Exhibit 10.1
 
FOREST LABORATORIES, INC.
ANNUAL INCENTIVE COMPENSATION PLAN

 
1.  The Plan.  This Annual Incentive Compensation Plan (the “Plan”) is intended
to provide a cash-based incentive and to reward executive officers and certain
other key employees of Forest Laboratories, Inc. (the “Company”) and its
Subsidiaries for the achievement of corporate and divisional goals on an
individual, team, department or division-wide, and on a company-wide basis, to
establish an objective basis (with objective and subjective components) for
determining annual cash bonus awards, and to clearly communicate and reinforce
the strategic, operational and financial objectives of the Company and its
Subsidiaries. “Subsidiary” shall have the meaning given to the term “subsidiary
corporation” by Section 424(f) of the Internal Revenue Code of 1986, as amended
(the “Code”).
 
 
2.  Types of awards.  All awards payable under the Plan will be paid in cash.
 
 
3.  Administration.  The Plan shall be administered by the Compensation
Committee (the “Committee”) of the Board of Directors of the Company (the
“Board”).  The Committee may delegate administration of the Plan (or any portion
thereof) to one or more subcommittees appointed by the Committee from among its
members, which shall then have in connection with the administration of the Plan
(or the relevant portion thereof) the powers theretofore possessed by the
Committee, and any reference in the Plan to the Committee shall thereafter be
deemed to include such subcommittee.  Except as otherwise provided herein, the
Committee shall have plenary authority in its discretion, among other things, to
determine to whom among the eligible persons awards shall be granted, the terms
of each award and whether and to what extent the performance objectives and
performance levels relating to the awards have been satisfied.  The Committee
shall have plenary authority, subject to the express provisions of the Plan, to
interpret the Plan, to adopt a form of Certificate and to make such
modifications to such form of Certificate as it may from time to time determine,
to prescribe, amend and rescind any rules and regulations relating to the Plan
and to take such other action in connection with the Plan as it deems necessary
or advisable.  “Certificate” means the certificate delivered by the Committee to
the Participant with respect to a Performance Period and setting forth the
specific terms of the award, including the Target Bonus, the specific
performance objectives (and the allocation of the Target Bonus to each such
performance objective), the performance levels, and the payout percentage
allocable to each performance objective at each performance level.  The
interpretation, construction and administration by the Committee of any
provisions of the Plan, any Certificate or of any award granted hereunder shall
be final and binding on recipients of awards hereunder.
 
 
4.  Eligibility.  All executive officers and other key employees of the Company
and its Subsidiaries who are designated by the Committee in its sole discretion
will be eligible for awards under the Plan (each such officer or key employee, a
“Participant”).  The adoption of the Plan shall not be deemed to give any
employee any right to an award, except to the extent and upon such terms and
conditions as may be determined by the Committee.  Neither the Plan nor any
award granted hereunder is intended to or shall confer upon any Participant any
right with respect to a continuation of employment by the Company or any of its
Subsidiaries.
 
 
5.  Terms of awards.
 
 
(a)           Performance Period.  The performance period for each award (the
“Performance Period”) will begin on April 1 and end on the following March 31.
 
 
(b)           Bonus Ranges. The “Target Bonus” is the bonus which is payable if
all performance objectives established for a Participant are satisfied at the
“target” level of performance.   The Committee will establish a Target Bonus for
the Participant with respect to the Performance Period within a range of 25% -
100% of the Base Salary of the Participant. “Base Salary” means the
Participant’s annual base salary as in effect on the first day of the applicable
Performance Period, including any before-tax contributions the Participant makes
to any Company-sponsored retirement or welfare benefit plan.  Base Salary
excludes equity compensation, any bonus compensation, any fringe benefits made
available by the Company or any Subsidiary, and any other non-ordinary
compensation and/or retirement or other benefit plan contributions made by the
Company or any Subsidiary.
 
 
(c)           Setting of Awards. Except as provided in the last sentence of this
Section 5(c), the Committee shall approve and adopt, for each Participant
selected by the Committee for participation in the Plan for the Performance
Period, specific performance objectives, performance levels for each performance
objective, and payout percentages for achievement of each performance objective
at the various performance levels, which will be set forth in the Certificate
delivered to the Participant no later than 90 days after the commencement of the
Performance Period.    Provided that the Participant satisfies each performance
objective at least at the “threshold” level, depending on the level of
achievement by the Participant of each performance objective assigned by the
Committee, such Participant will be eligible to receive an award representing a
cash bonus equal to between 50% and 200% of the Participant’s Target Bonus.   If
a Participant’s performance with respect to a performance objective does not
meet the “threshold” level for such performance objective, the Participant will
not be entitled to that portion of the award that is subject to achievement of
such performance objective for that Performance Period.  In the case of a new
hire or a newly-promoted employee who is designated by the Committee as a
Participant after the commencement of a Performance Period, the Committee may
approve and adopt a Target Bonus, performance objectives, performance levels and
payout percentages for achievement of each performance objective at the various
performance levels with respect to that Participant no later than 90 days after
the commencement of such employment or the Participant’s promotion, and may
determine whether and in what manner to pro-rate the Participant’s award for
that Performance Period.
 
 
(d)           Performance Objectives.  For each Performance Period and for each
Participant, the performance objectives will consist of one or more of the
following components relating to corporate business performance objectives,
which may include financial and corporate growth objectives, and personal
performance objectives, which may include individual contributions to corporate
objectives and subjective performance measures:
 
 
1.           Financial Growth Objectives: GAAP earnings or GAAP earnings per
share, non-GAAP earnings or non-GAAP earnings per share, operating or net cash
flows, financial return ratios, total stockholder return, return on assets,
operating margins, shareholder return, or such other similar financial growth
measure as determined by the Committee.
 
 
2.           Corporate Growth Objectives:  Product pipeline productivity, market
share, sales and marketing achievements including product launches, research and
development progress including clinical test progress, or such other similar
corporate growth measure as determined by the Committee.
 
 
3.           Individual Contributions to Corporate Objectives Based on
Executive’s Role:  Success in improving product pipeline, marketing and sales,
research and development, clinical study management, intellectual property
management, financial or tax positioning, working capital maintenance, human
resources management, litigation oversight, fostering compliance with healthcare
standards, or such other similar personal performance objectives as determined
by the Committee.
 
 
4.           Subjective Performance Measures: Ability to deliver business
results, enhancement of organizational performance, demonstration of personal
leadership, development of human capital and other similar elements of
individual performance as determined by the Committee.
 
 
The Committee may determine to measure corporate business performance objectives
on a Company-wide, Subsidiary-wide or division or team-wide basis, or on some
combination of the foregoing, or based on the achievement of specified levels of
Company business performance relative to the performance of other business
entities. If the Committee establishes more than one objective with respect to a
Participant for any Performance Period, the Committee will set forth in the
Certificate how each portion of such award will be allocated among the various
corporate business and personal performance objectives.
 
 
(e)           Performance Levels and Payout Percentages. For each Performance
Period, the Committee will also set levels of achievement for the various
performance objectives, each of which will be expressed as a percentage of
performance relative to the “target” level of performance established by the
Committee for that performance objective, and a payout percentage (of the
portion of the Target Bonus allocated to the performance objective) allocable to
each performance level, all of which will be set forth on the Certificate.  For
each performance objective, the Committee will establish a “target” level of
performance, a “threshold” level of performance, and a “maximum” level of
performance, as well as levels of performance between the “threshold” and
“target” levels and between the “target” and “maximum” levels, and will allocate
a payout percentage to each performance level (i.e., the portion of the Target
Bonus allocable to the performance objective that will be eligible to be earned
with respect to each performance level).  If the Participant satisfies a
particular performance objective at least at the “threshold” level, the
Participant will be eligible to receive that portion of the Participant’s award
that is allocated to that performance objective at the payout percentage
specified for that performance level (as set forth on the Certificate).  If a
Participant’s performance with respect to any performance objective for any
Performance Period does not meet the “threshold” level of performance, the
Participant will not be eligible to receive that portion of the Participant’s
Target Bonus that is dependent on achievement of that particular performance
objective.
 
 
(f)           Calculation of Award; Payment. Subject to the provisions of
Section 6 below, not later than 60 days after the end of each Performance
Period, the Committee will determine the amount of each Participant’s award for
the Performance Period, which shall be the sum, on a weighted basis (in the
manner in which the performance objectives are weighted by the Committee with
respect to the Participant), of the payout percentages of the Participant’s
Target Bonus attributable to the various performance
objectives.  Notwithstanding the specific performance goals established by the
Committee with respect to any Participant, in making its determination the
Committee may take into account not only the level at which the performance
objectives were met but may also take into consideration such equitable factors
as may be determined by the Committee in its discretion. The determination of
the Committee as to the amount of any award shall be final and conclusive and
binding on the Participants.  Subject to the provisions of Section 6 below,
payment of the award shall be made in cash as soon as practicable following the
end of the Performance Period, but in no event later than 2 ½ calendar
months after the end of the Performance Period.
 
 
6.  Requirement of Continued Employment.
 
 
(a)           Eligibility for Payment.  Except as provided in Section 6(b) or as
otherwise determined by the Committee in its discretion and subject to the terms
of any employment, severance or other written compensation agreement between the
Participant and the Company or any of its Subsidiaries, a Participant must be
employed by the Company or any of its Subsidiaries on the last day of the
Performance Period in order to be eligible to receive payment with respect to
any award under the Plan with respect to that Performance Period.
 
 
(b)           Retirement, Death and Disability.  In the event of the termination
of a Participant’s employment during the Performance Period as a result of the
Participant’s Retirement (as defined below), Death, or Disability (as defined
below), the Participant will receive a pro rata portion of the award (as
calculated by the Committee in the manner set forth in the first sentence of
Section 5(e) and payable following the end of the Performance Period as set
forth in Section 5(f)).  For purposes of this Section 6(b), (i) the pro rata
portion shall equal the product of the amount of the award (as so determined by
the Committee) multiplied by a fraction, the numerator of which is the number of
days from the beginning of the Performance Period through the date of the
Participant’s employment termination and the denominator of which is the total
number of days in the Performance Period, (ii) the term “Retirement” shall mean
the termination of the Participant’s employment with the Company of its
Subsidiary (other than as a result of death or Disability or willful misconduct
or activity deemed detrimental to the interests of the Company as determined by
the Company) on or after (A) the Participant’s 65th birthday, or (B) the
Participant’s 55th birthday if the Participant has completed ten years of
service with the Company or any of its Subsidiaries, and (iii) the term
“Disability” shall have the meaning ascribed to “permanent and total disability”
as set forth in Section 22(e)(3) of the Code.
 
 
7.  General Provisions.
 
 
(a)           No Vested Interest.  No Participant shall have any vested interest
in any award under the Plan until such time as the amount of such award has been
determined and approved by the Committee.  All determinations with respect to
awards under the Plan shall be made by the Committee within its discretion.  No
executive officer or other employee of the Company or its Subsidiaries will have
the right to be designated as a Participant under the Plan.
 
 
(b)           Restrictions on Transfer.  No Participant may transfer, pledge,
assign or otherwise dispose of any of such Participant’s rights under the Plan
or with respect to any award, including by operation of law.  Any levy of
execution, attachment or similar process upon an award shall be null and void
and without effect.
 
 
(c)           Employment.  In consideration of the award and regardless of
whether the performance objectives are satisfied, the Participant will fulfill
all the duties and obligations of his or her employment by the Company or its
Subsidiaries.  Nothing in the Plan or in any Certificate shall confer upon the
Participant any right to a similar award in future years or any right to be
continued in the employ of the Company or its Subsidiaries or shall interfere in
any way with the right of the Company or any such Subsidiary to terminate or
otherwise modify the terms of the Participant’s employment.
 
 
(d)           Participation in Other Plans or Agreements.  Participation in the
Plan shall neither be deemed to limit a Participant’s rights under any other
compensation or benefit plan maintained by the Company or its Subsidiaries that
covers such Participant nor to entitle a Participant to benefits under any other
compensation or benefit plan maintained by the Company or any Subsidiary, unless
otherwise specifically provided for in such benefit plan. Awards issued under
the Plan shall be deemed to be bonuses for purposes of determining amounts
payable under all other compensation or benefit plans maintained or agreements
entered into by the Company or its Subsidiaries.
 
 
(e)           Taxes.  The Company shall be entitled to withhold from any payment
due to a Participant under the Plan all federal, state or local income or
employment taxes required under applicable law to be withheld therefrom.
 
 
(f)           Governing Law.  The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
 
 
(g)           Effective Date.   The Plan shall be effective as of May 7, 2012
(the “Effective Date”), and shall continue in effect until terminated by the
Board.
 
 
8.  Amendment. The Board shall have complete power and authority to modify or
amend the Plan at any time and from time to time and in any respect and may
discontinue or suspend the Plan at any time.  The Plan is intended to comply
with the requirements of Section 409A of the Code, without triggering the
imposition of any tax penalty thereunder.  To the extent necessary or advisable,
the Board may amend the Plan to delete any conflicting provision and to add such
other provisions as are required to fully comply with the applicable provisions
of Section 409A of the Code and any other legislative or regulatory requirements
applicable to the Plan.