the Compensation Committee’s philosophy that all officers should hold a significant amount of shares to ensure their interests are aligned with those of our shareholders. In addition, our insider trading policy prohibits our Named Executive Officers from hedging their economic exposure to our shares or pledging our shares.

 

Clawback policies. Our 162(m) Plan, defined below, includes clawback policies requiring the recoupment of certain incentive compensation in the event of a restatement of our financial statements.

 

IMPACT OF 2014 SAY ON PAY VOTE

 

At our 2014 shareholders meeting, we provided shareholders with the opportunity to cast an annual advisory vote on executive compensation. Over 97% of the votes cast on this 2014 “say-on-pay” vote were in favor of the proposal. Although the results of this vote are advisory and non-binding, we have considered the results of the 2014 say-on-pay vote and we believe that overwhelming support of our shareholders for the 2014 say-on-pay vote proposal indicates that our shareholders are generally supportive of our approach to executive compensation. In the future, we will continue to consider the outcome of our say-on-pay votes and other shareholder feedback when making compensation decisions regarding our Named Executive Officers.

 

DETERMINATION OF COMPENSATION

 

ROLE OF THE COMPENSATION COMMITTEE AND MANAGEMENT IN COMPENSATION DECISIONS

 

The Compensation Committee makes all compensation decisions regarding senior management, which includes our Named Executive Officers and certain other senior officers of the Company. The Compensation Committee considers the Chief Executive Officer’s recommendations in determining the compensation of the other Named Executive Officers.

 

The Compensation Committee engaged F.W. Cook, an independent executive compensation consulting firm, to advise the Compensation Committee on matters related to Chief Executive Officer and other executive compensation with respect to 2014.

 

For more information on the role of the Compensation Committee and the Committee’s independent consultant, see page 18 of this proxy statement.

 

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PRINCIPAL COMPONENTS OF 2014 EXECUTIVE COMPENSATION

 

This section describes the components of our Named Executive Officers’ 2014 compensation, which consisted of the following:

 

Direct Compensation Indirect Compensation
•  Base Salary •  Employee and other benefits
•  Annual Incentive Awards  
•  Long-Term Incentives  

 

The following chart illustrates the key compensation components for our Chief Executive Officer and other Named Executive Officers as a percentage of their 2014 total target direct compensation opportunities:

 

 

 

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BASE SALARY

 

Base salary provides our Named Executive Officers with a degree of financial certainty and stability. In setting base salaries and determining merit increases for our Named Executive Officers, the Compensation Committee takes into account a variety of factors, including:

 

level of responsibility;
   
individual and team performance;
   
internal review of the Named Executive Officer’s total compensation, individually and relative to our other officers and executives with similar responsibilities within the Company; and
   
general levels of salaries and salary changes relative to our other officers and executives with similar responsibilities at peer group companies.
   

Salary levels are typically reviewed annually as part of our performance review process as well as upon a promotion or other change in job responsibility. Merit-based increases to the salaries of our Named Executive Officers are based on the Compensation Committee’s and the Chief Executive Officer’s assessment (other than for himself) of the individual’s performance and market conditions.

 

After taking into consideration the factors listed above, Messrs. Stewart, Buchen, Joyce and Olafsson (collectively, the “Legacy Actavis NEOs”) received the following merit increases in base salary for 2014, effective March 24, 2014: Mr. Stewart received a merit increase of 15%; Mr. Buchen received a merit increase of 5%; and Mr. Joyce received a merit increase of 3%. Messrs. Bisaro and Olafsson did not receive merit increases of their respective base salaries during 2014. Messrs. Saunders and Meury and Ms. Hilado were not employees of the Company prior to July 1, 2014.

 

In connection with the merger of Forest Laboratories with the Company on July 1, 2014 (the “Forest Merger”), Mr. Bisaro ceased to serve as our Chief Executive Officer and commenced service as our Executive Chairman, and Mr. Saunders commenced employment as our Chief Executive Officer and President. In connection with the Forest Merger, we entered into employment agreements with Messrs. Saunders and Bisaro, which became effective July 1, 2014. Mr. Saunders’ 2014 base salary, which was set in arms’ length negotiations in connection with the entrance into his employment agreement, was $1,000,000. This represents a decrease of 23% from his base salary as Chief Executive Officer of Forest Laboratories to reinforce the enhanced performance orientation of our new executive compensation framework following the Forest Merger. Mr. Bisaro’s 2014 base salary was reduced to $750,000 in connection with his cessation of service as our Chief Executive Officer.

 

Also in connection with the Forest Merger, the Compensation Committee determined to decrease the annual base salaries for Messrs. Stewart, Buchen and Joyce by 5% to reinforce the enhanced performance orientation of our new executive compensation framework following the Forest Merger. Ms. Hilado commenced her employment with the Company on December 8, 2014. Ms. Hilado’s 2014 base salary, which was set in arms’ length negotiations during the hiring process, was $545,000.

 

The base salaries for our NEOs during 2014 (both before and after the Forest Merger) are set forth in the following table:

 

Name  Base Salary Immediately
Prior to Forest Merger
   Base Salary After July
2014 Forest Merger
   Change
(%)
Brenton L. Saunders  $1,300,000   $1,000,000    -23%
Paul M. Bisaro  $1,300,000   $750,000    -42%
Maria Teresa Hilado      $545,000*   N/A
Robert A. Stewart  $750,000   $715,000    -5%
David A. Buchen  $603,750   $575,000    -5%
William Meury  $575,000   $545,000    -5%
R. Todd Joyce  $577,179   $550,000    -5%
Sigurdur Olafsson  $750,000        N/A

 

* Ms. Hilado commenced employment on December 8, 2014 

 

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ANNUAL INCENTIVE AWARDS

 

Annual cash incentive awards are an important feature of our performance-based compensation program. Annual cash incentive awards to our Named Executive Officers are made under our 162(m) Plan, which the Company adopted and our shareholders approved in 2012. The 162(m) Plan is intended to allow incentive compensation payable under such plan to qualify as performance-based compensation and therefore be tax-deductible by the Company under Section 162(m) of the Internal Revenue Code. See “Tax Deductibility of Compensation” below for further information regarding Section 162(m).

 

For 2014, the maximum award for each participant under the 162(m) Plan continued to be based on a percentage of the Company’s operating income(1), as defined in the 162(m) Plan (3.0% for Messrs. Saunders and Bisaro and 2.0% for each of our other Named Executive Officers (other than Ms. Hilado)), with a cap of $7,000,000 payable to any participant in any given year. Ms. Hilado’s employment with us commenced in December 2014 and, accordingly, she did not participate in the 162(m) Plan during 2014. Under the 162(m) Plan, the Compensation Committee has the discretion to reduce the bonus amounts payable to our Named Executive Officers based on factors determined to be appropriate, including the achievement of performance goals applied under our Company-wide annual cash bonus program (the “Cash Bonus Program”), as described below. The majority of our employees participate in our Cash Bonus Program.

 

The Compensation Committee’s practice has been to exercise negative discretion from the calculated 162(m) Plan maximum award payable to each Named Executive Officer by applying the Cash Bonus Program performance goals in making its determination of the actual award amount paid. This approach is not purely formulaic, however, as the Compensation Committee also considers the contributions of each participant to our success during the performance period and other factors it deems appropriate. The Compensation Committee cannot increase the calculated 162(m) Plan maximum award payable and can only reduce it. Annual cash incentive awards are typically paid in March of the year following the 162(m) Plan performance period.

 

2014 Annual Incentive Awards

 

For Messrs. Bisaro, Stewart, Buchen, Joyce and Olafsson (together, the “Legacy Actavis NEOs”), who were employed by and served as executive officers of the Company prior to the closing of the Forest Merger, in March 2014, the Compensation Committee determined individual incentive award levels and corporate financial and individual performance goals, which were based on performance during the full 2014 calendar year. However, in connection with the Forest Merger, the Compensation Committee determined that it was appropriate to modify the pre-established corporate performance goals for the second half of 2014 in order to tie awards for the second half of 2014 to the financial performance of our combined company.

 

Accordingly, for purposes of determining annual incentive awards for the Legacy Actavis NEOs, Company performance during the period from January 1, 2014 through June 30, 2014 was measured against the financial targets approved in March 2014, and Company performance during the period from July 1, 2014 through December 31, 2014 was measured based on a new six-month financial target established in connection with the Forest Merger. Final annual incentive awards were determined using the average of these two results.

 

Messrs. Saunders and Meury were eligible to receive annual incentive awards only with respect to individual and Company performance during the period from July 1, 2014 through December 31, 2014.

 

Mr. Olafsson ceased to be employed by the Company on June 30, 2014. Pursuant to the terms of the separation agreement entered into between Mr. Olafsson and Actavis, Inc., Mr. Olafsson received a pro-rated annual incentive award for 2014 assuming target performance.

 

2014 Performance Goals

 

For 2014, the performance goals under the Company-wide Cash Bonus Program, which were applied as part of the Compensation Committee exercising its negative discretion under the 162(m) Plan, consisted of a combination of corporate financial and individual performance goals.

 

Corporate Financial Performance. The Corporate Financial Performance metric for 2014 was Adjusted EBITDA. For the purpose of measuring Corporate Financial Performance, “Adjusted EBITDA” means our earnings before interest, taxes, depreciation and amortization, adjusted for share-based compensation, acquisition or licensing related charges, restructuring charges, litigation gains or losses, charges associated with our global supply chain initiative, non-cash charges, gains or losses on debt repurchase, gains or losses on sales of operating assets or securities and such other special items as determined at the discretion of our Board.

 

For 2014, the Compensation Committee believed that Adjusted EBITDA was an appropriate indicator of Corporate Financial Performance because it facilitated analysis by management and investors in evaluating the Company’s financial performance and comparing it against companies in its peer group.

 

 
(1) “Operating income” is defined as the Company’s operating income determined in accordance with GAAP plus, without duplication and only to the extent such amount represents a charge or expense determined in accordance with GAAP and reflected in the operating income of the Company and regardless of classification within the Company’s statement of income, the sum of (a) depreciation and amortization expense; (b) asset impairment charges; (c) charges associated with the revaluation of material contingent liabilities that are based in whole or in part on future estimated cash flows; (d) business restructuring charges; (e) costs and charges associated with the acquisition of businesses and assets including, but not limited to, milestone payments and integration charges; (f) litigation charges and settlements; (g) losses and expenses associated with the sale of assets; minus (h) gains or income of a nature similar to items (a) through (g) above. With respect to each of (a) through (h), such amounts are as identified in the Company’s financial statements, notes to the financial statements, or management’s discussion and analysis with respect to the financial statements as filed with the U.S. Securities and Exchange Commission.

 

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2014 Adjusted EBITDA Results ($ millions)(1)

 

Period Threshold
($)
Target
($)
Stretch
($)
Actual
($)
Achievement
(%)
Jan 1 - June 30 $      1,374.6 $      1,617.7 $      1,779.5 $      1,722.1 133%
July 1 - Dec 31 2,166.0 2,549.1 2,804.1 2,734.6 137%
        Full-Year 135%

 

(1) Adjusted EBITDA, as calculated in the table above, equaled earnings before net interest expense, taxes, depreciation and amortization, adjusted for global supply chain initiative, acquisition and licensing and other charges, impairment/asset sales and related costs, non-recurring losses (gains), legal settlements, accretion on contingent liabilities and share based compensation.

 

Individual Performance. The Compensation Committee also recognizes that individual performance is a key element to consider in determining the overall cash incentive award available to an executive. To this end, our Chief Executive Officer reviews the performance of each of our Named Executive Officers (other than himself) on the basis of specific objectives and subjective factors and makes recommendations to the Compensation Committee on final award amounts. The Chief Executive Officer’s and Executive Chairman’s awards are subject to a similar adjustment based on their individual performance, respectively, which is determined by the Compensation Committee. Individual performance can adjust awards from 0% to 150% of a Named Executive Officer’s award as otherwise determined based on the Corporate Financial Performance.

 

In 2014, the Compensation Committee approved the following strategic goals and objectives for Mr. Bisaro as the Chairman and Chief Executive Officer of the Company, and, following the Forest Merger, the Compensation Committee extended the same strategic goals and objectives to Mr. Saunders as the new Chief Executive Officer of the Company:

 

i. Ensuring the successful integration of acquired businesses into our Company and the Company’s continued successful capture of the value of its strategic investments, including synergies, and the continued creation of shareholder value;
   
ii. Ensuring that the Company continues to invest and ultimately capture the value from such investments, including through robust R&D investments;
   
iii. Effectively communicate with shareholders, particularly with respect to value in specialty pharmaceutical leadership; and
   
iv. Recruit and retain key executives and develop and maintain succession plans for senior leaders.

 

In addition, the following goals and objectives applied to Mr. Bisaro during the portion of 2014 in which he served as the Executive Chairman of the Company:

 

I. Continue to represent the Company’s key stakeholders (government, customers, investors, etc.); and
   
Ii. Support the new Chief Executive Officer and ensure a smooth transition of responsibilities to the Chief Executive Officer.

 

Performance Goals of Other Named Executive Officers. In consultation with the Compensation Committee, our Chief Executive Officer and Executive Chairman assigned specific individual performance goals for 2014 to our other Named Executive Officers that were tailored to the scope and nature of their responsibilities.

 

Maximum performance under the Cash Bonus Program results in earning 225% of target payouts (150% adjustment for corporate Adjusted EBITDA x 150% adjustment for NEO’s individual performance). Threshold payouts are based on the minimum level of performance for which payouts are authorized and results in earning 50% of the Named Executive Officer’s target award.

 

The amount payable to each of the Legacy Actavis NEOs under the 162(m) Plan was determined as follows:

 

(NEO’s base salary) x (NEO’s target bonus percentage) x (Adjustment factor for (i) weighted Corporate Adjusted EBITDA from January 1, 2014 through June 30, 2014, and (ii) weighted Corporate Adjusted EBITDA from July 1, 2014 through December 31, 2014) x (Adjustment of 0% to 150% for
NEO’s individual performance)

 

Named Executive Officer 2014 Annual Incentive Awards
  Target   Actual
Name Annual Base
Salary
  Target Annual
Incentive %
  Target Annual
Cash Incentive
  Company
Performance %
  Individual
Performance %
  Final Award
Paul M. Bisaro* $    1,300,000   125%   $     812,500   135%   150%   $   2,699,813
  750,000   140%   525,000            
Robert A. Stewart 715,000   100%   715,000   135%   140%   1,351,350
David A. Buchen 575,000   100%   575,000   135%   100%   776,250
R. Todd Joyce 577,179 ** 80%   461,743   135%   100%   623,160

 

 * Mr. Bisaro’s base salary and target annual incentive for the first 6 months of 2014 as Chairman and CEO were $1,300,000 and 125%, respectively. His base salary and target annual incentive for the final 6 months of 2014 as Executive Chairman was $750,000 and 140%, respectively.
   
** Represents Mr. Joyce’s base salary prior to the 5% reduction in connection with the Forest Merger.

 

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The amounts payable to Messrs. Saunders and Meury under the 162(m) Plan were determined as follows:

 

(NEO’s base salary) x (NEO’s target bonus
percentage)
x (Adjustment factor for
Corporate Adjusted EBITDA from July
1, 2014 through December 31, 2014)
(Adjustment of 0% to 150% for
NEO’s individual performance)
x (50%)

 

Named Executive Officer 2014 Annual Incentive Awards
  Target   Actual
Name Annual Base
Salary
  Target Annual
Incentive %
  Target Annual
Cash Incentive
  Company
Performance %
  Individual
Performance %
  Final Award
Brenton L. Saunders $  1,000,000   150%   $  1,500,000   137%   150%   $  1,541,250
William Meury 545,000   100%   545,000   137%   140%   522,655

 

Pursuant to the terms of her offer letter with the Company, Ms. Hilado is eligible to receive a sign-on bonus of $3 million, payable in two equal installments on each of March 15, 2015 and December 8, 2015 (subject to repayment under certain circumstances).

 

LONG-TERM EQUITY INCENTIVES

 

The Compensation Committee believes that long-term equity-based incentive awards provide a valuable tool for aligning the interests of management with our shareholders and focusing management’s attention on our long-term growth. In addition, the Compensation Committee believes that equity-based awards are essential to attract and retain the talented professionals and managers needed for our continued success.

 

The Company currently maintains the Restated Plan (as defined below), which is described in Proposal 5 below. In connection with the closing of our acquisition of Allergan, Inc., the Company also assumed and subsequently amended the Allergan, Inc. 2011 Incentive Award Plan (the “Allergan Plan”). Shares available for issuance under the Allergan Plan may also be used to settle awards granted under the Restated Plan, subject to certain limitations.

 

Front-Loading Awards

 

It is important to note that the performance share unit (PSU) and stock option awards granted to the Named Executive Officers (other than Mr. Olafsson) on July 1, 2014 (or December 8, 2014 with respect to Ms. Hilado) represent “front-loaded” awards - that is, those awards represent three years’ worth of equity awards reflecting the applicable NEOs’ equity awards for 2015, 2016 and 2017. The ultimate value of the front-loaded awards will be based on the growth in our share price following the grant date. We believe that front loading these awards provides the following benefits to us and our shareholders:

 

creates immediate shareholder alignment by emphasizing performance in the critical first years following the Forest Merger;
   
encourages and rewards sustained performance over the performance period;
   
focuses our new management team on one set of goals; and
   
provides retention of executives in an environment where there is heightened competition for talent with industry peers.

 

Shareholders should note that these front-loaded equity grants cover multiple years of service and vesting and, therefore, result in large values being reported in the Summary Compensation Table in the first year of grant. However, the value of these awards will not be reported in future years, resulting in much less compensation reported in the Summary Compensation Table for those years. The table below shows the annual target value of long-term incentive grants to each of our Named Executive Officers, and is intended to provide shareholders with a more meaningful representation of the annual compensation opportunity intended to be delivered.

 

Named Executive Officer Target LTI Grant Values
  Annual Target Value   3-year Front-Loaded Value (2015 - 2017)
Name PSUs   Options   Total   PSUs   Options   Total
Brenton L. Saunders $   8,550,000   $   2,850,000   $   11,400,000   $   25,650,000   $   8,550,000   $   34,200,000
Paul M. Bisaro 6,375,000   2,125,000   8,500,000   19,125,000   6,375,000   25,500,000
Maria Teresa Hilado 1,432,500   477,500   1,910,000   4,297,500   1,432,500   5,730,000
Robert A. Stewart 2,100,000   700,000   2,800,000   6,300,000   2,100,000   8,400,000
David A. Buchen 1,800,000   600,000   2,400,000   5,400,000   1,800,000   7,200,000
William Meury 1,575,000   525,000   2,100,000   4,725,000   1,575,000   6,300,000
R. Todd Joyce 1,387,500   462,500   1,850,000   4,162,500   1,387,500   5,550,000

 

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Additionally, shareholders should note that the front-loaded grants generally vest and are paid out as though they were made annually under a more traditional three-year performance plan. The front-loaded PSU awards have a thirty-nine month performance period and are structured to provide for 100% vesting by Dec. 31, 2019 (i.e., at the same time that three years of annual grants would be fully vested). The chart below illustrates this point.

 

Illustrative PSU Vesting Timeline for CEO
Annual Grant   Target Value Granted   Vesting Date   Target Value Vested
2015   $ 8,550,000   2017     $ 8,550,000
2016     8,550,000   2018       8,550,000
2017     8,550,000   2019       8,550,000
TOTAL               $ 25,650,000
Front-Loaded Grant   Target Value Granted   Vesting Date       Target Value Vested
2014   $ 25,650,000   2017 (1/3)     $ 8,550,000
          2018 (1/3)       8,550,000
          2019 (1/3)       8,550,000
TOTAL               $ 25,650,000

 

JULY 2014 AWARDS

 

On July 1, 2014 (or December 8, 2014 with respect to Ms. Hilado), our NEOs (other than Mr. Olafsson), were granted the following long-term equity incentive awards:

 

Form of Award   Percentage of Total
Target Long-Term
Incentive Award
Value
  Purpose   Performance
Measured
  Earned and Vesting Periods
Performance Share
Unit (PSU) Award
(restricted stock units)
  75 %

 Creates unambiguous shareholder alignment

 Encourages retention

  Absolute TSR   Earned based on TSR for performance period from July 1, 2014 through September 1, 2017 and time-based vesting on December 31, 2017, 2018 and 2019
Stock Option Award   25 %

  Rewards long-term sustained share price appreciation.

 Encourages retention

  Share price growth above the grant price   5 year ratable vesting

 

2014 Performance Share Unit Awards

 

Seventy-five percent of the aggregate dollar value of the Named Executive Officers’ (other than Mr. Olafsson’s) long-term equity incentive awards granted on July 1, 2014 (or December 8, 2014 with respect to Ms. Hilado) was in the form of PSU awards that may be earned based on the Company’s TSR compound annual growth rate (“CAGR”) for the 39-month performance period from July 1, 2014 through September 1, 2017. Following the performance period, earned awards vest based on continued service with the Company, with 1/3 of the award vesting on each of December 31, 2017, 2018 and 2019. The number of PSUs that may be earned ranges from 0% to 300% of the target number granted, depending on performance (with linear interpolation between performance levels) as follows:

 

TSR CAGR Percentage of Target Shares Earned
Flat or drops below $210 (threshold) None
10% (target) 100%
30% or higher (maximum) 300%

 

As discussed above, the PSU Awards were front-loaded to include three years’ worth of grants. Therefore, awards for 2015 through 2017 were granted on July 1, 2014 (or December 8, 2014 with respect to Ms. Hilado).

 

While the performance period runs from July 1, 2014 through September 1, 2017, in order to protect against variations in share price due to forces and events beyond the control of the Company, there is a special feature built into the awards that allows the participants to “bank” a portion of the award prior to September 1, 2017 if the Company’s share price grows by at least 10% on an annual basis. There are two measurement dates before the performance period ends when a portion of the award may be banked:

 

Bank Date 1: If the Company’s closing share price is at or above the target share price of $280 during any rolling four-quarter period ending in 2015 or 2016, then 25% of the NEO’s target award will be banked at the end of such four-quarter period.

 

Bank Date 2: If the Company’s share price is at or above the target share price of $280 on June 1, 2017, then 25% of the actual amount earned will be banked on such date.

 

Any banked PSU Awards will be paid in shares when the total award is settled at the end of the performance period.

 

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2014 Stock Option Awards

 

Twenty-five percent of the aggregate dollar value of the Named Executive Officers’ (other than Mr. Olafsson’s) long-term equity incentive awards granted on July 1, 2014 (or December 8, 2014 with respect to Ms. Hilado) was in the form of options to purchase the Company’s ordinary shares (“Option Awards”). The Option Awards vest based solely on continued service with the Company, with 1/5 of the shares subject to each Option Award vesting on each of the first, second, third, fourth and fifth anniversaries of the grant date.

 

As discussed above, the Option Awards were front-loaded to include three years’ worth of awards. Therefore, awards for 2015 through 2017 were granted on July 1, 2014 (or December 8, 2014 with respect to Ms. Hilado).

 

MERGER SUCCESS AWARDS

 

On July 1, 2014 (or December 8, 2014 with respect to Ms. Hilado), we granted certain “Merger Success Awards” to our Named Executive Officers (other than Mr. Olafsson) pursuant to the terms of our Restated Plan (as defined below). As described in Proposal 5 below, we are asking our shareholders to approve the Restated Plan, which our Board adopted on July 1, 2014, subject to shareholder approval. If the Restated Plan is not approved by our shareholders, the Merger Success Awards will be canceled and become null and void. For additional information regarding the approval of the Restated Plan, please see Proposal 5 below.

 

The Merger Success Awards are special cash-based long-term performance awards that are intended to incentivize our executives to fulfill our Forest Merger commitments while maintaining industry leading shareholder returns (see the chart below). The performance period for these awards runs from July 1, 2014 through December 31, 2017. If earned, the Merger Success Awards will become 100% vested on December 31, 2017, and will be settled in cash or ordinary shares.

 

Messrs. Saunders and Bisaro were granted Merger Success Awards with target award values of $15 million and $10.5 million, respectively. Our other Named Executive Officers (other than Mr. Olafsson) were granted Merger Success Awards with target award values of $5 million.

 

Payout of the Merger Success Awards depends on achievement of the following important objectives:

 

Goal   Description   Weighting
Merger-Related Synergy Savings   •  

Delivery of cost savings related to the Forest Merger (e.g., eliminating overlapping functions and businesses, improving operating efficiencies and reducing costs).

  50%
Relative TSR      Achievement of above-median share price growth compared to peers.   50%
       Peer group is the component companies of the NYSE ARCA Pharmaceutical Index - a cross-section of small, medium and large pharmaceutical and generics companies representing several widely held, highly capitalized companies involved in various phases of the pharmaceutical industry.    

 

Threshold, target and maximum performance levels of merger-related synergy savings and relative TSR performance, and the related awards payable at each performance level, are as follows:

 

Performance Level   Merger-Related Synergy Savings     Percentage of Target Award Value
Threshold     $ 850 million     50%
Target       1.0 billion     100%
Maximum       1.2 billion     200%
Performance Level       Relative TSR     Percentage of Target Award Value
Threshold       30th percentile     50%
Target       60th percentile     100%
Maximum       90th percentile     200%

 

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Special Incentives Related the Allergan Transaction

 

In connection with the closing of the Allergan merger, members of our new senior management team, including Messrs. Saunders, Bisaro, Stewart and Meury and Ms. Hilado, were granted certain “Transformation Incentive Awards” pursuant to the terms of our Restated Plan (as defined below). As described in Proposal 5 below, we are asking our shareholders to approve the Restated Plan, which our Board adopted on July 1, 2014, subject to shareholder approval. If the Restated Plan is not approved by our shareholders, the Transformation Incentive Awards will be canceled and become null and void. For additional information regarding the approval of the Restated Plan, please see Proposal 5 below.

 

Similar to the Merger Success Awards described above, the Transformation Incentive Awards are intended to incentivize our executives to deliver superior performance during the critical years immediately following our merger with Allergan, which closed on March 17, 2015.

 

Goal   Description of Target   Weighting
Non-GAAP Earnings per Share (EPS)   •  

Achieve full-year non-GAAP EPS of $25.00 for 2017

  65%
Relative TSR      Achieve above-median share price growth compared to peers for the period of March 17, 2015 – December 31, 2018   35%

 

If earned, the Transformation Incentive Awards will be in paid in cash in two equal installments on December 31, 2018 and December 31, 2019, subject to the executives’ continued employment. The Compensation Committee believes that the additional time-vesting conditions promote executive retention and a longer-term perspective.

 

MAY 2014 AWARDS

 

On May 8, 2014, the Legacy Actavis NEOs (other than Mr. Olafsson) were granted annual long-term equity incentives under the Company’s then-existing equity incentive program:

 

Form of Award   Percentage of Total
Target Long-Term
Incentive Award Value
  Purpose   Performance Measured   Earned and Vesting
Periods
Restricted Stock Unit
(RSU) Award
  33.3%  

  Encourages retention

  Fosters shareholder mentality among the executive team

 

  N/A   4 year vesting, with 1/4 of the shares subject to the award vesting on March 5 of 2015, 2016, 2017 and 2018, respectively.
Adjusted EBITDA
Performance Award
  33.3%  

  Encourages retention

  Ties executive compensation to our operational performance

 

  Adjusted EBITDA   Earned at the end of one-year performance period based on Adjusted EBITDA; once earned, subject to time-based vesting: 1/4 of the award vests on March 5 of 2015, 2016, 2017 and 2018, respectively.
TSR Performance Award   33.3%  

  Encourages retention

  Ties executive compensation to our long-term market performance

  TSR   Earned and vested after three-year performance period based on relative TSR

 

The percentage mix described in the chart above is based on the dollar value of the awards granted. The Company’s “TSR” refers to the Company’s share price performance (and dividends, if any) ranked relative to the performance of its peer company group during the relevant period. We believe that the use of both TSR and Adjusted EBITDA measures balances operational and market performance and focuses executives on the Company’s strategic business goal of cash generation as well as the Company’s performance compared to a broad index of companies.

 

Awards were granted on May 8, 2014, rather than in March when our annual awards were granted in previous years, due to our merger with Warner Chilcott.

 

2014 Restricted Stock Unit Awards

 

One-third of the aggregate dollar value of the Legacy Actavis NEOs’ (other than Mr. Olafsson’s) annual equity awards granted on May 8, 2014 was in the form of restricted stock units (“RSU Awards”). The actual number of shares granted was determined on the basis of the Company’s closing share price on the date of grant. Once granted, the RSU Awards vest based solely on continued service with the Company, with 1/4 of the shares subject to the award vesting on March 5 of 2015, 2016, 2017 and 2018, respectively.

 

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2014 Adjusted EBITDA Performance Awards

 

One-third of the aggregate dollar value of the Legacy Actavis NEOs’ (other than Mr. Olafsson’s) annual equity awards granted on May 8, 2014 was in the form of one-year Company performance stock unit grants (each, an “Adjusted EBITDA Performance Award”). Adjusted EBITDA targets were initially established by the Compensation Committee for the entire 2014 fiscal year. However, in connection with the Forest Merger, the Company determined to measure the Company’s Adjusted EBITDA for the period from January 1, 2014 through June 30, 2014 based on EBITDA targets established at the beginning of the year, and then established new six-month EBITDA targets for the period from July 1, 2014 through December 31, 2014. Therefore, the Adjusted EBITDA Performance Awards are earned based on Adjusted EBITDA performance against the applicable 2014 targets. The number of shares that can be earned may range from 0% to 150% of the target, depending on performance (with interpolation between performance levels) as follows:

 

2014 Adjusted EBITDA Performance
Period Threshold
($)
Target
($)
Stretch
($)
Actual
($)
Achievement
Percentage
Jan 1 - June 30 $ 1,374.6 $ 1,617.7 $ 1,779.5 $ 1,722.1 133%
July 1 - Dec 31 2,166.0 2,549.1 2,804.1 2,734.6 137%
Full Year         135%

 

Based on the above, the Legacy Actavis NEOs earned the following number of Adjusted EBITDA Performance Awards:

 

Name   Target # of Units   Achievement Percentage   Actual # of Units Earned
Paul M. Bisaro     10,150   135%     13,702
Robert A. Stewart     3,384   135%     4,568
David A. Buchen     2,960   135%     3,996
R. Todd Joyce     2,537   135%     3,424

 

Once earned, Adjusted EBITDA Performance Awards will settle in the form of restricted shares and continue to be subject to time-based vesting with 1/4 of the shares subject to the award vesting on March 5 of 2015, 2016, 2017 and 2018, respectively.

 

2014 TSR Performance Awards

 

One-third of the aggregate dollar value of the Legacy Actavis NEOs’ (other than Mr. Olafsson’s) annual equity awards granted on May 8, 2014 was in the form of performance stock unit awards to be earned based on the Company’s TSR for the 3-year performance period from January 2014 through December 2016 relative to the Company’s peer group (each, a “TSR Performance Award”). Earned TSR Performance Awards vest at the end of the 3-year performance period and will be settled as soon as administratively feasible thereafter. The number of shares that may be earned may range from 0% to 150% of the target, depending on performance (with linear interpolation between performance levels) as follows:

 

TSR Percentage of Target Shares Earned
Below 25th percentile of peer group None
25th percentile of peer group (Base Threshold) 25%
50th percentile of peer group (Target) 100%
75th percentile of peer group (Upper Threshold) 150%

 

In the event that the Company has a negative TSR on an absolute basis at the end of the three-year performance period, then the maximum number of shares that could be earned, regardless of the Company’s TSR relative to its peer company group, would be 100% of target. For purposes of the TSR Performance Awards, we used our pre-Forest Merger peer group, which is described in more detail on page 33 of this Proxy Statement.

 

OTHER AWARDS

 

Pursuant to the terms of Ms. Hilado’s offer letter with the Company, Ms. Hilado received a sign-on grant of RSUs valued at $3 million which vests in four equal annual installments, subject to Ms. Hilado’s continued service through the applicable vesting date. This grant was provided to compensate Ms. Hilado for equity awards that Ms. Hilado forfeited when she left her former employer.

 

Additionally, on July 1, 2014, Mr. Buchen received a grant of 7,846 RSUs as consideration for waiving his right to receive a gross-up payment in the event any excise taxes become payable with respect to payments and benefits received in connection with any future change in control of the Company, as was specifically provided for in his employment agreement with the Company.

 

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EMPLOYEE AND OTHER BENEFITS

 

The Named Executive Officers are eligible to participate in a variety of retirement, health and welfare and paid time off benefits similar to, and on the same basis as, our other salaried, U.S.-based employees. Additionally, we provide our Named Executive Officers, along with our other executives, with a limited number of personal benefits that we believe have a business purpose and are reasonable and consistent with our overall compensation program and better enable us to attract and retain superior employees for key positions. The primary purpose of these additional benefits is to allow our executives to focus greater attention to important Company endeavors by helping them work more efficiently, minimizing distractions, and ensuring their safety and security.

 

Reimbursement of financial counseling and tax preparation up to a maximum of $3,000 per year. We believe that it is important for executives to have professional assistance with managing their total compensation so that they can focus their full attention on growing and managing the business.
   
Limited personal use of company aircraft and company cars. We believe that these benefits provide a more secure travel environment for executives and allow them to devote additional time to Company business. Messrs. Saunders and Bisaro are entitled to limited personal use of the company aircraft not to exceed $110,000 per year. Messrs. Saunders and Meury and Ms. Hilado are provided access to a company car and driver. The other Named Executive Officers are provided with an annual car allowance.

 

All taxes payable on the value of the benefits described above are borne by the recipient of such benefits.

 

OTHER COMPENSATION PRACTICES

 

Compensation Peer Group

 

The Compensation Committee reviews the elements of our compensation program, including executive officer compensation levels and opportunities as compared to those provided to similarly situated executives among a peer group of companies.

 

In setting the compensation for our Named Executive Officers and other senior executives, the Compensation Committee considers compensation survey data from independent third party sources as well as publicly available information. While we generally aim to set each Named Executive Officer’s target total direct compensation (base salary plus target annual cash incentive compensation plus the expected value of long-term incentive grants) within the levels paid to similarly situated executives in our peer group, such data is intended to serve as only one of several reference points to assist the Compensation Committee in its discussions and deliberations.

 

The Compensation Committee reserves flexibility to vary from the median based on a variety of factors including the desired mix of variable and fixed pay elements, prior year compensation targets, the Named Executive Officer’s overall performance and changes in roles or responsibilities.

 

In connection with the Forest Merger, in July 2014, the Compensation Committee approved certain modifications to our peer group. These modifications were intended to balance the need to reflect our new size, scale and operational complexity while maintaining reasonable relative size positioning against the peer group. Removed from the peer group were Forest Laboratories, Endo Pharmaceuticals and Hospira, Inc. Added to the peer group were Eli Lilly, Merck & Co. Inc. and Pfizer, Inc.

 

AbbVie Inc. Gilead Sciences, Inc.
Allergan, Inc. Merck & Co., Inc.*
Amgen Mylan Laboratories Inc.
Biogen Idec Inc. Perrigo Company
Bristol-Myers Squibb Company Pfizer, Inc.*
Celgene Corporation Valeant Pharmaceuticals International, Inc.
Eli Lilly*  
   
* New addition for 2014

 

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* The chart above does not reflect our revenues, market cap or number of employees following our acquisition of Allergan, Inc.

 

Share Ownership Guidelines

 

In order to better align the interests of our Board and management with those of our shareholders in a fair and reasonable manner, as well as to implement what we believe is a corporate governance “best practice,” we adopted share ownership guidelines for our senior executives in 2011.

 

The following table sets for the stock ownership guidelines and current holdings for the CEO, Executive Chairman, and the other Named Executive Officers as of March 20, 2015, assuming a stock price of $317.06.

 

 

Shares counted toward the share ownership requirements include: (i) vested ordinary shares held of record or in a brokerage account by the individual or his or her spouse; and (ii) unvested restricted shares. Outstanding stock options and performance awards with respect to which the actual number of shares to be awarded have not yet been determined do not count toward satisfaction of the ownership requirements.

 

Prohibitions on Hedging and Pledging of Our Shares

 

Our insider trading policy prohibits any Named Executive Officer or any other officer or employee subject to its terms from entering into short sales or derivative transactions to hedge their economic exposure to our shares. In addition, these officers and employees are prohibited from pledging our shares as security for any loan.

 

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Clawback Policies; Recoupment of Incentive Compensation

 

Pursuant to Messrs. Saunders’ and Bisaro’s employment agreements with the Company, all equity awards (including any proceeds, gains or other economic benefit actually or constructively received by Messrs. Saunders and Bisaro upon any receipt or exercise of any equity award or upon the receipt or resale of any shares of the Company underlying an equity award) will be subject to the provisions of any clawback policy implemented by the Company, including, without limitation, any clawback policy adopted to comply with the requirements of applicable law, including without limitation the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such clawback policy and/or in the applicable equity award.

 

In addition to the clawback provision in Messrs. Saunders’, Bisaro’s and Meury’s employment agreements, the 162(m) Plan also provides that the Compensation Committee has the discretion to require a participant to repay the income, if any, derived from an award under the plan in the event of a restatement of the Company’s financial results within three years after payment of such award to correct a material error that is determined by the Compensation Committee to be the result of fraud or intentional misconduct.

 

These clawback policies help ensure that incentive compensation is payable only if the applicable underlying performance goals are met, consistent with our pay-for-performance philosophy.

 

Tax Deductibility of Compensation

 

In establishing total compensation for the executive officers, the Compensation Committee considers the effect of Section 162(m) of the Internal Revenue Code (“Section 162(m)”). Section 162(m) generally disallows a tax deduction for compensation over $1 million paid for any fiscal year to the Chief Executive Officer and the three other highest paid executive officers other than the Chief Financial Officer unless the compensation qualifies as performance-based. While the Compensation Committee generally seeks to preserve the deductibility of most compensation paid to executive officers, the primary objective of the compensation program is to support the Company’s business strategy. Thus, the Compensation Committee maintains discretion to award compensation that may not be fully deductible.

 

Compensation Committee Report

 

The Compensation Committee of Actavis has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

 

THE COMPENSATION COMMITTEE

 

Ronald R. Taylor, Chairman
Christopher W. Bodine
Christopher J. Coughlin

 

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Summary Compensation Table

 

The following table sets forth certain information regarding the annual and long-term compensation for services rendered to the Company in all capacities with respect to the fiscal years ended December 31, 2012, December 31, 2013 and December 31, 2014 of our Named Executive Officers.

 

Name and Principal
Position
  Year  Salary(7)
($)
  Bonus
($)
  Stock
Awards(8)
($)
  Option
Awards(9)
($)
  Non-Equity
Incentive Plan
Compensation(10)
($)
  All Other
Compensation(11)
($)
  Total
($)
Brenton L. Saunders(1)  2014  500,000    25,931,824  8,585,568  1,541,250  55,187  36,613,829
Chief Executive                        
Officer & President                        
Paul M. Bisaro(2)  2014  1,025,000    25,641,217  6,401,499  2,699,813  123,137  35,890,666
Executive Chairman  2013  1,276,923  1,318,750  6,011,652    2,681,250  92,497  11,381,072
   2012  1,200,000  1,200,840  4,394,209    1,779,160  85,100  8,659,309
Maria Teresa Hilado(3)  2014  31,442    8,721,187  1,432,418    256  10,185,303
Chief Financial                        
Officer                        
Robert A. Stewart  2014  707,500    8,471,370  2,108,756  1,351,350  47,723  12,686,699
Chief Operating  2013  639,504    1,902,031  1,621,943  1,000,350  52,650  5,216,478
Officer  2012  590,692    2,568,245    660,953  42,390  3,862,280
David A. Buchen  2014  582,188    9,067,962  1,807,505  776,250  46,576  12,280,481
EVP, NA Generics  2013  570,688    1,750,253    759,000  39,645  3,119,586
and International  2012  557,726     1,686,427    538,238  63,044  2,845,435
William Meury(4)  2014  272,500    4,776,992  1,581,567  522,655  1,746  7,155,460
EVP, North                        
American Brands                        
R. Todd Joyce(5)  2014  580,645    5,784,797  1,393,285  623,160  53,033  8,413,662
Former Chief  2013  557,289    1,750,254    641,061  50,828  2,999,432
Financial Officer  2012  502,498    1,686,427    488,886  39,026  2,716,837
Sigurdur Olafsson(6)  2014  444,231          7,878,493  8,322,724
Former President –  2013  735,641    1,999,677  3,243,885  1,002,375  389,517  7,371,095
Actavis Pharma  2012  681,674    2,568,245    726,717  38,557  4,015,193
(1) Mr. Saunders assumed the role of Chief Executive Officer on July 1, 2014 at the closing of the Forest Merger. This table includes all compensation paid by Actavis on and after that date.
(2) Mr. Bisaro served as Chief Executive Officer until June 30, 2014, at which time he assumed the role of Executive Chairman of the Board. This table includes all compensation received for 2014 in both roles.
(3) Ms. Hilado was hired as Chief Financial Officer on December 8, 2014.
(4) Mr. Meury assumed the role of EVP, North American Brands on July 1, 2014 at the closing of the Forest Merger. This table includes all compensation paid by Actavis following July 1, 2014.
(5) Mr. Joyce served as Chief Financial Officer until December 7, 2014, but remained employed by the Company until January 9, 2015.
(6) Mr. Olafsson served as President - Actavis Pharma until June 30, 2014.
(7) Salary includes annual salary and cash paid in lieu of vacation and any salary earned but deferred, as applicable, under the Company’s deferred compensation plan.
(8) The amounts shown in this column represent the aggregate grant date fair value of restricted stock unit grants issued pursuant to Time Awards, Adjusted EBITDA Performance Awards, TSR Performance Awards and Performance Share Units (collectively, the “Stock Awards”), in each case computed in accordance with FASB ASC Topic 718. These amounts do not represent the actual value realized by the Named Executive Officers during the respective year. The maximum possible value of the Adjusted EBITDA Performance Awards on the date they were granted, assuming achievment at the highest performance level, was as follows: $3,000,086 for Mr. Bisaro, $1,000,226 for Mr. Stewart, $874,902 for Mr. Buchen and $749,874 for Mr. Joyce. The maximum possible value of the TSR Performance Awards on the date they were granted, assuming achivement of the highest performance level, was as follows: $3,459,084 for Mr. Bisaro, $1,153,028 for Mr. Stewart, $1,009,198 for Mr. Buchen and $865,027 for Mr. Joyce. The maximum possible value of the Performance Share Units on the date they were granted, assuming achievment at the highest performance level, was as follows: $77,795,471 for Mr. Saunders, $58,005,140 for Mr. Bisaro, $17,163,924 for Ms. Hilado, $19,107,743 for Mr. Stewart, $16,378,065 for Mr. Buchen, $14,330,976 for Mr. Meury and $12,624,843 for Mr. Joyce. For discussion of the assumptions used in these valuations, see Share-Based Compensation in Note 8 to the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
(9) The amounts shown in this column represent the aggregate grant date fair value of the stock option awards, as determined in accordance with FASB ASC Topic 718. These amounts do not represent the actual value realized by the Named Executive Officers during the respective year. The values were calculated using the Black-Scholes option pricing model. For discussion of the assumptions used in these valuations, see Share-Based Compensation in Note 8 to the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
(10) Non-equity incentive plan compensation represents payment under our annual incentive plan for the 2014 performance year. For additional discussion on our annual incentive plan, see “Annual Incentive Awards” on page 26 of Compensation Discussion and Analysis.
(11) All Other Compensation for 2014 consisted of car allowances, Company matches under our qualified and non-qualified savings plans, group life insurance coverage, termination-related payments and other perquisites as follows:

 

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Name  Company
Aircraft(1)
($)
  Car and
Driver/Car
Allowance(2)
($)
  Savings Plan
Company
Matching
Contributions
($)
  Group Term
Life Insurance
($)
  Financial
Planning
Reimbursement
($)
  Severance and
Retention(3)
($)
  Other
Perquisites(4)
($)
  Total Other
Compensation
($)
Brenton L. Saunders  51,034  83     570  3,500        55,187
Paul M. Bisaro  32,599  14,423  72,005  2,622  1,488        123,137
Maria Teresa Hilado        105  151           256
Robert A. Stewart     11,077  34,324  1,710  612        47,723
David A. Buchen     11,539  32,163  2,875           46,576
William Meury     891     855           1,746
R. Todd Joyce     11,539  32,197  4,903        4,395  53,033
Sigurdur Olafsson     6,000  31,995  1,020     7,839,478     7,878,493
(1) Amounts represent the incremental costs to us associated with the executive’s personal use of our aircraft. Incremental costs include fuel costs, landing and parking fees, per hour accruals for maintenance service plans, passenger catering and ground transportation, crew travel expenses and other trip-related variable costs (including fees for contract crew members and the use of our fractional jet interest). Because our aircraft are used primarily for business travel, incremental costs exclude fixed costs that do not change based on usage, such as pilots’ salaries, aircraft purchase or lease costs, fractional jet interest management fees, home-base hangar costs and certain maintenance fees.
(2) The incremental cost for the Company car driver for commutation and nonbusiness events is calculated by multiplying the variable rate by the applicable miles driven. The variable rate includes a driver’s overtime compensation (if any), plus a cost per mile calculation based on fuel and maintenance expense. Because Company car and drivers are used primarily for business travel, incremental costs exclude fixed costs that do not change based on usage such as drivers’ salaries and vehicle purchase or lease cost. For instances where a car service is used, the incremental cost to the company is the actual fees paid for such service. The incremental cost for car allowance for Messrs. Bisaro, Stewart Buchen and Olaffson is the actual amounts paid by the Company to the Named Executive Officer during 2014.
(3) These amounts were paid in connection with Mr. Olafsson’s departure on June 30, 2014. For a description of these payments, see page 47.
(4) The amount represents the company’s incremental cost for a physical under our executive physical program.

 

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2014 Grants of Plan-Based Awards

 

The following table provides information about equity and non-equity awards granted to our Named Executive Officers for 2014:

 

         Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
  Estimated Future Payouts Under
Equity Incentive Plan Awards
  All Other
Stock
  All Other
Option
      
Name  Award Type  Grant
Date
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)
  Awards:
Number
of Shares
of Stock
or Units
(#)
  Awards:
Number of
Securities
Underlying
Options
(#)
  Exercise or
Base Price
of Option
Awards
($/ sh)
  Grant Date
Fair Value
of Stock
and Option
Awards ($)
Brenton L.
Saunders
  Non-Equity Incentive Plan Award  7/1/14(1)       7,000,000                     
   Merger Success Award  7/1/14(2) 7,500,000  15,000,000  30,000,000                     
   Stock Options  7/1/14(3)                      104,651  224.00  8,585,568
   Performance Share Units  7/1/14(4)          11,499  114,997  344,991           25,931,824
Paul M. Bisaro  Non-Equity Incentive Plan Award  3/5/14(1)       7,000,000                     
   Merger Success Award  7/1/14(2) 5,250,000  10,500,000  21,000,000                     
   Time Awards  5/8/14(5)                   10,150        2,000,058
   Adjusted EBITDA Performance Award  5/8/14(6)          5,075  10,150  15,225           2,000,058
   TSR Performance Award  5/8/14(7)          2,537  10,149  15,224           2,306,056
   Stock Options  7/1/14(3)                      78,029  224.00  6,401,499
   Performance Share Units  7/1/14(4)          8,574  85,743  257,229           19,335,047
Maria Teresa Hilado  Non-Equity Incentive Plan Award  (8)                             
   Merger Success Award  12/8/14(2) 2,500,000  5,000,000  10,000,000                     
   Time Awards  12/8/14(9)                   11,296        2,999,879
   Stock Options  12/8/14(3)                      14,890  265.57  1,432,418
   Performance Share Units  12/8/14(4)          1,618  16,182  48,546           5,721,308
Robert A. Stewart  Non-Equity Incentive Plan Award  3/5/14(1)       7,000,000                     
   Merger Success Award  7/1/14(2) 2,500,000  5,000,000  10,000,000                     
   Time Awards  5/8/14(5)                   3,383        666,620
   Adjusted EBITDA Performance Award  5/8/14(6)          1,692  3,384  5,076           666,817
   TSR Performance Award  5/8/14(7)          845  3,383  5,075           768,685
   Stock Options  7/1/14(3)                      25,704  224.00  2,108,756
   Performance Share Units  7/1/14(4)          2,824  28,245  84,735           6,369,248

 

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         Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
  Estimated Future Payouts Under
Equity Incentive Plan Awards
  All Other
Stock
  All Other
Option
      
Name  Award Type  Grant
Date
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)
  Awards:
Number
of Shares
of Stock
or Units
(#)
  Awards:
Number of
Securities
Underlying
Options
(#)
  Exercise or
Base Price
of Option
Awards
($/ sh)
  Grant Date
Fair Value
of Stock
and Option
Awards ($)
David A. Buchen  Non-Equity Incentive Plan Award  3/5/14(1)       7,000,000                     
   Merger Success Award  7/1/14(2) 2,500,000  5,000,000  10,000,000                     
   Time Awards  5/8/14(5)                   2,960        583,268
   Adjusted EBITDA Performance Award  5/8/14(6)          1,480  2,960  4,440           583,268
   TSR Performance Award  5/8/14(7)          740  2,961  4,442           672,798
   Stock Options  7/1/14(3)                      22,032  224.00  1,807,505
   Performance Share Units  7/1/14(4)          2,421  24,210  72,630           5,459,355
   Time Awards  7/1/14(5)                   7,846        1,757,504
William
Meury
  Non-Equity Incentive Plan Award  7/1/14(1)       7,000,000                     
   Merger Success Award  7/1/14(2) 2,500,000  5,000,000  10,000,000                     
   Stock Options  7/1/14(3)                      19,278  224.00  1,581,567
   Performance Share Units  7/1/14(4)          2,118  21,184  63,552           4,776,992
R. Todd Joyce  Non-Equity Incentive Plan Award  3/5/14(1)       7,000,000                     
   Merger Success Award  7/1/14(2) 2,500,000  5,000,000  10,000,000                     
   Time Awards  5/8/14(5)                   2,537        499,916
   Adjusted EBITDA Performance Award  5/8/14(6)          1,269  2,537  3,806           499,916
   TSR Performance Award  5/8/14(7)          634  2,538  3,807           576,684
   Stock Options  7/1/14(3)                      16,983  224.00  1,393,285
   Performance Share Units  7/1/14(4)          1,866  18,662  55,986           4,208,281
(1) The “maximum” amounts shown in the table reflect the largest possible payouts to our Named Executive Officers under our 162(m) Plan for the 2014 performance period based on operating income, as defined under that plan. There are no thresholds or targets under the 162(m) Plan. The 162(m) Plan provides the Compensation Committee with the ability to use negative discretion to award any amount that does not exceed the maximum. The Compensation Committee’s practice has been to exercise such discretion to reduce the maximum 162(m) Plan award payable to each Named Executive Officer by applying the performance goals established under our Cash Bonus Program. The actual amounts awarded under our 162(m) Plan for 2014 are reported as “Non-Equity Incentive Plan Compensation” in the “Summary Compensation Table” on page 36. For a description of the 162(m) Plan and the performance goals under the Cash Bonus Program, including the threshold, target and maximum possible payouts for our Named Executive Officers and the use of the Cash Bonus Program goals in the Compensation Committee’s exercise of negative discretion, see “Annual Incentive Awards” on page 26.
(2) The payout of the Merger Success Award can range from 50% of target at threshold to a maximum of 200% of target, depending on the level of achievement of the applicable performance goals. For more information on Merger Success Awards, see page 30 of the Compensation Discussion & Analysis of this proxy statement.
(3) Stock Options vest and become exerciseable in in five equal annual installments, beginning on the first anniversary of the grant date.
(4) The payout of 2014 Performance Share Units can range from 10% of target at threshold to a maximum of 300% of target, depending on the level of achievement of the applicable performance goals. Earned Performance Share Units vest 1/3 on each of December 31, 2017, 2018 and 2019. For more information on 2014 Performance Share Units, see page 29 of the Compensation Discussion & Analysis of this proxy statement.
(5) 2014 Time Awards vest and become payable in Actavis ordinary shares in four equal annual installments beginning on the first anniversary of the grant date.
(6) The payout of 2014 Adjusted EBITDA Performance Awards can range from 50% of target at threshold to a maximum of 150% of target, depending on the level of achievement of the applicable performance goals. For more information on 2014 Adjusted EBITDA Performance Awards, see page 32 of the Compensation Discussion & Analysis of this proxy statement.
(7) The payout of 2014 TSR Performance Awards can range from 25% of target at threshold to a maximum of 150% of target, depending on the level of achievement of the applicable performance goals. For more information on 2014 TSR Performance Awards, see page 32 of the Compensation Discussion & Analysis of this proxy statement.
(8) Under the terms of her offer letter, Ms. Hilado was not eligible for an annual incentive award for 2014.
(9) This grant vests and becomes payable in Actavis ordinary shares in four equal annual installment, beginning on the first anniversary of the grant date.

 

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2014 Outstanding Equity Awards at Fiscal Year-End

 

The following sets forth the outstanding equity awards for our Named Executive Officers at December 31, 2014.

 

   Option Awards  Stock Awards 
Name  Number of
Securities
Underlying
Unexercised
Options -
Exercisable
(#)
   Number of
Securities
Underlying
Unexercised
Options -
Unexercisable
(#)
    Option
Exercise Price
($)
   Option
Expiration
Date
  Number of
Shares or Units
That Have Not
Vested
(#)
    Market Value of
Shares or Units
That Have Not
Vested
($)
   Equity Incentive
Plan Awards:
Number of
Unearned Units
That Have Not
Vested
(#)
    Equity Incentive
Plan Awards:
Market Value of
Unearned Units
That Have Not
Vested
($)
 
Brenton L.        104,651(1)    224.00   6/30/24   31,370(4)    8,074,994    114,997(9)    29,601,378 
Saunders        63,566(2)    196.16   5/12/24   19,958(5)    5,137,384            
    73,576    149,382(3)    91.13   9/30/23   29,263(6)    7,532,528            
    2,790          90.22   8/14/23   416(7)    106,986            
    3,691          73.14   8/22/22   256(8)    66,015            
    9,446          70.79   8/22/21                      
Paul M.
Bisaro
        78,029(1)    224.00   6/30/24   10,150(10)    2,612,712    85,743(9)    22,071,106 
                       13,702(11)    3,527,032    10,149(12)    2,612,454 
Maria Teresa Hilado        14,890(13)    265.57   12/7/24   11,296(14)    2,907,703    16,182(9)    4,165,409 
Robert A.        25,704(1)    224.00   6/30/24   3,383(10)    870,818    28,245(9)    7,270,545 
Stewart                      4,568(11)    1,175,849    3,383(12)    870,818 
David A.
Buchen
        22,032(1)    224.00   6/30/24   7,846(15)    2,019,639    24,210(9)    6,231,896 
                       2,960(10)    761,934    2,961(12)    762,191 
                       3,996(11)    1,028,610            
William
Meury
        19,278(1)    224.00   6/30/24   4,024(5)    1,035,695    21,184(9)    5,452,973 
         12,813(2)    196.16   5/12/24   4,209(20)    1,083,353            
    5,717    17,150(16)    80.20   5/20/23   6,286(21)    1,618,160            
    5,738    5,738(17)    72.07   5/6/22   1,172(22)    301,749            
    10,721    5,361(18)    63.51   12/4/21   3,448(23)    887,496            
    12,752    8,500(19)    68.11   12/5/20   7,887(24)    2,030,298            
    18,891          66.20   12/6/19                      
    4,722          51.07   12/7/18                      
    11,807          78.88   12/7/17                      
    11,807          109.12   12/7/16                      
R. Todd
Joyce
        16,983(1)    224.00   6/30/24   2,537(10)    653,049    18,662(9)    4,803,785 
                       3,424(11)    881,372    2,538(12)    653,307 

 

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(1) Represents options granted on July 1, 2014, which vest ratably 20% per year on each anniversary of the grant date in 2015 through 2019.
(2) Represents options granted on May 13, 2014, which vest ratably 25% per year on each anniversary of the grant date in 2015 through 2018.
(3) Represents options granted on October 1, 2013 which vest ratably 33% per year on each anniversary of the grant date in 2014 through 2016.
(4) Represents restricted stock units granted on June 30, 2014, which vest 100% on June 30, 2016.
(5) Represents restricted stock units granted on May 13, 2014, which vest ratably 33% per year on each anniversary of the grant date in 2015 through 2017.
(6) Represents restricted stock units granted on October 1, 2013, which vest ratably 33% per year on each anniversary of the grant date in 2014 through 2016.
(7) Represents restricted stock units granted on August 15, 2013, which vest ratably 33% per year on each anniversary of the grant date in 2014 through 2016.
(8) Represents restricted stock units granted on August 23, 2012, which vest ratably 33% per year on each anniversary of the grant date in 2013 through 2015.
(9) Represents performance share units granted on July 1, 2014 (other than Ms. Hilado, whose grant was made December 8, 2014), with the number of units eligible to vest based on our absolute total shareholder return (CAGR) between July 1, 2014 and September 1, 2017. Units remain subject to time-vesting thereafter, and vest 33% per year on December 31 of 2017, 2018 and 2019. The value reported is the target number of units granted multiplied by our closing share price on December 31, 2014.
(10) Represents restricted stock units granted on May 8, 2014, which vest ratably 25% per year on each anniversary of the grant date in 2015 through 2018.
(11) Represents performance share units granted on May 8, 2014, with the number of units eligible to vest based on our FY 2014 EBITDA. For 2014, we achieved 135% of our target goal. Units remain subject to time-vesting, and vest 25% per year on March 5 of 2015, 2016, 2017 and 2018. The value reported is the actual number of units earned multiplied by our closing share price on December 31, 2014.
(12) Represents performance share units granted on May 8, 2014, with the number of units eligible to vest based on our 3-year relative total shareholder return between January 1, 2014 and December 31, 2016. Units vest 100% on December 31, 2016. The value reported is the target number of units granted multiplied by our closing share price on December 31, 2014.
(13) Represents options granted on December 8, 2014, which vest ratably 20% per year on each anniversary of the grant date in 2015 through 2019.
(14) Represents restricted stock units granted on December 8, 2014, which vest ratably 25% per year on each anniversary of the grant date in 2015 through 2018.
(15) Represents restricted stock units granted on July 1, 2014, which vest 100% on July 1, 2016.
(16) Represents options granted on May 21, 2013, which vest ratably 25% per year on each anniversary of the grant date in 2014 through 2017.
(17) Represents options granted on May 7, 2012, which vest ratably 25% per year on each anniversary of the grant date in 2013 through 2016.
(18) Represents options granted on December 5, 2011, which vest ratably 25% per year on each anniversary of the grant date in 2012 through 2015.
(19) Represents options granted on December 6, 2010, which vest 15% on each of the first four anniversaries of the grant date and as to the remaining 40% on the fifth anniversary of the grant date.
(20) Represents restricted stock units granted on May 31, 2013, which vest ratably 33% per year on each anniversary of the grant date in 2014 through 2016.
(21) Represents restricted stock units granted on May 31, 2013, which vest 100% on April 1, 2016.
(22) Represents restricted stock units granted on May 7, 2012, which vest ratably 33% per year on each anniversary of the grant date in 2013 through 2015.
(23) Represents restricted stock units granted on May 7, 2012, which vest 100% on April 1, 2015.
(24) Represents restricted stock units granted on December 5, 2011, which vest 100% on April 1, 2015.

 

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2014 Option Exercises and Stock Vested

 

The following table sets forth certain information with respect to the exercise of stock options and the vesting of stock awards during the fiscal year ended December 31, 2014 for certain of our Named Executive Officers:

 

   Option Awards  Stock Awards
Name  Number of Shares
Acquired on
Exercise(1)
(#)
  Value Realized on
Exercise
($)
  Number of Shares
Acquired on
Vesting(1)
(#)
  Value Realized on
Vesting(2)
($)
Brenton L. Saunders        15,096  3,592,357
William Meury  7,083  $1,274,373  7,405  1,970,100
(1) Shares acquired on exercise or vesting are presented on a pre-tax basis.
(2) Represents the closing market price of our ordinary shares on the date of vesting multiplied by the number of shares that have vested.

 

2014 Nonqualified Deferred Compensation

 

The following table sets forth the executive contributions, employer matching contributions, earnings, withdrawals/distributions and account balances, where applicable, for certain of our Named Executive Officers in the Executive Deferred Compensation Plan (the “Deferral Plan”), an unfunded, unsecured deferred compensation plan.

 

Name  Executive
Contributions in
Last FY(1)
($)
   Registrant
Contributions in
Last FY(2)
($)
   Aggregate
Earnings in Last
FY(3)
($)
   Aggregate
Withdrawals/
Distributions
($)
  
Aggregate
Balance at
Last FYE(4)
Paul M. Bisaro   119,931    49,983    37,864         1,321,532
Maria Teresa Hilado   8,385    105              8,489
Robert A. Stewart   67,296    16,824    7,369         277,209
David A. Buchen   334,774    13,308    39,122    (117,349)   1,427,077
R. Todd Joyce   782,179    11,797    40,301    (450,231)   1,165,817
Sigurdur Olafsson   78,027    14,495    5,862         220,023
(1) Executive contributions include salary contributions for 2014, if any, and amounts related to non-equity incentive plan compensation earned in 2013 but paid in 2014. Any contributions are also reported in the “Salary” column for 2014 or the “Non-Equity Incentive Plan Compensation” column for 2013 in the Summary Compensation Table on page 36. Included in the amounts above representing non-equity plan contributions earned in 2013 but paid in 2014 was $80,000 for Mr. Bisaro, $40,014 for Mr. Stewart, $151,800 for Mr. Buchen, $512,849 for Mr. Joyce and $60,143 for Mr. Olafsson.
(2) This column represents company matching contributions to the Deferral Plan in 2014. All Registrant contributions are reported in the “All Other Compensation” column of the Summary Compensation Table on page 36.
(3) This column represents deemed investment earnings at the guaranteed fixed interest rate for 2014 of 3.25%. No other investment alternatives for amounts deferred or credited are offered under the Deferral Plan.
(4) This column reflects balances as of December 31, 2014 and includes deferred compensation earned in prior years, which was disclosed as either “Salary” or “Non-Equity Incentive Plan Awards” in the Summary Compensation Table of prior proxy statements.

 

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Pursuant to the Deferral Plan, eligible employees may defer from 1% to 80% of their salary and from 1% to 80% of their annual cash incentive award, if any. We match 50% of the first 2% an employee defers in accordance with this Plan. Vesting of the matched amount is based on an employee’s years of service with us. If an employee has been with us for less than one year, none of the matched amount is vested. Vesting thereafter occurs 33% per year, such that employees who have been with us for more than 3 years are 100% vested in the matched amount.

 

All contributions to our Deferral Plan have a guaranteed fixed interest rate of return. This guaranteed rate is adjusted annually based on the Prime interest rate published in the Wall Street Journal on the first business day of November. In 2014, the guaranteed interest rate was 3.25%.

 

Assets in the Deferral Plan are distributed either (i) at separation of service as a result of retirement, disability, termination or death; or (ii) on a designated date elected by the participant. The Deferral Plan requires participants to make an annual distribution election with respect to the money to be deferred in the next calendar year. If a participant so elects, deferrals made in one year may be distributed as soon as the next year following the deferral election. Participants may elect to receive a distribution as a lump-sum cash payment or in installment payments paid over 2 to 15 years, as the participant elects. Bonus deferrals are credited to a participant’s account the year following the year in which the bonus is earned. As a result, bonus deferrals may not be distributed until the year following the year in which the bonus is paid to a participant and credited to his or her account. Per regulatory requirements, participants may not accelerate distributions from the Deferral Plan.

 

Potential Payments Upon Termination or Change in Control

 

EXECUTIVE SEVERANCE AND CHANGE IN CONTROL AGREEMENTS

 

Each of Messrs. Saunders, Bisaro, Buchen, Meury and Joyce is a party to an employment agreement or arrangement with the Company or with Actavis, Inc. (or, in the case of Mr. Meury, with Forest Laboratories, Inc.) pursuant to which he is entitled to certain payments and benefits in the event of an involuntary termination without cause or his resignation for good reason, which may differ depending on whether the termination is in connection with a change in control. Each of Mr. Stewart and Ms. Hilado participate (and Mr. Olafsson participated through May 19, 2014) in our severance pay plan and in our change in control severance pay plan, pursuant to which he or she is (or, in Mr. Olafsson’s case, was) entitled to certain payments and benefits in the event of an involuntary termination without cause or his or her resignation for good reason, which may differ depending on whether the termination is in connection with a change in control. Our severance pay plan was amended effective July 1, 2014, and our change in control severance pay plan was amended effective January 1, 2015. For purposes of this disclosure, we have described the payments and benefits our applicable Named Executive Officers would be entitled to receive under the current terms of our severance pay plan and change in control severance pay plan. Following is a summary of the termination and change in control provisions applicable to each Named Executive Officer. Following such summary is a table estimating the values of the applicable payments and benefits, as well as the definitions of “change in control,” “cause,” and “good reason,” which differ slightly among the executives.

 

In addition to the payments and benefits described below, pursuant to the terms of our Restated Plan (as defined below), certain long-term incentive awards held by our Named Executive Officers will vest in full and, as applicable, become exercisable upon a “qualified termination” during the two year period following a change in control (each as defined in our Restated Plan).

 

Brenton L. Saunders

 

Pursuant to the terms of his employment agreement, Mr. Saunders is entitled to the following payments and benefits in the event of a termination by us without cause or by Mr. Saunders for good reason at any time between July 1, 2014 and July 1, 2017, provided that the benefits received shall not be less than the severance benefits Mr. Saunders would have received pursuant to his previous employment agreement if his employment had been terminated on July 1, 2014:

 

(1) any accrued compensation obligations to Mr. Saunders through the termination date, including a pro-rated “highest annual bonus” (as defined in the employment agreement between Forest Laboratories, Inc. and Mr. Saunders);
   
(2) a lump-sum cash payment equal to three times the sum of (i) Mr. Saunders’ then-current annual base salary and (ii) Mr. Saunders’ highest annual bonus;

 

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(3) continued group health benefits (medical, dental and vision) for Mr. Saunders and his dependents for 36 months following termination (or longer, if so provided by the terms of the applicable plan, program, policy or practice); and
   
(4) reasonable outplacement benefits until no later than the Company’s second taxable year following the taxable year in which Mr. Saunders terminates.

 

Mr. Saunders will be entitled to the following payments and benefits in the event of a termination by us without cause or by Mr. Saunders for good reason at any time after July 1, 2017 and until the end of the agreement term (December 31, 2019):

 

(1) a lump-sum cash payment equal to two times the sum of (i) Mr. Saunders’ then-current annual base salary and (ii) Mr. Saunders’ target bonus amount; and
   
(2) continued group health benefits (medical, dental and vision) for Mr. Saunders and his dependents for up to 24 months following termination.

 

In the event that Mr. Saunders’ employment terminates without cause or he resigns for good reason at any time after July 1, 2017 and until the end of the agreement term (December 31, 2019), and if the termination occurs within 90 days prior to or 12 months following a change in control (as defined in the employment agreement), he will be entitled to the same payments and benefits as in the non-change in control context (as described above), except that (i) the lump-sum cash payment will equal three times (instead of two times) the sum of Mr. Saunders’ then-current annual base salary and target bonus amount, and (ii) continued group health benefits will be provided for up to 36 months (instead of up to 24 months) following termination.

 

If the Company elects not to continue Mr. Saunders’ employment with the Company at the conclusion of the agreement term or any time thereafter on substantially the same terms in effect at the expiration of the employment agreement or on other mutually agreeable terms, then Mr. Saunders will be entitled to the same payments and benefits as in the non-change in control context (as described above), as well as any accrued compensation obligations to Mr. Saunders through his termination date, including a pro-rated bonus for the year of termination.

 

If, at the expiration of Mr. Saunders’ employment agreement, Mr. Saunders retires from the Company or does not agree to enter into a new employment agreement or an amendment to the existing agreement extending his employment for a period of at least three years on substantially the same terms as his existing agreement, Mr. Saunders will be entitled to any accrued compensation obligations through his termination date, including a pro-rated bonus for the year of termination.

 

Paul M. Bisaro

 

On November 12, 2012, Mr. Bisaro entered into an amended and restated employment agreement with Watson Pharmaceuticals, Inc. (the “Prior Employment Agreement”). In connection with Mr. Bisaro’s appointment as Executive Chairman, Mr. Bisaro entered into an employment agreement with Actavis, Inc. (the “New Employment Agreement”) which superseded his Prior Employment Agreement. Accordingly, the Prior Employment Agreement governed the terms and conditions of Mr. Bisaro’s employment from January 1, 2014 through June 30, 2014, and the New Employment Agreement governed the terms and conditions of Mr. Bisaro’s employment from July 1, 2014 through December 31, 2014.

 

Under the terms of Mr. Bisaro’s Prior Employment Agreement, Mr. Bisaro was entitled to the following payments and benefits in the event of a termination by us without cause or by Mr. Bisaro for good reason:

 

(1) a lump sum cash payment equal to two times the sum of (i) Mr. Bisaro’s then-current annual base salary and (ii) Mr. Bisaro’s target annual bonus for the year of termination; and
   
(2) continued group health benefits (medical, dental and vision) for Mr. Bisaro and his dependents for up to 36 months.

 

In addition, under his Prior Employment Agreement, in the event that Mr. Bisaro’s employment terminated without cause or he resigned for good reason within 90 days prior to or 12 months following a change in control (as defined in the employment agreement), he would be entitled to the same payments and benefits as in the non-change in control context (as described above), except that (i) the lump-sum cash payment would equal three times (instead of two times) the sum of Mr. Bisaro’s then-current annual base salary and target bonus amount, and (ii) all unvested equity awards held by Mr. Bisaro at the time of his termination would become immediately vested and exercisable.

 

Mr. Bisaro was entitled to the same severance benefits if the Company elected not to renew the agreement at the end of his term of employment. He was also entitled to a prorated bonus based on actual company performance at the end of his employment agreement term in such case, or if, at the end of the term, he retired from the Company or did not agree to enter into a new employment agreement or amendment to the existing agreement extending his employment for a period of at least three years on substantially the same terms as his existing agreement. Finally, he was entitled to a prorated target bonus in the event of his death or disability.

 

In addition, Mr. Bisaro’s Prior Employment Agreement provided that Mr. Bisaro would be entitled to continued or accelerated vesting of his outstanding equity awards in certain circumstances upon his separation from employment with the Company outside of the change in control context. Specifically, if Mr. Bisaro retired from his employment at the end of the agreement term, or the Company did not renew the agreement at the end of the agreement term, or Mr. Bisaro was terminated without cause or resigned for good reason at any time after the 54-month anniversary of the agreement, or was terminated for disability, he would be entitled to continued vesting of his unvested equity awards. Additionally, in the event Mr. Bisaro’s employment was terminated as a result of his death, his estate would be entitled to accelerated vesting of all of his then-unvested equity awards.

 

Under the terms of Mr. Bisaro’s New Employment Agreement, which became effective on July 1, 2014, Mr. Bisaro will be entitled to the following payments and benefits in the event of a termination by us without cause or by Mr. Bisaro for good reason:

 

(1) a lump-sum cash payment equal to two times the sum of (i) Mr. Bisaro’s then-current annual base salary and (ii) Mr. Bisaro’s target bonus amount;

 

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(2) a prorated annual bonus for the year of termination; and
   
(3) continued group health benefits (medical, dental and vision) for Mr. Bisaro and his dependents for up to 24 months following termination.

 

In addition, under his New Employment Agreement, in the event that Mr. Bisaro’s employment terminates without cause or he resigns for good reason within 90 days prior to or 12 months following a change in control (as defined in the employment agreement), he will be entitled to the same payments and benefits as in the non-change in control context (as described above), except that (i) the lump-sum cash payment will equal three times (instead of two times) the sum of Mr. Bisaro’s then-current annual base salary and target bonus amount, and (ii) continued group health benefits will be provided for up to 36 months (instead of up to 24 months) following termination.

 

If the Company elects not to continue Mr. Bisaro’s employment with the Company at the conclusion of the agreement term or any time thereafter on substantially the same terms in effect at the expiration of the New Employment Agreement or on other mutually agreeable terms, then Mr. Bisaro will be entitled to the same payments and benefits as in the non-change of control context (as described above), as well as any accrued compensation obligations to Mr. Bisaro through his termination date, including a pro-rated bonus for the year of termination.

 

If, at the expiration of the New Employment Agreement, Mr. Bisaro retires from the Company or does not agree to enter into a new employment agreement or amendment to the New Employment Agreement extending his employment for a period of at least three years on substantially the same terms as the New Employment Agreement, Mr. Bisaro will be entitled to any accrued compensation obligations through his termination date, including a pro-rated bonus for the year of termination.

 

Maria Teresa Hilado

 

Ms. Hilado participates in our severance pay plan and in our change in control severance pay plan. Under the terms of our severance pay plan, Ms. Hilado is entitled to the following payments and benefits in the event of a termination by us without cause or by Ms. Hilado for good reason:

 

(1) continued payment of Ms. Hilado’s then-current annual base salary for two years following termination;
   
(2) continued group health benefits (medical, dental and vision) for Ms. Hilado and her dependents for up to 24 months following termination;
   
(3) career transition assistance for up to 24 months following termination; and
   
(4) immediate payment of any unpaid portion of her cash sign-on bonus.

 

Under our change in control severance pay plan, in the event Ms. Hilado is terminated by us without cause or resigns for good reason within 24 months following a change in control, she will be entitled to the payments and benefits described in (1), (2), (3) and (4) above, plus an amount equal to two times Ms. Hilado’s target bonus for the year of termination, or, if greater, for the year preceding the change of control. Additionally, the cash payment will be paid in a single lump sum (rather than in installments).

 

Robert A. Stewart

 

Mr. Stewart participates in our severance pay plan and in our change in control severance pay plan. Under the terms of our severance pay plan, Mr. Stewart is entitled to the following payments and benefits in the event of a termination by us without cause or by Mr. Stewart for good reason:

 

(1) continued payment of Mr. Stewart’s then-current annual base salary for two years following termination;
   
(2) continued group health benefits (medical, dental and vision) for Mr. Stewart and his dependents for up to 24 months following termination;
   
(3) career transition assistance for up to 24 months following termination; and
   
(4) continued vesting and payment of Mr. Stewart’s then-outstanding equity awards that were granted prior to July 1, 2014 for two years following termination.

 

Under our change in control severance pay plan, in the event Mr. Stewart is terminated by us without cause or resigns for good reason within 24 months following a change in control, he will be entitled to the payments and benefits described in (1), (2) and (3) above, plus an amount equal to two times Mr. Stewart’s target bonus for the year of termination, or, if greater, for the year preceding the change of control. Additionally, the cash payment will be paid in a single lump sum (rather than in installments).

 

David A. Buchen

 

On February 28, 2000, Mr. Buchen entered into a Key Employee Agreement with Watson Pharmaceuticals, Inc., which was subsequently amended on December 31, 2008 (the “Buchen Employment Agreement”). On May 19, 2014, in connection with management changes following the Forest Merger, Mr. Buchen entered into a retention letter with the Company (the “Buchen Retention Letter”) which superseded the Buchen Employment Agreement. Accordingly, the Buchen Employment Agreement governed the terms and conditions of Mr. Buchen’s employment from January 1, 2014 through May 19, 2014, and the Buchen Retention Letter governed the terms and conditions of Mr. Buchen’s employment from May 19, 2014 through December 31, 2014.

 

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Pursuant to the terms of the Buchen Employment Agreement, Mr. Buchen was entitled to the following payments and benefits in the event of a termination by us without cause or by Mr. Buchen for good reason:

 

(1) a lump sum cash payment payable within 30 days of termination equal to two times the sum of (i) Mr. Buchen’s then-current annual base salary and (ii) the greater of Mr. Buchen’s target annual bonus for the year of termination or the amount of the bonus paid to Mr. Buchen in the year preceding his termination;
   
(2) a prorated target annual bonus for the year of termination;
   
(3) continued group health benefits (medical, dental and vision) for Mr. Buchen and his dependents for up to 24 months following termination;
   
(4) outplacement services for one year with a nationally recognized service selected by us; and
   
(5) if the termination occurred within 90 days prior to or two years following a change in control, acceleration of all equity awards.

 

Pursuant to the terms of the Buchen Retention Letter, Mr. Buchen would receive the following benefits in the event his employment with the Company was terminated (a) by the Company without “cause” (as defined in the Buchen Retention Letter) or (b) by Mr. Buchen in the event he was not serving as the Company’s General Counsel as of January 1, 2015:

 

(1) a lump sum payment equal to two times the sum of (i) his then-current annual base salary, and (ii) his annual cash incentive bonus (calculated based on the higher of the target bonus or the highest bonus Mr. Buchen received in the two years prior to his termination, whichever is greater);
   
(2) a prorated target annual bonus for the year of termination;
   
(3) payment of the retention bonus amounts granted to Mr. Buchen in November 2014, as if Mr. Buchen had been terminated without “cause” (as defined under the terms of his November 2013 retention award agreement);
   
(4) continued group health benefits (medical, dental and vision) for Mr. Buchen and his dependents for up to 24 months following termination; and
   
(5) outplacement services for one year with a nationally recognized service selected by us.

 

In late 2014, the Company announced that Mr. Buchen would not be continuing in his role as Executive Vice President, North American Generics and International, following the closing of the acquisition of Allergan, Inc., and would be departing the Company on or about May 1, 2015. As a result, Mr. Buchen will become entitled to the benefits and payments described in the Buchen Retention Agreement, consisting of (i) two times Mr. Buchen’s pre-July 1, 2014 base salary (or $1,207,500), (ii) two times the bonus paid to Mr. Buchen for the 2014 performance year (or $1,552,500), and (iii) a pro-rated 2015 target bonus (or $116,575).

 

In addition, the portion of Mr. Buchen’s outstanding time-vested restricted stock units granted on May 8, 2014 and July 1, 2014 that would have vested during the 24-month period following Mr. Buchen’s resignation will be paid and delivered in accordance with the schedule provided for under the applicable award agreement and equity award plan, without regard to Mr. Buchen’s continued employment. Mr. Buchen will also remain eligible to vest in his outstanding unvested performance-based restricted stock units granted on May 8, 2014, over a similar 24-month period (with the shares earned to be based on actual Company performance during such extended vesting period and delivered in accordance with the schedule provided for under the applicable award agreement and equity award plan). Lastly, Mr. Buchen will be entitled to receive an amount equal to 50% of his target Merger Success Award, or $2.5 million. The receipt of the foregoing severance benefits is subject to Mr. Buchen’s execution and non-revocation of a release of claims in favor of the Company.

 

William Meury

 

Pursuant to the terms of his employment agreement, Mr. Meury is entitled to the following payments and benefits in the event of a termination by us without cause or by Mr. Meury for good reason (whether or not such termination occurs in connection with a change in control):

 

(1) any accrued compensation obligations to Mr. Meury through the termination date, including a pro-rated “highest annual bonus” (as defined in the employment agreement between Forest Laboratories, Inc. and Mr. Meury);
   
(2) a lump sum payment equal to three times the sum of (i) Mr. Meury’s then-current annual base salary and (ii) Mr. Meury’s highest annual bonus;
   
(3) continued group health benefits (medical, dental and vision) for Mr. Meury and his dependents for 36 months following termination (or longer, if so provided by the terms of the applicable plan, program, policy or practice); and
   
(4) reasonable outplacement benefits until no later than the Company’s second taxable year following the taxable year in which Mr. Meury terminates.

 

R. Todd Joyce

 

Pursuant to the terms of his employment agreement, Mr. Joyce is entitled to the following payments and benefits in the event of a termination by us without cause or by Mr. Joyce for good reason:

 

(1) a lump-sum cash payment payable within 30 days of termination equal to two times the sum of (i) Mr. Joyce’s then-current annual base salary and (ii) the greater of Mr. Joyce’s target annual bonus for the year of termination or the amount of the bonus paid to Mr. Joyce in the year preceding his termination;
   
(2) a prorated annual bonus for the year of termination, in the Company’s discretion;
   
(3) continued group health benefits (medical, dental and vision) for Mr. Joyce and his dependents for up to 18 months;
   
(4) outplacement services for one year with a nationally recognized service selected by us; and
   
(5) if the termination occurs within 90 days prior to or two years following a change in control, acceleration of equity awards.

 

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On December 8, 2014, Mr. Joyce resigned as the Company’s Chief Financial Officer, but remained with the Company through early 2015 to support the transition of his duties. In connection with his resignation, Mr. Joyce became entitled to the benefits and payments described in his employment agreement, consisting of (i) two times Mr. Joyce’s then-current annual base salary (or $1,154,358), (ii) two times the bonus paid to Mr. Joyce in 2013 (or $1,282,122), and (iii) a pro-rated 2015 target bonus (or $16,466).

 

In addition, the portion of Mr. Joyce’s outstanding time-vested restricted stock units granted on May 8, 2014 that would have vested during the 24-month period following Mr. Joyce’s resignation will be paid and delivered in accordance with the schedule provided for under the applicable award agreement and equity award plan, without regard to Mr. Joyce’s continued employment. Mr. Joyce will also remain eligible to vest in his outstanding unvested performance-based restricted stock units granted on May 8, 2014, over a similar 24-month period (with the shares earned to be based on actual Company performance during such extended vesting period and delivered in accordance with the schedule provided for under the applicable award agreement and equity award plan). The receipt of the foregoing severance benefits was subject to Mr. Joyce’s execution and non-revocation of a release of claims in favor of the Company.

 

Sigurdur Olafsson

 

Prior to May 19, 2014, Mr. Olafsson participated in our severance pay plan and in our change in control severance pay plan. On May 19, 2014, in connection with management changes following the Forest Merger, the Company entered into a retention letter with Mr. Olafsson (the “Olafsson Retention Letter”). Accordingly, our severance pay plan and change in control severance pay plan governed the terms and conditions of Mr. Olafsson’s employment from January 1, 2014 through May 18, 2014, and the Olafsson Retention Letter governed the terms and conditions of Mr. Olafsson’s employment from May 19, 2014 through June 30, 2014.

 

Under the terms of our severance pay plan, Mr. Olafsson was entitled to the following payments and benefits in the event of a termination by us without cause or by Mr. Olafsson for good reason:

 

(1) continued payment of Mr. Olafsson’s then-current annual base salary for two years following termination; and
   
(2) continued group health benefits (medical, dental and vision) for Mr. Olafsson and his dependents for up to 24 months following termination; and
   
(3) career transition assistance for up to 24 months following termination.

 

Under our change in control severance pay plan, in the event that Mr. Olafsson’s employment was terminated by the Company due to a lay-off or he resigned due to a relocation of his principal place of employment by more than 50 miles or a material reduction in his base pay, in any case, within 12 months following a change of control (as defined in the change of control severance pay plan), he would be entitled to the same payments and benefits as in the non-change in control context (as described above), except that the cash payment would be paid in a single lump sum (rather than in installments).

 

Pursuant to the terms of the Olafsson Retention Letter, Mr. Olafsson would receive the following benefits in the event his employment with the Company was terminated during calendar year 2014 (a) by the Company without “cause” (as defined in the Olafsson Retention Letter) or (b) by Mr. Olafsson after the earlier of the closing of the Forest Merger and July 1, 2014:

 

(1) a lump sum payment equal to two times the sum of (i) his then-current annual base salary, and (ii) his annual cash incentive bonus (calculated based on the higher of the target bonus or the highest bonus Mr. Olafsson received in the two years prior to his termination, whichever is greater);
   
(2) the full amount of the retention bonus amounts granted to Mr. Olafsson in November 2013, as if Mr. Olafsson had been terminated without cause (as defined under the terms of his November 2013 retention award agreement); and
   
(3) continued health and welfare benefits under the Company’s plans at the employee rate for Mr. Olafsson and his eligible dependents for up to 24 months following his termination date.

 

Any amounts payable to Mr. Olafsson pursuant to the Olafsson Retention Letter would be reduced, dollar for dollar, by any cash severance benefits to which Mr. Olafsson would otherwise be entitled pursuant to any severance plan of, or any offer letter or employment agreement he has with, the Company.

 

On June 30, 2014, Mr. Olafsson resigned as President – Actavis Pharma. Pursuant to the terms of a separation agreement entered into between Mr. Olafsson and Actavis, Inc., in connection with his resignation, Mr. Olafsson became entitled to a pro-rated bonus for 2014 (in an amount equal to $334,726.03) and the benefits and payments described in the Olafsson Retention Letter, consisting of (i) two times Mr. Olafsson’s then-current annual base salary (or $1,500,000), (ii) an accelerated retention award payout in the amount of $4 million, and (iii) two times Mr. Olafsson’s highest bonus received in the two years prior to his termination (or $2,004,752).

 

Excise Tax

 

Pursuant to his employment agreement, which has not been amended since 2009, Mr. Joyce was entitled to receive a tax gross-up payment to compensate him for any excise taxes payable under Sections 280G of and 4999 of the Internal Revenue Code with respect to the payments and benefits received by the applicable executive in connection with a change in control.

 

Pursuant to their respective employment agreements (in the case of Messrs. Saunders, Bisaro, Buchen and Meury) or our change in control severance plan (in the case of Ms. Hilado or Mr. Stewart), to the extent that any payment or benefit received by the Named Executive Officer in connection with a change in control would be subject to an excise tax under Section 4999 of the Internal Revenue Code, such payments and/or benefits will be subject to a “best pay cap” reduction if such reduction would result in a greater net after-tax benefit to the applicable executive than receiving the full amount of such payments.

 

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Conditions to Payment

 

In order to receive their severance benefits, the Named Executive Officers, other than Mr. Meury, are required to execute a release of claims against the Company.

 

In addition, in order to receive their severance benefits, each of Messrs. Saunders and Bisaro are required to comply with certain restrictive covenants included in their employment agreements, consisting of (i) limitations on soliciting or interfering with the Company’s employees, customers, suppliers, licensees, or other business associates for a one-year period following the executive’s termination of employment; (ii) restrictions on competing with Actavis for a one-year period following termination; and (iii) non-disparagement and cooperation covenants effective for twenty-four months following termination. In the event that Mr. Saunders or Mr. Bisaro incurs a termination of employment that does not entitle him to severance, the Company may elect to pay the executive a lump sum cash amount equal to his then-current base salary and target bonus in exchange for the applicable executive’s agreement to comply with the non-competition restrictions described above.

 

In order to receive their respective severance benefits, Mr. Joyce must comply with a one-year non-solicitation covenant that requires him not to solicit any of our employees or independent contractors, and Mr. Meury must comply with a one-year noncompetition covenant.

 

The Named Executive Officers’ incentive payments are subject to potential recoupment in the event of certain restatements of our financial results, as described above under “Compensation Discussion and Analysis”.

 

ESTIMATED TERMINATION PAYMENTS

 

In accordance with the requirements of the rules of the SEC, the table below indicates the amount of compensation payable by us to each Named Executive Officer upon certain types of termination of employment. The amounts assume that such termination was effective as of December 31, 2014 and thus include amounts earned through such date and are only estimates of the amounts that would actually be paid to such executives upon their termination. The severance benefits that Mr. Olafsson became entitled to receive upon his resignation on June 30, 2014 are described above (rather than included in the table below).

 

The table does not include certain amounts that the Named Executive Officers are entitled to receive under certain plans or arrangements that do not discriminate in scope, terms or operation in favor of our Named Executive Officers and that are generally available to all salaried employees, such as payment of accrued vacation. The table also does not include the accrued and vested accounts of the executives under our Deferral Plan. These amounts are generally distributed to our executives upon a termination of employment, regardless of the reason, in accordance with his or her election under the applicable plan. The accrued and vested amounts under the Deferral Plan are set forth in the table under “2014 Nonqualified Deferred Compensation” on page 42.

 

Trigger   Cash
Severance(1)
  Health &
Welfare
Benefits(2)
  Outplacement(3)   Restricted
Stock(4)
  Performance
Shares(5)
  Stock
Options(6)
  Merger
Success
Award(7)
  Retention/
Sign-on
Bonus(8)
  Excise
Tax
Gross-up
  Total
Brenton L. Saunders                                  
Good Reason or Without Cause   10,839,432   103,930   12,900   20,917,907   2,696,392   28,732,656       N/A   63,303,218
Qualifying Termination in Event of Change in Control   10,839,432   103,930   12,900   20,917,907   20,048,590   32,229,046   22,500,000     N/A   106,651,806
Paul M. Bisaro                                    
Good Reason or Without Cause   3,600,000   62,358       2,010,459       5,000,000   N/A   10,672,817
Qualifying Termination in Event of Change in Control   5,400,000   108,287     2,612,712   21,087,930   2,606,949   15,750,000   5,000,000   N/A   52,565,877
Maria Teresa Hilado                            
Good Reason or Without Cause   1,090,000   62,358   12,900     51,814       3,000,000   N/A   4,217,072
Qualifying Termination in Event of Change in Control   2,180,000   62,358   12,900   2,907,703   2,821,172     7,500,000   3,000,000   N/A   18,484,133

 

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Trigger   Cash
Severance(1)
  Health &
Welfare
Benefits(2)
  Outplacement(3)   Restricted
Stock(4)
  Performance
Shares(5)
  Stock
Options(6)
  Merger
Success
Award(7)
  Retention/
Sign-on
Bonus(8)
  Excise
Tax
Gross-up
  Total
Robert A. Stewart                                    
Good Reason or Without Cause   1,430,000   62,358   12,900   435,409   2,121,017       3,000,000   N/A   7,061,684
Qualifying Termination in Event of Change in Control   3,430,700   62,358   12,900   870,818   6,970,903   858,771   7,500,000   3,000,000   N/A   22,706,450
David A. Buchen                                        
Good Reason or Without Cause   2,668,000   42,352   6,450     1,329,855       1,000,000   N/A   5,046,657
Qualifying Termination in Event of Change in Control   2,668,000   42,352   6,450   2,781,572   6,011,576   736,089   7,500,000   1,000,000   N/A   20,746,039
William Meury                                        
Good Reason or Without Cause   3,303,498   $103,930   12,900   6,956,750   496,712   7,535,977       N/A   18,409,767
Qualifying Termination in Event of Change in Control   3,303,498   $103,930   12,900   6,956,750   3,693,221   8,180,055   7,500,000     N/A   29,750,354
R. Todd Joyce                                        
Good Reason or Without Cause   2,382,122   41,572   6,450   326,525   1,531,570       1,000,000   N/A   5,288,238
Qualifying Termination in Event of Change in Control   2,382,122   41,572   6,450   653,049   4,788,214   567,402   7,500,000   1,000,000     16,938,809
(1) See the above narrative disclosure for a description of the cash severance benefits payable to the Named Executive Officers.
(2) See the above narrative disclosure for a description of the health and welfare benefits payable to the Named Executive Officers.
(3) See the above narrative disclosure for a description of the outplacement services provided to the Named Executive Officers.
(4) In the event of termination without a change in control, for Messrs. Stewart, Buchen and Joyce and Ms. Hilado, represents a portion of restricted stock awards which may continue to vest following termination; for Messrs. Saunders and Meury, represents restricted shares granted prior to the Forest Merger, subject to full acceleration upon the termination date. For all Named Executive Officers, all restricted shares will accelerate upon termination in connection with a chance in control.
(5) In the event of termination without a change in control, for all Named Executive Officers, represents the pro-rated value of the Performance Share Units granted in July 1, 2014 based on target performance (upon an actual termination without a change in control, payout is based an actual performance at the conclusion of the performance period); for Messrs. Stewart, Buchen and Joyce, also includes a portion of performance share awards which may continue to vest following termination. For all Named Executive Officers, in the event of termination in connection with a change in control, represents the value of the Performance Share Units based on performance to date (upon an actual termination following a change in control, employees are entitled to the greater of (a) the pro-rated award at target or (b) award based on performance to date); for Messrs. Stewart, Buchen and Joyce, also includes additional performance share awards at target.
(6) In the event of termination without a change in control, for Messrs. Saunders and Meury, represents stock option grants prior to the Forest Merger, subject to full acceleration upon the termination date. For all Named Executive Officers, all stock options will accelerate upon termination in connection with a change in control.
(7) For all Named Executive Officers, represents the Merger Success Award value at an estimated performance level to date of 150% of target.
(8) For Messrs. Bisaro, Stewart, Buchen and Joyce, represents the vesting of cash retention bonus awards granted in connection with the Warner Chilcott acquisition in 2013. For Ms. Hilado, represents her outstanding cash sign-on award.

 

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CERTAIN DEFINITIONS

 

Change in Control

 

Pursuant to the terms of Mr. Saunders’ employment agreement and Mr. Bisaro’s New Employment Agreement, and under the terms or our severance pay plan and change of control severance pay plan (in which Ms. Hilado and Mr. Stewart participate and Mr. Olafsson participated through May 19, 2014), a “change in control” generally means (i) the acquisition by an individual, entity or group of more than 50% of the total fair market value of our ordinary shares or the combined voting power of our voting securities, or during any 12-month period, of 50% or more of our outstanding voting securities; (ii) the replacement of the majority of our incumbent directors by individuals not approved by a majority of our incumbent Board; or (iii) the consummation of a reorganization, merger, consolidation or sale of all or substantially all of the assets of the Company, unless (a) owners of our ordinary shares and voting securities immediately prior to such transaction own more than 50% of the common shares and combined voting power of the resulting corporation, (b) no person owns more than 50% of the combined voting power of the resulting corporation unless that ownership existed prior to the transaction, and (c) a majority of our Board members following the transaction were members of our incumbent Board.

 

Pursuant to the terms of Mr. Bisaro’s Prior Employment Agreement, Mr. Joyce’s employment agreement and the Buchen Employment Agreement, a “change in control” generally means (i) a sale of assets representing 50% or more of our net book value and fair market value; (ii) our liquidation or dissolution; (iii) a merger, consolidation or other transaction involving us after the completion of which our shareholders before the transaction represent less than 50% of the voting power of our shareholders following the transaction; (iv) the acquisition by a person or group of more than 50% of the combined voting power of the Company; or (v) the replacement of the majority of our incumbent directors by individuals not approved by a majority of our incumbent Board.

 

Pursuant to the terms of Mr. Meury’s employment agreement, a “change in control” generally means (i) the acquisition by an individual, entity or group of more than 50% of the total fair market value of our common stock or the combined voting power of our voting securities, or during any 12-month period, of 30% or more of our outstanding voting securities; (ii) the replacement of the majority of our incumbent directors by individuals not approved by a majority of our incumbent Board; or (iii) consummation of a reorganization, merger, consolidation or sale of all or substantially all of our assets, unless (a) owners of our ordinary shares and voting securities immediately prior to such transaction own more than 50% of the common stock and combined voting power of the resulting corporation, (b) no person owns more than 30% of the combined voting power of the resulting corporation unless that ownership existed prior to the transaction, and (c) a majority of our Board members following the transaction were members of our incumbent Board.

 

Good Reason

 

Pursuant to the terms of Mr. Saunders’ employment agreement and Mr. Bisaro’s New Employment Agreement, a termination for “good reason” means that the executive has terminated his employment with us due to (i) a material diminution in his base salary; (ii) the assignment to him of duties that are materially inconsistent with his position, duties, or responsibilities; (iii) any change in the geographic location at which he performs his services to the Company outside of a 75 mile radius of the city limits of Parsippany, New Jersey; or (iv) any other material breach of his employment agreement.

 

Pursuant to the terms of Mr. Bisaro’s Prior Employment Agreement, a termination for “good reason” means that the executive has terminated his employment with us because (i) we failed to re-elect him to, or removed him from, the position of President and Chief Executive Officer; (ii) of a material diminution of his duties, and responsibilities, taken as a whole; (iii) we failed to appoint or re-nominate him as a member of our Board; (iv) the assignment to him of duties that are materially inconsistent with, or materially impair his ability to perform, the duties customarily assigned to a President and Chief Executive Officer of a corporation of the size and nature of ours; (v) we changed our reporting structures such that he reports to someone other than the Board; (vi) we materially breached our obligations under his employment agreement; (vii) we failed to obtain an assumption of his employment agreement by any successor or assignee; or (viii) we cause him to commit fraud or expose him to criminal liability.

 

Pursuant to the terms of our severance pay plan (in which Ms. Hilado and Mr. Stewart participate and Mr. Olafsson participated through May 19, 2014), a termination for “good reason” means that the executive has terminated his employment with us because the Company decided to relocate his or her principal work site such that his or her one-way commuting distance increases by more than 50 miles.

 

Pursuant to the terms of our change in control severance pay plan (in which Ms. Hilado and Mr. Stewart participate and Mr. Olafsson participated through May 19, 2014), a termination for “good reason” means that the executive has terminated his or her employment with us because (i) his or her base pay was reduced by 10% or more; (ii) the Company decided to relocate his or her principal work site such that his or her one-way commuting distance increases by more than 50 miles; or (iii) he or she was assigned duties inconsistent in any material respect with his or her authority, duties, or responsibilities as in effect immediately prior to the change in control.

 

Pursuant to the terms of the Buchen Employment Agreement, a termination for “good reason” generally means that Mr. Buchen has terminated his employment with us because of (i) a material reduction of his then existing annual base salary, except to the extent the annual base salary of all other executive officers at levels similar to Mr. Buchen is similarly reduced (provided such reduction does not exceed 15% of Mr. Buchen’s then existing base salary); (ii) a material reduction in his package of benefits and

 

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incentives, taken as a whole or any action by the Company which would materially and adversely affect Mr. Buchen’s participation or reduce his benefits under any such plans, except to the extent that such benefits and incentives of all other executive officers are similarly reduced; (iii) a material diminution of Mr. Buchen’s duties, responsibilities, authority, reporting structure; (iv) a requirement that he relocate such that the distance of his one-way commute is increased by more than 35 miles; (v) we materially breached our obligations under his employment agreement; or (vi) we failed to obtain the assumption of his employment agreement by any successor or assign.

 

Pursuant to the terms of Mr. Meury’s employment agreement, a termination for “good reason” means that Mr. Meury has terminated his employment with us due to (i) any action by the Company, including the assignment to Mr. Meury of any duties inconsistent in any material respect with his position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, which results in a material diminution in his position, authority, duties or responsibilities; (ii) any material failure by the Company to comply with certain sections Mr. Meury’s employment agreement; or (iii) any material change in the geographic location at which Mr. Meury must perform services to the Company.

 

Pursuant to the terms of Mr. Joyce’s employment agreement, a termination for “good reason” means that he has terminated his employment with us because (i) after a change in control, there is (a) a material reduction of his then existing annual base salary, except to the extent the annual base salary of all other executive officers at levels similar to Mr. Joyce is similarly reduced (provided such reduction does not exceed 15% of Mr. Joyce’s then existing base salary), (b) a material reduction in his package of benefits and incentives, taken as a whole, except to the extent that such benefits and incentives of all other executive officers at levels similar to Mr. Joyce are similarly reduced, (c) a material diminution of his duties and responsibilities, taken as a whole, or (d) a requirement that he relocate such that the distance of his one-way commute is increased by more than 35 miles; (ii) we materially breached our obligations under his employment agreement; or (iii) we failed to obtain the assumption of his employment agreement by any successor or assign.

 

Cause

 

Pursuant to the terms of Mr. Saunders’ employment agreement and Mr. Bisaro’s New Employment Agreement, a termination for “cause” means that we have terminated Mr. Saunders or Bisaro because of (i) his refusal to perform or substantially perform his duties with the Company, other than due to periods of illness, injury or incapacity, or to follow the lawful instructions of the Board; (ii) his illegal conduct or gross misconduct; (iii) a material breach of his obligations under the employment agreement; (iv) a conviction of, or entry of a plea of guilty or nolo contendere with respect to, a felony or a crime involving moral turpitude; (v) a prohibition or restriction from performing any material portion of his duties by applicable law; or (vi) a willful breach of the material policies of the Company to which he is subject and which have been previously made available to him.

 

Pursuant to the terms of Mr. Bisaro’s Prior Employment Agreement, the Olafsson Retention Letter and the Buchen Retention Letter, a termination for “cause” means that we have terminated Mr. Bisaro, Mr. Olafsson or Mr. Buchen because of (i) his fraud, misrepresentation embezzlement or other act of material misconduct against us; (ii) his gross neglect, willful malfeasance or gross misconduct in connection with this employment; (iii) his conviction or plea of guilty or nolo contendere to a felony that negatively impacts us economically or our reputation, as reasonably determined by the Board; (iv) his willful and knowing violations of any rules or regulations of any governmental or regulatory body material to our business; (v) his failure to cooperate, if requested by the Board, with any internal or external investigation or inquiry into our business practices; or (vi) his substantial and willful failure to render services in accordance with the terms of his employment agreement.

 

Pursuant to the terms of our severance pay plan and change in control severance pay plan (in which Ms. Hilado and Mr. Stewart participate and Mr. Olafsson participated through May 19, 2014), a termination for “cause” means that we have terminated the executive because of (i) the executive’s unsatisfactory performance or misconduct (including, but not limited to, conviction of any felony or a material violation of a Company policy); or (ii) the executive’s material breach of his or her duties to us, which he or she fails to correct within thirty (30) days after he or she is given written notice by his or her immediate supervisor, designated Company officer, or one of their designees.

 

Pursuant to the terms of Mr. Joyce’s employment agreement, a termination for “cause” means that we have terminated Mr. Joyce because of (i) his conviction of any felony; (ii) his gross misconduct, material violation of Company policy, or material breach of his duties to the Company, which he fails to correct within thirty (30) days after he is given written notice by the CEO; or (iii) his failure to relocate his principal residence by August 1, 2010 to a location in reasonable day-to-day proximity to the Company’s commercial headquarters located in New Jersey.

 

Pursuant to the terms of Mr. Meury’s employment agreement, a termination for “cause” means that we have terminated Mr. Meury because of (i) his willful and continuous failure to performance substantially his duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to him by the Board or the Chief Executive Officer which specifically identifies the manner in which the Board or Chief Executive Officer believes that he has not substantially performed his duties; or (ii) his willful engaging in illegal misconduct or gross misconduct which is materially and demonstrably injurious to the Company.

 

Pursuant to the terms of the Buchen Employment Agreement, a termination for “cause” means that we have terminated Mr. Buchen because of (i) his conviction for any felony; or (ii) his gross misconduct, material violation of our policies, or material breach of his duties to us, which he fails to correct within thirty (30) days after he is given written notice by our Chief Executive Officer or another designated officer.

 

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DIRECTOR COMPENSATION

 

Following the closing of our merger with Warner Chilcott, the Company assumed the Actavis, Inc. compensation program for its directors, with certain changes. Pursuant to this program, all members of the Board of Directors who were not full-time employees of the Company received an annual fee equal to $65,000 and a grant of restricted shares valued at $225,031 (with the exception of Ms. Basgoz and Messrs. Coughlin and Michal, as described below) on the date of such grant for 2014. In addition, in 2014, non-employee directors were paid $4,000 for each Board meeting personally attended and $1,000 for each meeting attended telephonically. Directors were also paid $1,500 for each Committee meeting personally attended and $1,000 for each Committee meeting attended telephonically. Our lead independent director also received an additional annual fee of $50,000. Andrew L. Turner served as our lead independent director until May 2014, after which Catherine M. Klema began serving as our lead independent director. As compensation for serving as committee chairmen, (i) the Chairman of the Audit and Compliance Committee received an additional annual fee of $20,000, (ii) the Chairman of the Compensation Committee received an additional annual fee of $15,000, and (iii) the Chairmen of each of the Nominating and Corporate Governance Committee and Quality and Operations Committee received an additional annual fee of $12,500.

 

All directors were reimbursed for expenses incurred in connection with attending Board and Committee meetings. In addition, as expense reimbursements are subject to payment of Irish tax under an interpretation by the Irish Revenue authorities, the Company provides a gross-up in connection with expense reimbursements to the non-employee directors in order to avoid any adverse economic effects of this Irish income inclusion. In addition, non-employee directors were eligible to receive a tax equalization payment to avoid the impact of double taxation.

 

Messrs. Saunders, Bisaro and Olafsson, who were also employed by us during 2014, did not receive additional compensation for their service as directors during 2014.

 

As noted above, in order to better align the interests of our Board with those of our shareholders in a fair and reasonable manner, as well as to implement what we believe is a corporate governance “best practice,” we adopted share ownership guidelines for our senior executives and directors in 2012. Our ownership guidelines require our directors to hold shares in the Company in an amount at least equal in value to four times their annual base director’s fee. Under our guidelines, restricted shares, as well as vested shares owned by a director, are included in the calculation. Each of our directors is currently in compliance with the Company’s share ownership guidelines.

 

The following table sets forth the annual compensation paid by the Company to each person who served as a non-employee director during 2014:

 

Name  Fees Earned or
Paid in Cash
($)(1)
   Restricted
Share Awards
($)(2)
   Equalization Payments
and Tax Gross-up
on Expense
Reimbursement
($)(3)
    Total
($)
 
Nesli Basgoz   26,750    168,788    15,545     211,083 
James H. Bloem   106,392    225,031    71,288     402,711 
Christopher W. Bodine   73,446    225,031    48,267     346,744 
Christopher J. Coughlin   28,250    168,788    14,290     211,328 
Tamar D. Howson(4)   106,892    225,031    61,741     393,664 
John A. King(4)   98,392    225,031    38,955     362,378 
Catherine M. Klema   83,321    225,031    62,796     371,148 
Jiri Michal(4)   110,303    362,375    43,396     516,074 
Jack Michelson(5)   26,000        17,863     43,863 
Patrick J. O’Sullivan   106,929    225,031    1,606     333,029 
Ronald R. Taylor   77,929    225,031    68,041     371,001 
Andrew L. Turner(4)   63,036    225,031    87,277     375,344 
Fred G. Weiss   78,393    225,031    77,167     380,591 
(1) Includes annual cash retainer fees, meeting fees and chairperson fees, if applicable.
(2) Consists of the annual grant of restricted shares to non-employee directors, equal to 1,142 shares of restricted stock with a per share fair value of $197.05 granted on May 8, 2014, with the exception of (i) Ms. Basgoz and Mr. Coughlin, who each received 694 shares of restricted stock with a per share fair value of $243.21 on October 30, 2014 in connection with their appointment to the Board following the closing of the Forest transaction and (ii) Mr. Jiri Michal, who received 1,839 shares of restricted stock with a per share fair value of $197.05 on May 8, 2014, which included an additional prorated amount in connection with Mr. Michal’s service on the Board from October 1, 2013 through May 9, 2014, for which he did not receive an earlier grant.
(3) Includes tax gross-ups on business expense reimbursements associated with non-employee director travel to Board meetings in Ireland, which are subject to payment of Irish tax under an interpretation by the Irish Revenue authorities and a tax equalization payment to avoid the impact of double taxation.
(4) Resigned effective March 17, 2015.
(5) Resigned effective May 9, 2014.

 

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Stock Ownership of Certain Beneficial Owners

 

The following table sets forth the name, address (where required) and beneficial ownership of each person (including any “group” as defined in Section 13(d)(3) of the Exchange Act) known by us to be the beneficial owner of more than 5% of our ordinary shares, based on filings made under Section 13 of the Exchange Act as of April 10, 2015:

 

Name of Beneficial Owner Amount and Nature of Beneficial
Ownership(1)
Percent of Class
FMR LLC
245 Summer Street

Boston, MA 02210
19,562,845(2) 5.0%
(1) Unless otherwise indicated in the footnotes to this table and pursuant to applicable community property laws, we believe the persons named in this table have sole voting and investment power with respect to all ordinary shares reflected in this table. As of April 10, 2015, 392,769,263 of our ordinary shares were issued and outstanding.
(2) According to a Schedule 13G/A filed with the SEC on February 13, 2015 by FMR LLC, FMR LLC is the beneficial owner of 19,562,845 shares (with sole voting power with respect to 1,196,501 shares and sole dispositive power with respect to 19,562,845 shares).

 

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Stock Ownership of Directors and Executive Officers

 

The following table sets forth, as of March 20, 2015, based on 391,739,928 ordinary shares outstanding as of that date, the beneficial ownership of Actavis ordinary shares (including rights to acquire shares within 60 days of March 20, 2015) by (i) each Actavis director and director nominee; (ii) each Actavis Named Executive Officer and (iii) all current directors and executive officers (including NEOs) as a group. No shares have been pledged as security by any of the Actavis directors or executive officers named below. No individual director, nominee or Named Executive Officer beneficially owned more than 1% of Actavis’ ordinary shares.

 

Unless otherwise indicated in the footnotes to this table and pursuant to applicable community property laws, Actavis believes the persons named in this table have sole voting and investment power with respect to all ordinary shares reflected in this table. The business address of Actavis’ directors and NEOs is 1 Grand Canal Square, Docklands, Dublin 2, Ireland.

 

    Amount and Nature of
Beneficial Ownership
 
Name   Ordinary
Shares
(#)(1)
    Rights to
Acquire
Shares
(Options)
(#)
    Rights to
Acquire
Shares
(Restricted
Stock Units)
(#)
    Total
(#)
 
Directors (excludes executive officer directors)                    
Nesli Basgoz, M.D.   3,120    19,726         22,846 
James H. Bloem   8,942             8,942 
Christopher W. Bodine   12,771             12,771 
Christopher J. Coughlin   1,661    15,927         17,588 
Michael R. Gallagher(2)   12,964        17,641    30,605 
Catherine M. Klema   20,750             20,750 
Peter J. McDonnell, M.D.   2,065            2,065 
Patrick J. O’Sullivan   3,412             3,412 
Ronald R. Taylor   23,084             23,084 
Fred G. Weiss   25,417             25,417 
Named Executive Officers                    
Paul M. Bisaro   402,865            402,865 
Brenton L. Saunders   39,415    105,394    21,283    166,092 
Maria Teresa Hilado                
Robert A. Stewart   42,236            42,236 
David A. Buchen   60,988            60,988 
William Meury   51,015    88,227    15,906    155,148 
R. Todd Joyce(3)   40,000            40,000 
Sigurdur Olafsson(4)   71,947              71,947 
All current directors and executive officers as a group (24 individuals)   846,541    269,547    58,373    1,174,461 
(1) Ordinary shares includes voting securities represented by shares held of record, shares held by a bank, broker or nominee for the person’s account and shares held through family trust arrangements, including any shares of restricted stock which remain subject to sale restrictions.
(2) Includes 17,641 phantom share units representing an equal number of ordinary shares which, upon termination of the director’s service on our Board of Directors, the director has the right to receive.
(3) Includes ordinary shares held by the Joyce Family Trust. Mr. Joyce is no longer an officer or employee of Actavis and the amount shown reflects his share ownership as of the date of his last Form 4 filing with the SEC. Mr. Joyce’s last Form 4 was filed on July 3, 2014.
(4) Information is as of June 30, 2014, the last day of Mr. Olafsson’s service to the Company.

 

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PROPOSAL NO. 2   NON-BINDING VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY VOTE”)

 

BACKGROUND

 

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 we are providing our shareholders the opportunity to vote to approve, on an advisory (non-binding) basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement. The Company has determined to hold such say-on-pay advisory vote every year and expects to hold its next say-on-pay advisory vote at the 2016 Annual Meeting of Shareholders.

 

SUMMARY

 

In accordance with Section 14A of the Securities and Exchange Act of 1934, as amended, we are asking our shareholders to provide advisory approval of the compensation of our Named Executive Officers (which consist of our Chief Executive Officer, Chief Financial Officer and our next three highest paid executives), as such compensation is described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation and the accompanying narrative disclosure set forth in this Proxy Statement, beginning on page 20. Our executive compensation programs are designed to enable us to attract, motivate and retain executive talent, who are critical to our success. These programs link compensation to the achievement of pre-established corporate financial performance objectives and other key objectives within each executive’s area of responsibility and provide long-term incentive compensation that focuses our executives’ efforts on building shareholder value by aligning their interests with those of our shareholders. The following is a summary of some of the key points of our executive compensation program. We urge our shareholders to review the “Compensation Discussion and Analysis” section of this Proxy Statement and executive-related compensation tables for more information.

 

Performance-Based Compensation. Our executive compensation program includes (i) cash awards that are linked to measurable annual individual, business and strategic objectives and corporate financial goals; and (ii) performance-based equity incentives that are directly linked to the creation of long-term, sustainable shareholder value.
   
Long-Term Compensation. Grants of performance share units and stock options are intended to align the interests of executives with our shareholders and focus executives’ attention on long-term growth. In addition, even after performance awards are earned, they continue to be subject to service vesting requirements to promote executive retention and a longer-term perspective.
   
Independent Compensation Consultation. The Compensation Committee has engaged an independent global executive compensation consulting firm, Frederic W. Cook & Co., Inc., to advise the committee on matters related to executive compensation.

 

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RECOMMENDATION

 

Our Board of Directors believes that the information provided above and within the “Compensation Discussion and Analysis” section of this Proxy Statement demonstrates that our executive compensation program was designed appropriately and is working to ensure that management’s interests are aligned with our shareholders’ interests to support long-term value creation.

 

The text of the resolution in respect of Proposal No. 2 is as follows:

 

“RESOLVED, that the compensation of Actavis’ Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in this Proxy Statement be and is hereby approved.”

 

The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board of Directors. However, the Compensation Committee will consider the outcome of the vote in deciding whether to take any action as a result of the vote and when making future compensation decisions for Named Executive Officers.

 

REQUIRED VOTE

 

A simple majority of votes cast at the Annual Meeting is required to approve, on an advisory (non-binding) basis, the compensation of our Named Executive Officers. Abstentions and broker non-votes will not have any effect on the outcome of this proposal because neither an abstention nor a broker non-vote represents a vote cast.

 

Our Board of Directors recommends that shareholders vote FOR adoption of the resolution approving, on an advisory basis, the compensation of the Company’s Named Executive Officers, as described in the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in this Proxy Statement.

 

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PROPOSAL NO. 3   NON-BINDING RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS AND BINDING AUTHORIZATION OF THE BOARD TO DETERMINE ITS REMUNERATION

 

The firm of PricewaterhouseCoopers LLP has audited our consolidated financial statements since our inception, and the Board of Directors recommends that the shareholders ratify, in a non-binding vote, the appointment of PricewaterhouseCoopers LLP to audit our consolidated financial statements for the fiscal year ending December 31, 2015 and to authorize, in a binding vote, the Board of Directors, acting through the Audit and Compliance Committee, to determine PricewaterhouseCoopers LLP’s renumeration. Representatives of that firm are expected to be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from shareholders.

 

We have been informed by PricewaterhouseCoopers LLP that neither the firm nor any of its members or their associates has any direct financial interest or material indirect financial interest in us or our affiliates.

 

Shareholder ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm is not required by our Articles of Association or otherwise. However, the Board of Directors is submitting the appointment of PricewaterhouseCoopers LLP to the shareholders entitled to vote at the Annual Meeting for ratification as a matter of good corporate practice. If the shareholders fail to ratify the appointment, the Audit and Compliance Committee will reconsider whether or not to retain that firm. Even if the appointment is ratified, the Audit and Compliance Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our best interests and in the best interests of our shareholders.

 

RECOMMENDATION

 

The text of the resolution in respect of Proposal No. 3 is as follows:

 

“To ratify, in a non-binding vote, the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company until the next annual general meeting of the Company in 2016 and to authorize, in a binding vote, the Board, acting through the Audit and Compliance Committee, to determine its remuneration.”

 

REQUIRED VOTE

 

A simple majority of votes cast at the Annual Meeting is required to ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year December 31, 2015 and authorize the Board of Directors acting through the Audit and Compliance Committee, to determine PricewaterhouseCoopers LLP’s remuneration. Abstentions will not have any effect on the outcome of this proposal because an abstention does not represent a vote cast. The ratification of PricewaterhouseCoopers LLP is a matter on which a broker or other nominee has discretionary voting authority, and thus, we do not expect any broker non-votes with respect to this proposal.

 

The Board of Directors unanimously recommends a vote FOR the non-binding ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2015 and the binding authorization of the Board of Directors, acting through the Audit and Compliance Committee, to determine PricewaterhouseCoopers LLP’s remuneration.

 

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Audit Fees

 

The aggregate fees billed or expected to be billed by PricewaterhouseCoopers LLP, our independent registered public accounting firm, in fiscal years 2014 and 2013 were as follows:

 

Services    2014      2013  
Audit Fees  $21,086,000   $19,831,000 
Audit-Related Fees   4,794,000    4,824,000 
Total Audit and Audit-Related Fees   25,880,000    24,655,000 
Tax Fees   7,060,000    4,190,000 
All Other Fees   186,000    74,000 
TOTAL FEES  $33,126,000   $28,920,000 

 

AUDIT FEES

 

Audit Fees include professional services rendered in connection with the annual audits of our financial statements, including statutory filings required by regulation, and internal control over financial reporting and the reviews of the financial statements included in our Form 10-Qs covering quarterly periods during the related year. Additionally, Audit Fees include other services that only an independent registered public accounting firm can reasonably provide, such as services associated with SEC registration statements and security offerings, comfort letters or other documents filed with the SEC.

 

AUDIT-RELATED FEES

 

Audit-Related Fees include accounting consultations and review procedures related to accounting, financial reporting or disclosure matters not classified as “Audit Fees,” due diligence fees associated with our acquisitions and business development and divestiture activity, audits of employee benefit plans and other attest services related to financial reporting matters in connection with our acquisitions.

 

TAX FEES

 

Tax fees include tax compliance for our foreign subsidiaries, tax advice in connection with certain acquisitions and other tax advice and tax planning services. Tax fees in 2014 include $4,795,000 for tax consulting services mainly related to our integration of Forest and Warner Chilcott businesses and $2,265,000 for services provided in connection with tax audits, transfer pricing and other tax compliance/preparation services. Tax Fees in 2013 include $3,346,000 for tax consulting services mainly related to our integration of the Actavis and Warner Chilcott businesses, and $844,000 for compliance services including providing services for tax audits, transfer pricing and other compliance matters.

 

ALL OTHER FEES

 

All Other Fees in 2014 and 2013 consist of fees for miscellaneous services not characterized as audit services, audit related services or tax services.

 

The Audit and Compliance Committee believes that the provision of all non-audit services rendered is compatible with maintaining PricewaterhouseCoopers LLP’s independence.

 

The Audit and Compliance Committee approved all audit and non-audit services provided by PricewaterhouseCoopers LLP in 2014. The Audit and Compliance Committee has adopted a policy to pre-approve all audit and certain permissible non-audit services provided by PricewaterhouseCoopers LLP. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to type of services to be provided by PricewaterhouseCoopers LLP and the estimated fees related to these services. During the approval process, the Audit and Compliance Committee considers the impact of the types of services and the related fees on the independence of PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP and management are required to periodically report to the full Audit and Compliance Committee regarding the extent of services provided by PricewaterhouseCoopers LLP, in accordance with the pre-approval policy and the fees for the services performed. During the year, circumstances may arise when it may become necessary to engage PricewaterhouseCoopers LLP for additional services not contemplated in the pre-approval. In those instances, the Audit and Compliance Committee requires specific pre-approval by the Audit and Compliance Committee or its delegate, the Audit and Compliance Committee chair, before engaging PricewaterhouseCoopers LLP for such services.

 

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Report of the Audit and Compliance Committee

 

The primary functions of the Audit and Compliance Committee are to assist the Board of Directors in fulfilling its oversight of:

 

the integrity of Actavis’ financial statements;
Actavis’ compliance with legal and regulatory requirements;
the outside auditor’s qualifications and independence; and
the performance of Actavis’ internal audit function and of its independent registered public accounting firm.
Additionally, the Audit and Compliance Committee serves as an independent and objective party that:
monitors Actavis’ financial reporting process and internal control systems;
retains, oversees and monitors the qualifications, independence, compensation and performance of Actavis’ independent registered public accounting firm; and
provides an open avenue of communication among the independent registered public accounting firm, financial and senior management, the internal auditing department and the Board of Directors.

 

The Audit and Compliance Committee Charter describes in greater detail the full responsibilities of the Audit and Compliance Committee, and is available under the Investors section of our website at http://www.Actavis.com. The Audit and Compliance Committee reviews the Audit and Compliance Committee Charter annually prior to Actavis’ Annual Shareholders’ Meeting and at such other times as deemed appropriate by the Audit and Compliance Committee.

 

The Audit and Compliance Committee schedules its meetings and implements procedures designed to ensure that during the course of each fiscal year it devotes appropriate attention to each of the matters assigned to it under the Audit and Compliance Committee Charter. To this end, the Audit and Compliance Committee met each quarter, and eight times in total, during 2014. In addition to the foregoing, the Audit and Compliance Committee makes itself available to Actavis and its internal and external auditors during the course of the year to discuss any issues believed by such parties to warrant the attention of the Audit and Compliance Committee.

 

In carrying out its responsibilities, the Audit and Compliance Committee acts in an oversight capacity. Management has the primary responsibility for the financial reporting process, including the system of internal controls, and for preparation of consolidated financial statements in accordance with generally accepted accounting principles. Actavis’ independent registered public accounting firm is responsible for auditing those financial statements and expressing an opinion as to their conformity with generally accepted accounting principles. In performing its oversight responsibilities in connection with Actavis’ 2014 audit, the Audit and Compliance Committee has:

 

reviewed and discussed Actavis’ audited consolidated financial statements for fiscal 2014 with management and Actavis’ independent registered public accounting firm, PricewaterhouseCoopers LLP;
discussed with PricewaterhouseCoopers LLP the matters required to be discussed by Auditing Standard No. 16 (Communication with Audit Committees), as adopted by the Public Company Accounting Oversight Board (“PCAOB”) and currently in effect; and
received the written disclosures and the letter from PricewaterhouseCoopers LLP required by PCAOB Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence, and has discussed with PricewaterhouseCoopers LLP its independence from Actavis and its management.

 

Based on the review and discussions above, the Audit and Compliance Committee has recommended that the Board of Directors include the audited consolidated financial statements in Actavis’ Annual Report on Form 10-K for the year ended December 31, 2014.

 

Fred G. Weiss, Chairman
Catherine M. Klema
James H. Bloem
Patrick J. O’Sullivan

 

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PROPOSAL NO. 4   CHANGE OF COMPANY NAME

 

BACKGROUND

 

On November 15, 2014, our board of directors approved, subject to shareholder approval and the approval of the Registrar of Companies in Ireland, the change in name of the Company from Actavis plc to Allergan plc (the “Name Change Amendment). The Company recently acquired Allergan, Inc., a name the Company believes is synonymous with high quality pharmaceutical products in the global market. Our Board of Directors believes that adopting the new company name is in the best interests of our Company and our shareholders and that the new name will more accurately reflect our anticipated future operations.

 

The Name Change Amendment will not effect any change in our business or management and will not change the location of our principal executive offices. Our common stock is traded on the NYSE and will continue to be quoted on the NYSE after the Name Change Amendment becomes effective. Currently, our common stock is traded on the NYSE under the symbol “ACT.” As a result of the change in name of the Company, we may be issued a new trading symbol and CUSIP number.

 

RECOMMENDATION

 

Our Board of Directors believes that the information provided above demonstrates that changing the name of the Company from Actavis plc to Allergan plc is in the best interest of the Company and is designed to ensure the Company’s long-term strategy and goals.

 

The text of the special resolution in respect of Proposal No. 4 is as follows:

 

“RESOLVED, that, subject to the approval fo the Registrar of Companies in Ireland, the name of the Company be changed from Actavis plc to Allergan plc.”

 

REQUIRED VOTE

 

A qualified majority of 75% of the votes cast at the Annual Meeting is required to approve the Name Change Amendment to change the name of the Company from Actavis plc to Allergan plc. Abstentions and broker non-votes will not have any effect on the outcome of this proposal because neither an abstention nor a broker non-vote represents a vote cast.

 

Our Board of Directors recommends that shareholders vote FOR adoption of the resolution approving the Name Change Amendment as a special resolution changing the name of the Company to Allergan plc, as described in this Proxy Statement.

 

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PROPOSAL NO. 5   APPROVAL OF AMENDMENT TO AMENDED AND RESTATED 2013 INCENTIVE AWARD PLAN

 

We are asking our shareholders to approve the Amended and Restated 2013 Incentive Award Plan of Actavis plc (the “Restated Plan”) attached hereto as Appendix A. Our Board adopted the Restated Plan on July 1, 2014, subject to shareholder approval. The Restated Plan amends and restates the Amended and Restated 2013 Incentive Award Plan of Actavis plc (the “Prior Plan”) in its entirety. The Restated Plan will become effective only if it is approved by our shareholders. If the Restated Plan is not approved by our shareholders, all Merger Success Awards and Transformation Incentive Awards (which are cash-based long-term performance awards that were granted under the Restated Plan at the closing of our acquisition of Allergan, Inc.) previously awarded under the Restated Plan shall be canceled and become null and void, and all provisions of the Restated Plan relating to other cash-based awards shall cease to be effective with respect to such Merger Success Awards and Transformation Incentive Awards. For the avoidance of doubt, any award other than a Merger Success Award or Transformation Incentive Award awarded on or after the date the Board adopted the Restated Plan and prior to such shareholder approval shall remain in full force and effect and the Restated Plan will continue in full force and effect with respect to all provisions other than those related to other cash-based awards.

 

The Restated Plan does not increase the number of shares authorized for issuance and the authorized share limit from the Prior Plan, which was last approved by our shareholders in September 2013, would continue to apply. As permitted by NYSE Rules, however, the Restated Plan does assume the number of shares which remained available for issuance under the Forest Plan (as defined below) as explained in the summary below.

 

The Restated Plan makes a number of changes to the Prior Plan, each of which we believe enhances our ability attract and retain talent or reflects compensation and governance best practices. The Restated Plan amended and restates the Prior Plan as follows:

 

provides for the grant of other cash-based awards, with a maximum value of a cash payment made under an other cash-based award in any fiscal year to any Section 162(m) participant of $50,000,000;
revises the definition of change in control to mirror the definition found in the Forest Laboratories, Inc. Equity Incentive Plan (the “Forest Plan”);
revises the share reserve provisions to assume the number of shares which remained available for issuance under the Forest Plan prior to the closing of the Forest Merger (the “Forest Closing”);
provides that, solely with respect to awards granted on or after the Forest Closing, such awards will accelerate in full upon the award holder’s qualified termination within two years following such change in control; and
extends the term of the Restated Plan through the tenth anniversary of the date on which it was adopted by the Board, or June 30, 2024.

 

In addition to the above, we are asking shareholders to approve the Restated Plan to satisfy the shareholder approval requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”) and to approve the material terms of the performance goals for awards that may be granted under the Restated Plan as required under Section 162(m). In general, Section 162(m) places a limit on the deductibility for federal income tax purposes of the compensation paid to our Chief Executive Officer or any of our three other most highly compensated executive officers (other than our Chief Financial Officer). Under Section 162(m), compensation paid to such persons in excess of $1 million in a taxable year generally is not deductible. However, compensation that qualifies as “performance-based” under Section 162(m) does not count against the $1 million deduction limitation. One of the requirements of “performance-based” compensation for purposes of Section 162(m) is that the material terms of the plan under which compensation may be paid be disclosed to and approved by our public shareholders. For purposes of Section 162(m), the material terms include (a) the employees eligible to receive compensation, (b) a description of the business criteria on which the performance goals may be based and (c) the maximum amount of compensation that can be paid to an employee under the performance goals. Each of these aspects of the Prior Plan, as proposed to be amended in the form of the Restated Plan, is discussed below, and shareholder approval of this Proposal No. 5 is intended to constitute approval of the material terms of the Restated Plan for purposes of the shareholder approval requirements of Section 162(m).

 

Shareholder approval of the Restated Plan is only one of several requirements under Section 162(m) that must be satisfied for amounts realized under the Restated Plan to qualify for the “performance-based” compensation exemption under Section 162(m), and submission of the material terms of the Restated Plan performance goals for shareholder approval should not be viewed as a guarantee that we will be able to deduct all compensation under the Restated Plan. Nothing in this proposal precludes us or the plan administrator from making any payment or granting awards that do not qualify for tax deductibility under Section 162(m).

 

We believe that long-term incentives are critical to attracting and retaining the most talented employees in our industry. Shareholder approval of the Restated Plan will allow us to continue to provide such incentives.

 

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Shareholder Approval Requirement

 

Shareholder approval of the Restated Plan is necessary in order for us to (1) meet the shareholder approval requirements of the NYSE, (2) take tax deductions for certain compensation resulting from awards granted thereunder intended to qualify as performance-based compensation under Section 162(m), and (3) grant incentive stock options (“ISOs”) thereunder.

 

Specifically, approval of the Restated Plan will constitute approval of the material terms of the Restated Plan pursuant to the shareholder approval requirements of Section 162(m), as discussed above, which will enable (but not require) us to award performance-based compensation within the meaning of Section 162(m) through our 2020 annual meeting of shareholders, preserving the deductibility of these awards for federal income tax purposes. In addition, approval of the Restated Plan will constitute approval pursuant to the shareholder approval requirements of Section 422 of the Code relating to ISOs.

 

If shareholders do not approve this Proposal No. 5, all Merger Success Awards and Transformation Incentive Awards previously awarded under the Restated Plan shall be canceled and become null and void, and all provisions of the Restated Plan relating to other cash-based awards shall cease to be effective with respect to such Merger Success Awards and Transformation Incentive Awards. For the avoidance of doubt, any award other than a Merger Success Award or Transformation Incentive Award awarded on or after the date the Board adopted the Restated Plan and prior to such shareholder approval shall remain in full force and effect and the Restated Plan will continue in full force and effect with respect to all provisions other than those related to other cash-based awards.

 

SUMMARY OF THE RESTATED PLAN

 

General

 

The Restated Plan allows the Company to offer to participants a variety of long-term incentives, including options, stock appreciation rights, restricted stock, restricted stock units, stock payments, deferred stock, dividend equivalents and other cash-based awards. These awards may or may not require the attainment of performance objectives. The purposes of these awards are to: (1) provide an additional incentive for directors, employees and consultants to further the growth, development and financial success of the Company by personally benefiting through the ownership of Company shares and/or rights which recognize such growth, development and financial success; and (2) enable the Company to obtain and retain the services of directors, employees and consultants considered essential to the long-range success of the Company by offering them an opportunity to own shares in the Company and/or rights which will reflect the growth, development and financial success of the Company.

 

Administration

 

The Restated Plan is currently administered by the Compensation Committee, except with respect to awards granted to Independent Directors, which are administered by the Board. All members of the Compensation Committee are non-employee directors, each of whom is intended to qualify as (i) an independent director under the Company’s Director Independence Standards, (ii) a “non-employee director” as defined by Rule 16b-3 of the Exchange Act, (iii) an “outside director” for purposes of Section 162(m) of the Code, and (iv) an “independent director” under the NYSE rules. The Compensation Committee has the power to designate employees, directors and consultants to receive awards, determine the number and types of awards granted and the terms and conditions of those awards, interpret the Restated Plan and to adopt such rules for the administration, interpretation and application of the Restated Plan as are consistent with the Restated Plan. The Compensation Committee may also delegate certain of its duties under the Restated Plan to one or more members of the Compensation Committee or officers of the Company, except that no delegation is permitted for (a) participants that are subject to the reporting rules under Section 16(a) of the Exchange Act, (b) participants who may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code or (c) officers that are delegated such authority by the Compensation Committee. All references to the “Administrator” mean the Compensation Committee or the party to whom it delegates authority. The Board may at any time exercise the rights and duties of the Compensation Committee or the party to whom it has delegated authority, except with respect to matters under Rule 16b-3 or Section 162(m) of the Code that are required to be determined by the Compensation Committee. Action by the Compensation Committee will be taken by a majority vote or written consent of all of its members.

 

Authorized Shares; Award Limit

 

The Restated Plan authorizes the issuance of up to (i) 8,241,885 shares of stock, representing the shares of stock authorized for issuance under the 2001 Incentive Award Plan of Watson Pharmaceuticals, Inc. (the “Original Plan”) as of December 31, 2010, plus any shares of stock that after December 31, 2010 were added back under the Original Plan, or may be added back to the Restated Plan in accordance with the terms of the Restated Plan (the “Original Shares”), plus (ii) 1,269,340 shares of stock, which were assumed under the Warner Chilcott Equity Incentive Plan (the “Warner Chilcott Shares”), plus (iii) 7,156,687 shares of stock, which were assumed under the Forest Plan, excluding any awards granted under the Forest Plan prior to the Forest Closing that were conditioned upon such closing (the “Forest Laboratory Shares”). On and after the Forest Closing, (x) Original Shares shall be available for awards granted to Legacy Actavis Participants and New Actavis Participants, (y) Warner Chilcott Shares shall be available for awards granted to Legacy Warner Chilcott Participants and New Actavis Participants and (z) Forest Laboratories Shares shall be available for awards granted to Legacy Forest Employees and New Actavis Participants (each as defined in the Restated Plan). The number of shares of our stock available for issuance

 

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under the Restated Plan will be reduced by 2.45 shares for each Forest Laboratories Share subject to an award granted under the Restated Plan (other than Forest Laboratories Shares issuable upon the exercise of a stock option or the vesting of a stock appreciation right or dividend equivalent award), and by one share for each share of our stock subject to all other awards granted under the Restated Plan.

 

Under the Original Plan or under the Restated Plan, any shares of stock that are potentially deliverable under any award that expires or is canceled, forfeited, settled in cash or otherwise terminated without a delivery of such shares (including on payment in shares on exercise of a stock appreciation right) will, to the extent of the expiration, cancellation, forfeiture, cash settlement or termination, again be available for awards under the Restated Plan and any shares of stock that have been issued in connection with any award (e.g., restricted stock) that is canceled, forfeited, or settled in cash such that those shares are returned to the Company, such shares, to the extent of the cancellation, forfeiture or cash settlement, will again be available for awards. In addition, any shares of stock withheld or surrendered in payment of the exercise price or taxes relating to any award under the Restated Plan will again be available for awards under the Restated Plan. Shares of our stock subject to awards that are adjusted and become exercisable with respect to shares of stock of another corporation will again be available for awards under the Restated Plan.

 

For all shares that become available again for awards, the number of shares of stock available for issuance under the Restated Plan will be increased by one share, with the exception of Forest Laboratories Shares (other than Forest Laboratories Shares issuable upon the exercise of a stock option or the vesting of a stock appreciation right or dividend equivalent award), for which the number of shares of stock available for issuance under the Restated Plan will be increased by 2.45 shares. To the extent that Original Shares underlying an award are again available for awards, such Original Shares shall be used for awards granted to Legacy Actavis Participants or New Actavis Participants. To the extent Warner Chilcott Shares or Forest Laboratories Shares underlying an award are again available for awards under the Restated Plan, such shares shall be used for awards granted to Legacy Warner Chilcott Participants or Legacy Forest Laboratories Participants, as applicable, or New Actavis Participants.

 

Shares of stock issued or issuable pursuant to substitute awards will not reduce the number of shares available for issuance under the under the Restated Plan. Additionally, in the event that a company acquired by the Company has shares available under a pre-existing plan approved by its shareholders and not adopted in contemplation of such acquisition, the shares available for grant pursuant to such pre-existing plan may be used for awards under the Restated Plan and will not reduce the number of shares available for issuance under the Restated Plan.

 

In the event of a dividend, recapitalization, reclassification, stock split, merger, consolidation, split-up, spin-off, combination, consolidation, reorganization, dissolution or other similar corporate transaction that affects our stock, other than an “Equity Restructuring” (as defined in the Restated Plan), the Administrator will equitably adjust any or all of the following in order to prevent the dilution or enlargement of benefits or potential benefits intended to be made available under the Restated Plan:

 

(i) the number and kind of shares of our stock that may be granted under the Restated Plan,
(ii) the limitation on the maximum number and kind of shares that may be subject to one or more awards granted to any one individual during any fiscal year of the Company,
(iii) the number and kind of shares subject to outstanding awards, and
(iv) the grant or exercise price with respect to any such award.

 

In the event of an Equity Restructuring, the number and type of securities subject to each outstanding award and the exercise price, if applicable, of each outstanding award shall be equitably adjusted, and the Administrator will make such equitable adjustments to the number and kind of shares that may be issued under the Restated Plan as the Administrator deems appropriate.

 

The shares of our stock covered by the Restated Plan may be treasury shares or authorized but unissued shares. For purposes of the Restated Plan, the fair market value of a share of our stock as of any given date is the closing sales price for a share of our stock on the stock exchange or national market system on which our stock is listed on such date or, if there is no closing sales price for our stock on the date in question, the closing sales price for a share of our stock on the last preceding date for which such quotation exists, as reported in The Wall Street Journal.

 

Subject to adjustment, the maximum number of shares of our stock that may be subject to awards granted to any individual in any fiscal year of the Company may not exceed 500,000 shares and or options, and the maximum value of a cash payment made under an other cash-based award with respect to any fiscal year of the Company to any “Section 162(m) Participant” (as defined in the Restated Plan) is $50,000,000. All stock options and stock appreciation rights are granted with an exercise price equal to the fair market value at grant. With respect to other awards, such as restricted stock and restricted stock units, the maximum value an individual can receive is the fair market value of the shares assuming there is no purchase price.

 

Eligibility

 

Participants in the Restated Plan are employees, consultants, or independent directors of the Company or its subsidiaries, as selected by the Administrator. Consultants and independent directors who are based in the United Kingdom and who are not also employees of the Company or its subsidiaries are not eligible to receive awards under the Restated Plan.

 

Awards

 

Stock Options

 

A stock option may be granted either alone or in addition to other awards granted under the Restated Plan and may be an incentive stock option or a non-qualified stock option. The Administrator determines (i) which employees, consultants, and directors are to be granted options; (ii) the number of shares covered thereby; (iii) whether the options are intended to qualify as incentive stock options or non-qualified stock options (except that only employees of the Company or any subsidiary corporation may be granted incentive stock options); and (iv) terms and conditions of such options, consistent with the Restated Plan.

 

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In the case of incentive stock options, (i) the per share exercise price will not be less than 100% of the fair market value of shares of our stock on the grant date, and (ii) for the persons owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of capital stock of the Company or any subsidiary corporation (a “10% Person”), the per share exercise price will be not less than 110% of the fair market value of a share of our stock on the grant date.

 

In the case of non-qualified stock options, the per share price will not be less than 100% of the fair market value of a share of our stock on the date the option is granted.

 

Each option, and its exercise price, term (not to exceed a maximum of ten years), vesting and other material terms will be evidenced by a written award agreement. Payment of the stock option exercise price will be made in cash. However, the Administrator, in its discretion, may allow payment through the delivery of shares of our stock already held by the award recipient, shares then issuable upon exercise of the stock option, the cash proceeds from a broker assisted market sale of the shares, or other consideration approved by the Administrator, or any combination thereof, having a fair market value on the exercise date equal to the total option exercise price.

 

In the event the term of a stock option would expire at a time when trading in shares of the stock by the award recipient is prohibited by law or the Company’s insider trading policy, the term of such Option will be automatically extended, subject to a maximum of ten (10) years from the date the stock option was granted and any requirements of Section 422 of the Code, to the 30th day following the expiration of any applicable trading prohibition.

 

Restricted Stock

 

Restricted stock may be sold to participants at various prices or granted in connection with the performance of services. Restricted stock is subject to forfeiture or repurchase by the Company if the vesting conditions are not met and is subject to transferability restrictions. Vesting conditions may be based on duration of employment and performance criteria (or other specified criteria). The Administrator, in its discretion, will determine (i) which employees, directors or consultants are to be granted restricted stock awards, (ii) the purchase price, which will be no less than the par value of our stock to be purchased, and (iii) the vesting conditions and restrictions on the shares of our stock awarded. Except as otherwise determined by the Administrator at the time of grant or thereafter, upon termination of employment or service for any reason during the restriction period, all shares of restricted stock will be surrendered by the participant and redeemed or acquired by the Company for no consideration.

 

Dividend Equivalents, Deferred Stock, Stock Payments, Restricted Stock Units and Other Cash-Based Awards

 

Participants awarded dividend equivalents will be entitled to receive payments, as determined by the Administrator, equivalent to all or some portion of the dividends payable with respect to a specified number of shares of our stock, to be credited as of the divided payment dates. Dividend equivalents are converted to cash or additional shares of our stock by such formula and at such time and subject to such limitations determined by the Administrator.

 

Dividend equivalents may be calculated with reference to the number of shares covered by a related award (other than an independent dividend equivalent award, option or stock appreciation right) held by the participant. Dividend equivalents will not be granted on options or stock appreciation rights. In addition, dividend equivalents with respect to an award with performance-based vesting that are based on dividends paid prior to the vesting of such award shall only be paid out to the Participant to the extent that the performance-based vesting conditions are subsequently satisfied and the award vests.

 

Deferred stock and stock payments will be issued as shares of our stock at the discretion of the Administrator and pursuant to such vesting, distribution and other terms as the Administrator deems appropriate, including vesting based on specific performance criteria, number of shares, term, and exercise or purchase price.

 

Restricted stock units will be granted at the discretion of the Administrator and will be subject to such terms as the Administrator deems appropriate, including (i) the number of shares of our stock subject to the award, (ii) vesting schedule, (iii) purchase price, (iv) performance goals, (v) distribution dates, and (vi) the maximum term of the award. Restricted stock units are subject to forfeiture if the conditions or restrictions are not met. Payments will be made as shares of our stock.

 

Other cash-based awards will be granted in amounts, and on terms and conditions, determined by the Administrator. Other cash-based awards may be granted subject to the satisfaction of vesting conditions or may be awarded purely as a bonus and not subject to restrictions or conditions, and if subject to vesting conditions, the Committee may accelerate the vesting of such award at any time. The grant of an other cash-based award shall not require a segregation of any of the Company’s assets for satisfaction of the Company’s payment obligation thereunder.

 

Unless otherwise determined by the Administrator, dividend equivalents, deferred stock, stock payments and restricted stock units will be exercisable or distributable only while the participant is an employee, consultant or independent director of the Company, as applicable.

 

Stock Appreciation Rights

 

Stock appreciation rights may be granted either alone or in tandem with stock options granted, or previously granted, under the Restated Plan. In the case of a stock appreciation right related to a stock option, the stock appreciation right or applicable portion thereof will terminate and no longer be exercisable upon the termination or exercise of the related stock option. A stock option related to a stock appreciation right will no longer be exercisable to the extent that the related stock appreciation right has been exercised. An independent stock appreciation right is unrelated to any option and has terms, including the number of shares of our stock covered and vesting terms, that are set by the Administrator. The Administrator may impose such conditions or restrictions on the exercise of any stock appreciation right as it will deem appropriate, provided that no stock appreciation right will have a term that is longer than ten years or an exercise price below the fair market value of the stock on the date of grant. In the event the term of a stock appreciation right would expire at a time when trading in shares of the stock by the award recipient is prohibited by law or the Company’s insider trading policy, the term of such stock appreciation right will be automatically extended, subject to a maximum of ten (10) years from the date the stock appreciation right was granted, to the 30th day following the expiration of any applicable trading prohibition.

 

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Payment for stock appreciation rights will be made based on the fair market value of the shares of our stock on the date of exercise, less the exercise price, and may be paid in cash, our stock or a combination of both, as determined by the Administrator. The Administrator may reserve the right, under the terms of a stock option award, to substitute a stock appreciation right for such stock option at any time prior to or upon exercise of the option, with the stock appreciation right being exercisable for the same number of shares of our stock and at the same per share exercise price.

 

Performance Criteria

 

The Restated Plan has been designed to permit the Committee to grant awards that will qualify as “performance-based compensation” within the meaning of Section 162(m). The Committee may grant performance-based compensation awards to Covered Employees whose compensation for a given fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m), to preserve the deductibility of these awards for federal income tax purposes (see additional discussion of deductibility requirements under “Federal Income Tax Consequences” below). Performance-based compensation awards vest or become exercisable upon the attainment of specific performance targets that are pre-established by the Committee and are related to one or more of the performance criteria (described below) set forth in the Restated Plan. Participants are only entitled to receive payment for a performance-based compensation award for any given performance period to the extent that such pre-established performance goals for the period are satisfied.

 

The pre-established performance goals must be based on one or more of the following performance criteria: (i) net earnings (either before or after one or more of the following: interest, taxes, depreciation and amortization); (ii) gross or net sales or revenue; (iii) net income (either before or after taxes); (iv) adjusted net income; (v) operating income, earnings or profit; (vi) cash flow (including, but not limited to, operating cash flow and free cash flow); (vii) return on assets; (viii) return on capital; (ix) return on shareholders’ equity; (x) total shareholder return (either absolute or relative to a peer group of companies); (xi) return on sales; (xii) gross or net profit or operating margin; (xiii) costs (including, but not limited to, cost reductions or savings); (xiv) funds from operations; (xv) expenses; (xvi) working capital; (xvii) earnings per share; (xviii) adjusted earnings per share; (xix) price per share of stock; (xx) regulatory body approval or commercialization of a product; (xxi) implementation or completion of critical projects; (xxii) market share; or (xiii) economic value.

 

The foregoing criteria may relate to the Company, one or more of its divisions, business units, platforms or an individual, or any combination of the foregoing, and may be applied on an absolute basis or as compared to any incremental increases or as compared to results of one or more peer group companies or market performance indicators or indices, or any combination thereof, all as the Committee shall determine.

 

The Committee may provide that one or more objectively determinable adjustments will be made to one or more of the performance goals established for any performance period. Such adjustments may include one or more of the following: (i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the performance period; (vii) items related to the disposal of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under applicable accounting standards; (ix) items attributable to any stock dividend, stock split, combination or exchange of shares occurring during the performance period; (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments; (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; (xiv) items related to acquired in-process research and development; (xv) items relating to changes in tax laws; (xvi) items relating to major licensing or partnership arrangements; (xvii) items relating to asset impairment charges; (xviii) items relating to gains or losses for litigation, arbitration and contractual settlements; or (xix) items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions.

 

In determining the actual size of an individual performance-based award for a performance period, the Committee may reduce or eliminate (but not increase) the award. Generally, a participant will have to be employed on the date the performance-based award is paid to be eligible for a performance-based award for any period.

 

Change in Control

 

Upon the occurrence of “Change in Control” (as defined in the Restated Plan), each outstanding award will remain outstanding, or will be assumed or a “Qualified Substitute Award” (as defined in the Restated Plan) will be provided by the successor corporation, or a parent or subsidiary of the successor corporation. Solely for awards granted on or after the Forest Closing, or which become effective on or after the Forest Closing, if the award continues to be outstanding following the effective date of a Change in Control, then in the event of a “Qualified Termination” (as defined in the Restated Plan) of the holder’s employment during the two year period following the “Change in Control,” the award will become fully vested and exercisable notwithstanding any provisions of the Restated Plan or the applicable award agreement to the contrary.

 

If the successor corporation refuses to assume or provide a Qualified Substitute Award for the awards, each holder of an award will be entitled to immediately exercise the award for all shares of our stock under the award, including unvested shares, and the holder will vest in, and have the right to receive a distribution, with respect to all of the shares subject to the award. If an award becomes exercisable in lieu of assumption or substitution with a Qualified Substitute Award, the Administrator will notify the holder that the award will become fully exercisable for a period of not less than 15 days prior to the “Change in Control” transaction, and the award will terminate upon the expiration of such period. An award will be considered assumed if, following the “Change in Control” transaction, the award provides the holder the right to purchase or receive for each share of our stock subject to the award prior to the “Change in Control” transaction, the consideration (whether in stock, cash or other securities or property) received or to be received for each share of our stock in the “Change in Control” transaction (and, if the holders of shares of our stock are offered a choice of consideration, the type of consideration chosen by the holders of a majority of the issued or outstanding shares of our stock).

 

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Term of the Restated Plan

 

No award will be granted pursuant to the Restated Plan after June 30, 2024.

 

Plan Amendments

 

The Board of the Company may amend, modify, suspend or terminate the Restated Plan at any time, except the Board of the Company must obtain approval of the shareholders of the Company within 12 months before or after such action to: (a) increase the aggregate number of shares of our stock that may be issued under the Restated Plan (or the aggregate number of shares of our stock that may be issued pursuant to restricted stock awards, restricted stock unit awards, dividend equivalent awards, deferred stock awards and stock payment awards), (b) expand the classes of persons to whom awards may be granted under the Restated Plan, (c) reduce the exercise price per share of any outstanding stock option or stock appreciation right granted under the Restated Plan or (d) cancel any stock option or stock appreciation right in exchange for cash or another award.

 

Transferability

 

Participants cannot assign or transfer any award, except (i) by will or the laws of descent and distribution; or (ii) subject to the consent of the Administrator, pursuant to a qualified domestic relations order (e.g., a divorce decree). However, the Administrator may permit a participant to transfer a non-qualified stock option to certain permitted transferees (which include certain family members, trusts or family-owned companies). Any transferred non-qualified stock option will not be assignable or transferable by the permitted trustee and will be subject to the same terms and conditions.

 

Material U.S. Federal Income Tax Consequence

 

The following is a general summary under current law of the material federal income tax consequences to an employee, director or consultant granted an award under the Restated Plan. This summary deals with the general federal income tax principles that apply and is provided for general information only. Alternative minimum tax and other kinds of taxes, such as state, local and foreign income taxes and federal employment taxes, are not discussed. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality.

 

Incentive Stock Options

 

No taxable income should be recognized by the optionee at the time of the grant of an incentive stock option, and no taxable income should be recognized for regular federal income tax purposes at the time the option is exercised; however, the excess of the fair market value of the share received over the option price is an “item of adjustment” for alternative minimum tax purposes. The optionee will recognize taxable income in the year in which the purchased shares are sold or otherwise made the subject of a taxable disposition. For federal income tax purposes, dispositions are divided into two categories: qualifying and disqualifying. A qualifying disposition occurs if the sale or other disposition is made more than two years after the date the option for the shares involved in such sale or disposition is granted and more than one year after the date the shares are transferred upon exercise. If the sale or disposition occurs before these two periods are satisfied, then a disqualifying disposition generally will result.

 

Upon a qualifying disposition, the optionee should recognize long-term capital gain in an amount equal to the excess of the amount realized upon the sale or other disposition of the purchased shares over the exercise price paid for the shares. If there is a disqualifying disposition of the shares, then the excess of the fair market value of those shares on the exercise date over the exercise price paid for the shares should be taxable as ordinary income to the optionee. Any additional gain or loss recognized upon the disposition will be recognized as a capital gain or loss by the optionee.

 

If the amount realized upon the sale or disposition of such shares is less than the fair market value of such shares on the date the shares were transferred to the participant upon exercise of the option, the ordinary income recognized for regular tax purposes will be limited to the amount realized upon the sale or disposition of such shares, less the exercise price paid.

 

We should not be entitled to any federal income tax deduction if the optionee makes a qualifying disposition of the shares. If the optionee makes a disqualifying disposition of the purchased shares, then generally we (or our subsidiary corporation) should be entitled to a federal income tax deduction, for the taxable year in which such disposition occurs, equal to the ordinary income recognized by the optionee.

 

Non-Qualified Stock Options

 

No taxable income should be recognized by the optionee at the time of the grant of a non-qualified stock option. Upon exercising a non-qualified stock option, a participant generally recognizes ordinary income equal to the difference between the fair market value of the shares on the date of exercise and the exercise price. The Company generally will be entitled to a deduction for the same amount.

 

Restricted Stock

 

A participant receiving a restricted stock award generally recognizes ordinary income on the date the restricted shares first become freely transferable, or no longer remain subject to substantial risk of forfeiture, in an amount equal to the excess of the fair market value of such shares on that date over the amount (if any) paid by the participant. A participant may be able to make an election under Section 83(b) of the Code to be taxed upon the date of transfer of the restricted stock. The Company generally will be entitled to a corresponding tax deduction at the time ordinary income is recognized by the participant.

 

Dividend Equivalents, Deferred Stock, Stock Payments, and Restricted Stock Units and Other Cash-Based Awards

 

A participant who is awarded dividend equivalent awards, deferred stock awards, stock payment awards or restricted stock unit awards generally will not recognize taxable income, and the Company generally will not receive a tax deduction, until the participant receives the shares, or cash, distributed pursuant to the award. When a participant receives payment for these awards in shares or cash, the fair market value of the shares or the amount of the cash received generally will be ordinary income to the participant and the Company generally will receive a tax deduction.

 

Tax consequences for other cash-based awards will vary depending on the terms of the award.

 

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Stock Appreciation Rights

 

A participant should not be taxed at the time a stock appreciation right is granted nor should the Company receive a tax deduction. Upon exercise of a stock appreciation right, the participant should recognize ordinary income equal to the cash or the fair market value of the shares received on the exercise date. The Company generally will be entitled to a corresponding tax deduction at the time ordinary income is recognized by the participant.

 

Section 162(m)

 

Section 162(m) denies a deduction to any publicly held corporation for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to such covered employee exceeds $1,000,000. It is possible that compensation attributable to awards under the Restated Plan, when combined with all other types of compensation received by a covered employee from us, may cause this limitation to be exceeded in any particular year.

 

Qualified Performance-Based Compensation (“QPBC”) is disregarded for purposes of the deduction limitation. In accordance with Treasury Regulations issued under Section 162(m), compensation attributable to stock awards will generally qualify as performance-based compensation if (1) the award is granted by a compensation committee composed solely of two or more “outside directors,” (2) the plan contains a per-employee limitation on the number of awards which may be granted during a specified period, (3) the material terms of the plan are disclosed to and approved by the shareholders, (4) for stock options and stock appreciation rights, the amount of compensation an employee could receive is based solely on an increase in the value of the stock after the date of the grant (which requires that the exercise price of the option is not less than the fair market value of the stock on the date of grant), and for awards other than options and stock appreciation rights, established performance criteria that must be met before the award actually will vest or be paid, and (5) in the case of awards other than stock options and stock appreciation rights, the compensation committee has certified that the performance goals have been met prior to payment.

 

The Restated Plan is designed to permit the Administrator to grants awards which may qualify as QPBC under Section 162(m); however, awards other than options and stock appreciation rights granted under the Restated Plan will only be treated as QPBC under Section 162(m) if the awards and the procedures associated with them comply with all other requirements of Section 162(m). As one of the factors in its decisions regarding grants under and administration of the Restated Plan, the Administrator will consider the anticipated effect of Section 162(m). These effects will depend upon a number of factors, including not only whether the grants qualify for the performance exception, but also the timing of executives’ vesting in or exercise of previously granted equity awards and receipt of other compensation. Furthermore, interpretations of and changes in the tax laws and other factors beyond the Administrator’s control may also affect the deductibility of compensation. For these and other reasons, the Administrator may make grants that do not qualify for the performance exception and our tax deductions for those grants may be limited or eliminated as a result of the application of Section 162(m).

 

Section 409A

 

Certain types of awards under the Restated Plan may constitute, or provide for, a deferral of compensation subject to Section 409A of the Code. Unless certain requirements set forth in Section 409A of the Code are complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax (and, potentially, certain interest penalties and additional state taxes). To the extent applicable, the Restated Plan and awards granted under the Restated Plan are intended to be structured and interpreted in a manner intended to either comply with or be exempt from Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance that may be issued under Section 409A of the Code. To the extent determined necessary or appropriate by the Administrator, the Restated Plan and applicable award agreements may be amended to further comply with Section 409A of the Code or to exempt the applicable awards from Section 409A of the Code.

 

New Plan Benefits

 

Awards under the Restated Plan are subject to the discretion of the Administrator, and the Administrator has not made any determination to make future grants to any employees under the Restated Plan as of the date of this proxy statement. Therefore, it is not possible to determine the benefits that will be received in the future by participants in the Restated Plan.

 

Certain tables above under the general heading “Executive Compensation,” including the Summary Compensation Table, Grants of Plan-Based Awards table, Outstanding Equity Awards at Fiscal Year-End table, and Option Exercises and Stock Vested table set forth information with respect to prior awards granted to our individual named executive officers under the Prior Plan.

 

EQUITY AWARD GRANTS UNDER THE PRIOR PLAN

 

The following table sets forth summary information concerning the number of ordinary shares subject to, or the dollar value of, awards granted under the Prior Plan to our named executive officers, directors and employees since the Prior Plan’s inception through March 13, 2015. The dollar value of the other cash-based awards set forth below assumes that the applicable performance goals are achieved, and the awards are paid to the applicable holders, at target levels.

 

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As described above, it is not possible to determine the amount of awards that will be granted in the future to participants under the Restated Plan.

 

            Number of   Value of Other  
    Number of   Number of   Shares Subject   Cash-Based  
    Shares Subject   Restricted   to Restricted   Awards at Target  
Name   to Options   Shares   Share Units   Performance ($)(1)  
Brenton L. Saunders, President and Chief Executive Officer     104,651             30,000,000  
Paul M. Bisaro, Former Chief Executive Officer     605,229     386,853     160,474     15,500,000  
Maria Teresa Hilado, Chief Financial Officer     14,890         27,478     10,000,000  
Robert A. Stewart, Chief Operating Officer     100,704     87,707     50,674     10,000,000  
David A. Buchen, Executive Vice President     121,532     104,542     52,291     5,000,000  
William Meury, EVP, North American Brands     19,278             10,000,000  
R. Todd Joyce, Former Chief Financial Officer     75,483     80,161     43,176     5,000,000  
Sigurdur Olafsson, Former President - Actavis Pharma     150,000     76,649     40,544      
All current executive officers as a group (8 persons)     1,191,767     735,912     374,637     80,500,000  
All current non-employee directors as a group (12 persons)     91,700     142,502          
Nesli Basgoz,         694          
James H. Bloem         1,142          
Christopher W. Bodine         18,371          
Christopher J. Coughlin         694          
Tamar D. Howson         1,142          
John A. King         1,142          
Catherine M. Klema     21,700     30,751          
Jiri Michal         1,839          
Patrick J. O’Sullivan         1,142          
Ronald R. Taylor     35,000     29,084          
Andrew L. Turner     35,000     29,084          
Fred G. Weiss         27,417          
Each associate of any such directors, executive officers or nominees                  
Each other person who received or is to receive 5 percent of such options, warrants or rights                  
All employees, including all current officers who are not executive officers, as a group     12,637,607     3,559,844     1,434,559     85,500,000  

 

(1) Other Cash-Based Awards include the Merger Success Awards and the Transformation Incentive Awards.

 

RECOMMENDATION

 

The Board believes that the Restated Plan, which amends and restates the Prior Plan in its entirety and will provide us with the continued ability to link participants’ pay to shareholder returns, is a critical compensation component in our ability to attract, retain and motivate employees by aligning their interests with the interests of our shareholders.

 

REQUIRED VOTE

 

A simple majority of votes cast at the Annual Meeting is required to approve the Restated Plan. Abstentions and broker non-votes will not have any effect on the outcome of this proposal because neither an abstention nor a broker non-vote represents a vote cast.10

 

Our Board recommends that shareholders vote FOR adoption of the Restated Plan, as described in this Proxy Statement.

 

 

10 NTD: Voting threshold to be confirmed by LW Corporate.

 

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PROPOSAL NO. 6   SUSTAINABILITY REPORTING

 

A shareholder has informed the Company he intends to present the non-binding proposal set forth below at the Annual Meeting. If the shareholder (or his qualified representative) is present at the Annual Meeting and properly submits the proposal for a vote, then the shareholder proposal will be voted upon at the Annual Meeting.

 

In accordance with federal securities laws, the shareholder proposal and supporting statement are presented below as submitted by the shareholder and are quoted verbatim. The Company disclaims all responsibility for the content of the proposal and the supporting statement, including other sources referenced in the supporting statement.

 

The Company will promptly provide to any shareholder the name, address and number of the Company’s voting securities held by the person submitting this proposal upon receiving an oral or written request made to the Company’s investor relations department by telephone at 1-862-261-7488, by email at investor.relations@actavis.com or by writing to our administrative address: Investor Relations, Actavis plc, Morris Corporate Center III, 400 Interpace Parkway, Parsippany, NJ 07054.

 

RECOMMENDATION

 

The Board of Directors recommends that shareholders vote “AGAINST” the adoption of this proposal.

 

REQUIRED VOTE

 

A simple majority of votes cast at the Annual Meeting is required to approve the shareholder proposal described in this Proposal No. 6. Abstentions and broker non-votes will not have any effect on the outcome of this proposal because neither an abstention nor a broker non-vote represents a vote cast.

 

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PROPOSAL 6 - SUSTAINABILITY REPORTING

 

We believe tracking and reporting on environmental, social and governance (ESG) business practices makes a company more responsive to a global business environment which is characterized by finite natural resources, changing legislation, and heightened public expectations for corporate accountability. Reporting also helps companies better integrate and gain strategic value from existing sustainability efforts, identify gaps and opportunities in products and processes, develop company-wide communications, publicize innovative practices, and receive feedback.

 

Today, companies like Bloomberg provide information on ESG performance that investors utilize in investment decisions. Carbon Disclosure Project (COP), representing 551 institutional investors globally with $71 trillion in assets, has for years requested greater disclosure from companies on their climate change management programs. In contrast our company, Actavis, does not have a sustainability report.

 

In a recent report issued by the G&A Institute (Governance & Accountability Institute) 53% of the S&P 500 and 57% of the Fortune 500 companies are reporting on their environmental, social and governance (ESG) impact. The G&A Institute is the US data partner for Global Reporting Initiative (GRI), a non-profit organization that works towards a sustainable global economy by providing sustainability reporting guidance.

 

Within the pharmaceutical sector, many peers have taken initiative and reported on sustainability metrics. Johnson and Johnson has a citizenship and responsibility report. Pfizer has a corporate responsibility report. Abbott Laboratories has a Global Citizenship report. In contrast, our company does not report on its sustainability efforts nor does it publish a sustainability report. Companies that report on their sustainability strategies, initiatives, programs and ESG performance appear to be more likely to be selected for key sustainability reputational lists, ranked higher by sustainability reputation raters and rankers, and selected for inclusion on leading sustainability investment indexes. Occupational safety and health, waste and water reduction targets and product related environmental impacts all have the potential to pose significant regulatory and legal risks. Our company states on its website that its global environmental responsibility program ensures that our Company is doing its part to lessen the impact of our business on the environment. However, investors do not have access to evaluative data on how the company is meeting these goals or managing these business factors.

 

Resolved, the shareholders request that our company issue a sustainability report describing the company’s ESG performance including GHG reduction targets and goals. The report should be available by November 2015, prepared at reasonable cost, omitting proprietary information.

 

SUPPORTING STATEMENT

 

We recommend the report include a company-wide review of policies, practices and metrics related to ESG performance and that Actavis commit to continuous improvement in reporting. We encourage Actavis to consider the use of the GRI Guidelines (G3). The GRI is a globally accepted reporting framework.

 

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Board of Directors’ Response to Shareholder Proposal 6

 

The Company recognizes the importance of environmental, social and governance (“ESG”) considerations and devotes significant resources to environmental sustainability reporting, in particular through its submission of ESG performance reports through the Carbon Disclosure Project (the “CDP”), which is referenced in the shareholder proposal.

 

While the Company agrees with the principles on which this proposal is based, the Company already addresses many of the concerns it raises, making adoption of this proposal unnecessary, a poor use of the Company’s resources and potentially confusing to investors, as noted below.

 

Therefore, the Board believes that implementation of the proposal is unnecessary and not in the best interests of our Company and shareholders and recommends that the shareholders vote AGAINST it.

 

We are committed to being a good corporate citizen and responsible steward of the environment in our operations around the world.

 

As described on our corporate website (at Actavis.com under the “Responsibility” tab), we are committed to environmental responsibility and are focused on educating and engaging employees and in employing innovative processes, equipment and technologies that will contribute to a greener, more environmentally aware company. Our commitment to environmental sustainability has also been recognized by others, including through being named by Newsweek magazine as one of the World’s Greenest Companies – an annual list compiled and published by the magazine that ranks the world’s largest companies on their corporate sustainability and environmental impact initiatives. The World’s Greenest Companies list is one of the most widely recognized indicators of company commitment to sustainability performance. In the 2014 list, Actavis was ranked as the 44th greenest company in the United States and the 71st greenest company in the world.

 

Our Operations and Innovation Committee is specifically responsible for oversight of environmental, health and safety matters. The committee regularly monitors our environmental responsibility programs to ensure we are meeting our targets and objectives. Under the oversight of this committee, we apply a number of overall environmental objectives to our business, including the following:

 

Environmental goals and objectives are established on an annual basis. These include enhancing sustainability efforts worldwide by focusing on efforts to decrease greenhouse gas emissions and increase the amount of material recycled as a percentage of total plant waste.
   
  Performance against targets is measured on a monthly basis and trends against the established targets are reported to the company’s Environmental, Health and Safety Steering Committee (chaired by Bob Stewart, our Chief Operating Officer in 2014, and following the closing of the Allergan transaction, our President, Generics and Global Operations) at least semi-annually. We also participate in the CDP Investor initiative, as described in further detail below.
   
  Additionally, we seek to employ green technology in the construction or renovation of our global facilities. Currently, our Parsippany, NJ, U.S. Administrative Headquarters; India Administrative Headquarters; and Olive Branch, MS, USA Distribution Center have or are pending LEED (Leadership in Energy and Environmental Design) Certifications. LEED is a green building certification program that recognizes best-in-class building strategies and practices using comprehensive and clearly defined metrics and criteria. Many of our sites have made significant investments in retrofitting facilities and equipment with the latest technology to reduce energy consumption and waste production. Most of the Company’s manufacturing sites have implemented energy conservation projects to reduce energy intensity (KWh per unit output) and minimize the carbon footprint of each facility. Below are just a few examples:

 

  Actavis’ manufacturing plant in Iceland is powered completely by renewable geothermal energy.
     
  Our site in Elizabeth, NJ implemented seven energy reduction projects including replacement of their catalytic oxidizer with regenerative thermal, reducing CO2 by almost 10%. All manufacturing waste is either recycled or reused through fuel blending, waste to energy incineration or beneficial re-use of solvent coating solutions to recover alcohol.
     
  Our Fajardo, Puerto Rico site implemented six energy reduction projects last year and decreased greenhouse gas emissions also by almost 10%, won the Puerto Rico Manufacturer’s Association award for Sustainable Project Implementation, increased recycling by 47% and won the Excellence Award from the Puerto Rico Aqueduct and Sewer Authority (PRASA) for improvements in their waste water treatment plant.
     
  Many of our sites have instituted other water saving initiatives last year including, Actavis’ API manufacturing plant in Ambernath, India. Our Ambernath plant is a zero wastewater discharge facility. It is a state of the art plant designed to process treated water from the effluent treatment plant by reverse osmosis followed by thermal treatment. Hence not a single drop of water is sent outside but instead it is all used internally. This results in a savings of over 2,000,000 liters of fresh water annually.

 

We have a strong commitment to internal sustainability assessment and reporting.

 

We currently employ a full team focused on our sustainability efforts. The team has focused its sustainability reporting efforts on submissions to the CDP and has submitted investor CDP reports on ESG performance to the CDP since 2009. In addition, we utilize an outside consultant to evaluate our ESG performance relative to other companies in the pharmaceutical industry. Many of our peers do not submit data to the CDP or Global Reporting Initiative (“GRI”) referenced in the shareholder proposal.

 

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Both the CDP and the GRI are globally accepted reporting frameworks, with each representing thousands of responder companies. The two reporting frameworks focus on similar governance, risks/opportunities and performance indicators through the submission of annual reports. Both frameworks also offer annual scores, graded by the CDP in the case of the CDP, or self-declared, in the case of the GRI. Given the comprehensiveness of the CDP’s requirements and our history and familiarity with reporting to the CDP, the Board does not believe our time, efforts and finances would be best used by switching our reporting efforts to the GRI.

 

We have submitted reports to the CDP since 2009 and intend to again submit our 2014 investor CDP report to the CDP on or about May 15, 2015. Our previously submitted reports are currently accessible by the CDP’s 722 institutional investor signatories and can be accessed by other entities which register as signatories of the CDP at no cost. Our CDP scoring, which is published on the CDP’s website, has improved year over year.

 

Because of the tremendous growth we have experienced over the past several years, however, in particular through the Actavis, Warner Chilcott, Forest and Allergan acquisitions, year-over-year comparisons between these reports are of very limited value and relevance as only facilities owned for greater than 12 months are included in the CDP reports.

 

Our acquisition of Allergan further enhances our sustainability efforts and capabilities.

 

In addition to our legacy initiatives, our recent acquisition of Allergan only strengthens our commitment to sustainability. In acquiring Allergan, we acquired a company that had an impeccable record of and commitment to sustainability and corporate social responsibility, for which it was awarded the Energy Star Partner of the Year and Sustained Excellence from the USEPA for energy efficiency in 2014 based on 2013 performance. Allergan established short, medium and long term corporate social responsibility goals and committed resources to and measured performance against achieving these goals, including some very challenging goals in its 2020 Sustainability Vision. Through the acquisition, we have further augmented our team focused on sustainability efforts and have also further developed our reporting and tracking capabilities.

 

Nonetheless, only after we have had an opportunity to fully integrate and assess sustainability from the perspective of the combined company will we be in a position to set out meaningful parameters and goals. We intend to continue to monitor and report on important elements of our environmental and corporate governance performance, as well as continuing to invest our capital to improve performance on behalf of our shareholders.

 

We constantly monitor and work to improve the efficiency of our global operations, including considering new sustainability initiatives, which we assess according to a number of criteria.

 

As the Company has expanded globally, it is engaged in continuous efforts to improve its efficiency and cost-effectiveness. In many instances, this involves modernizing existing facilities or, in some cases, divesting less efficient facilities, which often require more energy, water and other resources to operate. We carefully evaluate each facility and make determinations on the basis of the needs of our complex supply chain as well as the return on investment generated by a given project. Our efforts to streamline our supply chain result in making investments in, reconfiguring or eliminating facilities on an on-going basis, which we believe make year-over-year comparisons of our data less useful and potentially confusing to investors.

 

Utilizing these criteria, our commitment to sustainability and continual improvement is demonstrated by the projects we have undertaken at our global operations, manufacturing and R&D facilities, including the examples described above.

 

In summary, we believe Actavis’ ongoing dedication to environmental considerations is demonstrated by its continuing commitment to submit ESG performance reports to the CDP as well as the numerous sustainability improvements and accomplishments the Company has made to date. We believe we already effectively achieve the objectives of the sustainability reporting proposal without the potentially negative consequences we believe the shareholder’s proposed approach would entail.

 

In light of our existing policies and our strong commitment to environmental and sustainability matters, and the cost and burden of switching to the GRI reporting format and system, as well as the incomplete and potentially confusing information that publishing prior reports may entail, we do not believe that implementation of the proposal is appropriate for Actavis.

 

Therefore, we believe the shareholder proposal should be rejected. The Board unanimously recommends that you vote “AGAINST” this shareholder proposal.

 

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PROPOSAL NO. 7   EXECUTIVES TO RETAIN SIGNIFICANT STOCK

 

A shareholder has informed the Company he intends to present the non-binding proposal set forth below at the Annual Meeting. If the shareholder (or his qualified representative) is present at the Annual Meeting and properly submits the proposal for a vote, then the shareholder proposal will be voted upon at the Annual Meeting.

 

In accordance with federal securities laws, the shareholder proposal and supporting statement are presented below as submitted by the shareholder and are quoted verbatim. The Company disclaims all responsibility for the content of the proposal and the supporting statement, including other sources referenced in the supporting statement.

 

The Company will promptly provide to any shareholder the name, address and number of the Company’s voting securities held by the person submitting this proposal upon receiving an oral or written request made to the Company’s investor relations department by telephone at 1-862-261-7488, by email at investor.relations@actavis.com or by writing to our administrative address: Investor Relations, Actavis plc, Morris Corporate Center III, 400 Interpace Parkway, Parsippany, NJ 07054.

 

BOARD OF DIRECTORS RECOMMENDATION

 

The Board of Directors recommends that shareholders vote “AGAINST” the adoption of this proposal.

 

REQUIRED VOTE

 

A simple majority of votes cast at the Annual Meeting is required to approve the shareholder proposal described in this Proposal No. 7. Abstentions and broker non-votes will not have any effect on the outcome of this proposal because neither an abstention nor a broker non-vote represents a vote cast.

 

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PROPOSAL 7 - EXECUTIVES TO RETAIN SIGNIFICANT STOCK

 

Proposal 7 - Executives To Retain Significant Stock

 

Resolved: Shareholders urge that our executive pay committee adopt a policy requiring senior executives to retain a significant percentage of stock acquired through equity pay programs until reaching normal retirement age and to report to shareholders regarding the policy before our Company’s next annual meeting. For the purpose of this policy, normal retirement age would be an age of at least 60 and be determined by our executive pay committee. Shareholders recommend a share retention percentage requirement of 75% of net after-tax shares.

 

This single unified policy shall prohibit hedging transactions for shares subject to this policy which are not sales but reduce the risk of loss to the executive. Otherwise our directors might be able to avoid the impact of this proposal. This policy shall supplement any other share ownership requirements that have been established for senior executives, and should be implemented without violating current company contractual obligations or the terms of any current pay or benefit plan.

 

Requiring senior executives to hold a significant portion of stock obtained through executive pay plans would focus our executives on our company’s long-term success. A Conference Board Task Force report stated that hold-to-retirement requirements give executives “an ever-growing incentive to focus on long-term stock price performance.”

 

Our clearly improvable corporate governance (as reported in 2014) is an added incentive to vote for this proposal:

 

Paul M. Bisaro had 2013 Total Realized Pay of $113 million according to GMI Ratings, an independent investment research firm. Mr. Bisaro was also an inside director in addition to our CEO. Our Lead Director Andrew Turner had 17-year long tenure which is an impediment to director independence. A Lead Director, to be effective, should have outstanding director independence. Christopher Coughlin and Tamar Howson (on our executive pay committee) were potentially overextended with director responsibilities at 4 public companies each. There was not one independent director who had general expertise in risk management, based on GMI’s standards.

 

Our 2014 annual meeting was not near our corporate offices in Parsippany, New Jersey – but in Dublin, Ireland. It is not likely that our company of more than $50 billion in market capitalization has many of its shareholders residing within a 100-mile radius of Dublin.

 

Returning to the core topic of this proposal from the context of our clearly improvable corporate governance, please vote to protect shareholder value:

 

Executives To Retain Significant Stock – Proposal 7

 

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Board of Directors’ Response to Shareholder Proposal 7

 

Our current stock ownership guidelines include meaningful holding requirements that provide our executives with incentives to manage Actavis in a manner that promotes long -term value growth. Our guidelines, as well as our compensation program, already create a beneficial alignment with the long-term interests of shareholders and we believe they do so in a more comprehensive manner than the policy suggested in the proposal.

 

Therefore, the Board believes that implementation of the proposal is unnecessary and recommends that the shareholders vote AGAINST it.

 

Our existing stock ownership requirements already strongly align the long-term interests of our executives and shareholders. As explained in more detail in the “Compensation Discussion and Analysis” section of this Proxy Statement, Actavis has already mandated significant stock ownership requirements for all of its executive officers and maintains other policies that align the long-term interests of shareholders and executives. While the proposal is limited to shares acquired through equity pay programs, our stock ownership guidelines require ownership of any Actavis securities that may be acquired through a variety of means, including open market purchases, and set clear and reasonable standards for the amount of stock to be owned by senior executives. In particular, under our stock ownership guidelines, each executive officer must hold ordinary shares equal in value to at least a specified multiple of his or her base salary. The applicable multiples range from four times (4x) base salary for our CEO, 2x for our other Named Executive Officers to 1x for all of our executives at the level of Senior Vice President. The 4x ownership requirement for our CEO translates to $4 million in stock, which represents a substantial ongoing level of investment.

 

We have a strong culture of share ownership that results in our executives holding significant equity stakes. Each of our executive officers currently satisfies our share ownership requirements — but that fact alone paints an incomplete picture of the extent of their holdings. Since our founding, we have had a strong corporate culture of share ownership and retention. For example, excluding in-the-money options that are fully vested and exercisable, as of April 10, 2015, the record date for the 2015 Annual Meeting, our CEO is the beneficial owner of [ • ] of our ordinary shares and restricted share units (which represents an ongoing investment value of over $[ • ] as of such date).

 

Our existing compensation program and recent grants further align the interests of our CEO and officers with the long-term interests of shareholders. As described in the Compensation Discussion and Analysis section of this Proxy Statement, Actavis’ executive compensation program as a whole strongly links executive compensation with the Company’s operating performance and long-term stock price performance, and aligns the interests of our executive officers with the interests of our shareholders. This program is regularly reviewed by the Compensation Committee to ensure the continued strong linkage with long-term performance and shareholder value and to ensure the program’s competitiveness.

 

We focus on implementing equity compensation best practices as one of the key governance features of our executive compensation program. Among other things, a substantial portion of each of our named executive officer’s compensation is paid in the form of equity awards. In addition, our equity incentives generally vest over a period of three to five years to ensure that our executives maintain a long-term view of shareholder value creation and to encourage retention.

 

In particular, in connection with the closing of the Forest acquisition, “front-loaded” awards were granted to the Named Executive Officers (other than Mr. Olafsson) on July 1, 2014, as further described on page 28 of the “Compensation Discussion and Analysis.” These awards represent three years’ worth of equity awards reflecting the applicable NEOs’ equity awards for 2015, 2016 and 2017. We believe that front loading these awards further encourages and rewards sustained performance over the performance period and also created immediate shareholder alignment by emphasizing performance in the critical first years following the Forest merger, among other things.

 

Similarly, in connection with the closing of the Allergan acquisition, the Compensation Committee approved the grant of Transformation Incentive Awards (subject to shareholder approval). The Transformation Incentive Awards were granted to certain senior executives, including Messrs. Saunders, Bisaro, Meury and Stewart and Ms. Hilado, and provide for settlement in cash or Actavis Ordinary Shares with an equivalent fair market value, at the discretion of the Compensation Committee, based on the achievement of pre-established non-GAAP earnings per share and total shareholder return (relative to a pre-established peer group) goals during performance period commencing on the closing date of the Allergan acquisition (March 17, 2015) and ending, for the non-GAAP earnings per share goal, on December 31, 2017, and for the total shareholder return goal on December 31, 2018. Like the “front-loaded” awards granted following the Forest acquisition, the Transformation Incentive Awards granted on the closing of the Allergan acquisition are intended to strongly incentivize our senior management to rapidly integrate the Allergan and Actavis businesses and to create lasting shareholder value in the years immediately following the merger.

 

A requirement to retain a significant percentage of shares acquired through equity pay programs until reaching retirement age is inappropriate and would create an incentive for successful executives to terminate their employment with the company. A substantial portion of each of our named executive officer’s compensation is paid in the form of equity awards (a majority of total compensation reported in the Summary Compensation Table over the last three years). As a result, there is a legitimate need for executives to be able to diversify their assets. The proposal’s requirement for senior executives to retain a significant number of shares until reaching retirement age is not necessary to achieve the objective of aligning the long-term interests of executives and

 

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shareholders. Such a requirement would, in fact, create a strong incentive for executives to leave employment with Actavis in order to realize the value of their equity compensation. Ironically, under this proposal the most successful executives — those whose leadership contributes to a significant increase in stock price during their tenure — would have the greatest financial incentive to leave. Our ability to retain our senior management team has been an important factor in our long-term success, and this proposal would undermine that strength and harm our business.

 

A requirement to retain a significant percentage of shares acquired through equity pay programs until reaching retirement age would hinder our ability to recruit key executive talent. In addition to making it more difficult for Actavis to retain its most successful and therefore valuable executives, the proposal would harm the Company’s ability to recruit new executive talent. Stock retention requirements beyond share ownership requirements are not required at most companies and are especially rare among our competitors. Adoption of this proposal could also serve to discourage current employees from accepting promotions that resulted in them becoming subject to the proposed retention policy. Our success in promoting from within has been another important factor in our long-term success, and this proposal would undermine that strength and harm our business.

 

Moreover, unless the stock retention requirement urged by this proposal is implemented by each of our peer group companies and every other company with which we compete for executive officer talent, the implementation of such a requirement by Actavis could significantly impair our ability to attract, retain and incentivize executive officers in the highly competitive marketplace for executive officer talent, in turn jeopardizing Actavis’ long-term success. As a matter of principle, we believe our executive officers, provided they are in compliance with our established stock ownership guidelines, should have the flexibility to manage their personal financial affairs and sell or otherwise dispose of their Actavis shares as they deem appropriate -free of restrictions such as those urged by the proposal.

 

In summary, we believe Actavis’ business track record and long-term stock price performance (which has increased by over 500% during the five year period commencing in January 2010) demonstrate the focus our executive officers have on long-term performance as well as the alignment of our executive officers’ interests with those of our shareholders. Moreover, we believe Actavis’ stock awards to its executive officers, by way of tying such awards to our financial and stock price performance and the long-term vesting provisions of such awards, together with our established stock ownership guidelines, effectively achieve the objectives of the proposed stock retention requirement without the negative consequences we believe the proposed policy would entail.

 

In light of our existing policies, the strong culture of share ownership that exists among our executive officers, and the numerous deficiencies and potential unintended negative consequences of this proposal that are discussed above, we do not believe that implementation of the proposal is appropriate for Actavis.

 

Therefore, we believe the shareholder proposal should be rejected. The Board unanimously recommends that you vote “AGAINST” this shareholder proposal.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors and officers, and persons who own more than 10% of a registered class of our equity securities to file with the SEC reports of ownership and changes in ownership of our ordinary shares and our other equity securities. Officers, directors and greater-than-10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

 

Based solely on a review of the copies of such reports furnished to us or written representations that no other reports were required, we believe that during and with respect to the 2014 fiscal year all filing requirements applicable to our officers, directors and greater-than-10% beneficial owners were complied with and all filings were timely filed, except that, due to administrative oversight, two late Form 4s were filed on November 14, 2014 for Mr. Saunders to report withholding of shares for tax purposes on August 15 and 23, 2014 and two late Form 4s were filed on December 10, 2014 for Mr. Meury to report withholding of shares for tax purposes on December 5 and 6, 2014.

 

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Certain Relationships and Related Transactions

 

We review all relationships and transactions in which we and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. Pursuant to our written Related Person Transaction Policies and Procedures, our legal department is primarily responsible for the implementation of processes and controls to obtain information from the directors and executive officers with respect to related person transactions and for then determining, based on the facts and circumstances, whether we or a related person has a direct or indirect material interest in the transaction. In determining whether a proposed transaction is a related person transaction, our legal department assesses:

 

(i) the related person’s relationship to us;
   
(ii) the related person’s interest in the transaction;
   
(iii) the material facts of the proposed transaction, including the proposed aggregate value of such transaction or, in the case of indebtedness, the amount of principal that would be involved;
   
(iv) the benefits to us of the proposed transaction;
   
(v) if applicable, the availability of other sources of comparable products or services; and
   
(vi) whether the proposed transaction is on terms that are comparable to the terms available to an unrelated third party or to employees generally.

 

If our legal department determines that the proposed transaction is a related person transaction, the proposed transaction is submitted to our Nominating and Corporate Governance Committee for consideration. The Nominating and Corporate Governance Committee may only approve or ratify those transactions that are in, or are not inconsistent with, our best interests and the best interests of our shareholders, as the Nominating and Corporate Governance Committee determines in good faith.

 

As required under SEC rules, we disclose in our Proxy Statement any related person transactions determined to be directly or indirectly material to us or a related person. No reportable transactions occurred since January 1, 2014 or are currently proposed.

 

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Shareholders’ Proposals for the 2016 Annual General Meeting

 

Shareholder Proposals in the Proxy Statement for the 2016 Annual Meeting. Under Rule 14a-8 of the Exchange Act, shareholder proposals to be included in the Proxy Statement for the 2016 Annual Meeting of Shareholders must be received by our Secretary at its principal executive offices no later than December 26, 2015 (120 calendar days before the anniversary of the date we expect to release this Proxy Statement for the 2015 Annual Meeting) and must comply with the requirements of Rule 14a-8 of the Exchange Act.

 

Other Shareholder Proposals and Nominations for Directors to Be Presented at the 2016 Annual Meeting. If you desire to bring a matter before an annual meeting outside the process of Rule 14a-8, you may do so by following the procedures set forth in the Company’s articles of association. In accordance with our articles of association, in order to be properly brought before the 2016 Annual Meeting, a shareholder’s notice must generally be delivered to 1 Grand Canal Square, Docklands, Dublin 2, Ireland, Attention: Company Secretary, not less than 120 days nor more than 150 days prior to the anniversary date of the notice convening the Company’s 2015 Annual Meeting and must contain specified information concerning the matters to be brought before such meeting and concerning the shareholder proposing such matters. Any such proposal or nomination must also meet the requirements set forth in the rules and regulations of the SEC, including Rule 14a-8, in order for such proposal or nomination to be eligible for inclusion in the Company’s 2016 proxy statement. Therefore, to be presented at the Company’s 2016 Annual Meeting, such a proposal or nomination must be received by the Company on or after November 23, 2015, but no later than December 26, 2015.

 

Other Business

 

As of the date of this Proxy Statement, the Board of Directors knows of no other business that will be presented for consideration at the Annual Meeting. If other proper matters are presented at the Annual Meeting, however, it is the intention of the proxy holders named in the Company’s form of proxy to vote the proxies held by them in accordance with their best judgment.

 

Parsippany, New Jersey

 

April 24, 2015

 

By Order of the Board of Directors

 

 

A. Robert D. Bailey,

Chief Legal Officer and Secretary

 

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