exv10w35



 




EXHIBIT
10.35




ALLERGAN




2006

MANAGEMENT BONUS PLAN




JANUARY 2006




 

January 2006





 









 







 




PURPOSE OF THE PLAN



The Allergan, Inc. 2006 Management Bonus Plan (the “Plan”) is designed to reward eligible
management-level employees for their contributions to providing Allergan’s stockholders increased
value for their investment through the successful accomplishment of specific financial objectives
and individual performance objectives.



 

PLAN YEAR



The Plan year runs from January 1, 2006 through December 31, 2006.



 

ELIGIBILITY



All regular full-time and part-time employees of Allergan, Inc. and its subsidiaries (the
“Company”) scheduled to work 20 or more hours per week in salary grades 7E and above who are not
covered by any other bonus or sales incentive plan are eligible to participate in the Plan.
Notwithstanding anything in this Plan to the contrary, any individual shall not be eligible to
participate in the Plan if such individual (a) performs services for the Company and is classified
or paid as an independent contractor (regardless of his or her classification for federal tax or
other legal purposes) by the Company or (b) performs services for the Company pursuant to an
agreement between the Company and any other person including a leasing organization. Participants
must be employed on or before June 30, 2006 in order to be eligible to receive a bonus.
Participants must be actively employed by the Company on the date bonuses are paid in order to be
eligible to receive a bonus. Participants who resign or are terminated for reasons other than those
noted below will receive no bonus.



Bonuses, if any, for participants who become eligible after the beginning of the plan year, retire
(“normal retirement” is defined as termination of employment after the Plan participant has
attained age 55, provided that such participant has been employed by the Company for a minimum of 5
years), become disabled, die or transfer into a position covered by another incentive plan will be
prorated. Bonuses, if any, for participants who are laid-off will be prorated provided the
participant was eligible for at least six months of the Plan year. All proration will be based on
the number of months of participation in the Plan during the Plan year.



 

PERFORMANCE OBJECTIVES



Bonuses for Plan participants are based on both corporate performance and individual
performance in relation to pre-established objectives, as follows:



 

CORPORATE OBJECTIVES





			
	u	 	Earnings Per Share (“EPS”)—EPS is defined as adjusted net
earnings from continuing operations as measured by Wall Street
divided by the weighted average number of common and common
equivalent shares on a diluted basis.






			
	u	 	Pharmaceutical Sales Revenue Growth in Local
Currency—Pharmaceutical sales revenue stated in constant local
currency compared to the prior year. Specifically defined as the
percentage change in annual pharmaceutical sales revenue in
constant local currency from the previous fiscal year end to the
current fiscal year end (“Revenue Growth”). The purpose of sales
stated in constant local currency is to remove any impact on
sales growth from changes in currency exchange rates from year to
year.






			
	u	 	Research and Development (“R&D”) Reinvestment Rate— R&D
expense as a percentage of revenue. Specifically defined as the
total annual R&D expense as a percentage of annual pharmaceutical
sales as of the current fiscal year end.





 





			
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	u	 	Operating Income—Operating Income compared to budget will be
considered for allocation of bonus pools by Business
Unit/Function. Operating Income is defined as Net Sales minus
Cost of Goods minus Selling and General Administrative expenses
minus Research & Development minus allocated corporate interest
where applicable.




INDIVIDUAL OBJECTIVES



Management Bonus Objectives (“MBOs”) are prepared by each participant and his or her supervisor at
the beginning of the Plan year and may be modified throughout the year as necessary. Objectives
should reflect major results and accomplishments to be achieved in order to meet short and
long-term business goals that contribute to increased stockholder value. MBOs are expressed as
specific, quantifiable measures of performance in relation to key operating decisions for the
participant’s business unit, such as managing inventory levels, receivables, expenses, payables,
increasing sales, eliminating unnecessary capital expenditures, etc.



At the end of the Plan year, the supervisor evaluates the participant’s performance in relation to
his or her objectives in order to determine the size of the bonus award, if any. A more detailed
description of how the award is calculated is provided under “Individual Bonus Award Calculation.”



 

BONUS POOL CALCULATION



The components of this calculation for bonus pool funding are: (1) EPS, (2) Revenue Growth and
(3) R&D Reinvestment Rate.





			
	BONUS POOL FUNDING  —	 	Bonuses are funded when the Company achieves a threshold
level of target EPS performance. The level of bonus funding is determined by EPS
performance, Revenue Growth and R&D Reinvestment Rate as outlined in the table
below.






	 	 	 ̈ Earnings Per Share, Revenue Growth and R&D Reinvestment Rate





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	R&D	 	 	 	TOTAL
	2006 EPS	 	BONUS %	 	REVENUE	 	BONUS %	 	REINVEST.	 	BONUS %	 	BONUS % OF
	RANGE	 	OF TARGET	 	GROWTH	 	OF TARGET	 	RATE	 	OF TARGET	 	TARGET
	 	 	 
	-$0.15
	 	0.0%	 	7.6%	 	0.0%	 	15.75%	 	0.0%	 	0.0%
	-$0.12
	 	50.0%	 	8.6%	 	2.0%	 	16.00%	 	2.0%	 	54.0%
	-$0.09
	 	60.0%	 	9.6%	 	4.0%	 	16.25%	 	4.0%	 	68.0%
	-$0.06
	 	70.0%	 	10.6%	 	6.0%	 	16.50%	 	6.0%	 	82.0%
	-$0.03
	 	80.0%	 	11.6%	 	8.0%	 	16.75%	 	8.0%	 	96.0%
	Target
	 	90.0%	 	12.6%	 	10.0%	 	17.00%	 	10.0%	 	110.0%
	$0.02
	 	95.0%	 	13.6%	 	13.8%	 	17.25%	 	13.8%	 	122.5%
	$0.04
	 	100.0%	 	14.6%	 	17.5%	 	17.50%	 	17.5%	 	135.0%
	$0.06
	 	105.0%	 	15.6%	 	21.3%	 	17.75%	 	21.3%	 	147.5%
	$0.08
	 	110.0%	 	16.6%	 	25.0%	 	18.00%	 	25.0%	 	160.0%





Revenue Growth and R&D Reinvestment Rate bonus funding may not exceed target unless EPS
performance is equal to or greater than target. If actual results fall between the performance
levels shown above, bonuses will be prorated accordingly.




 





			
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BONUS POOL DIFFERENTIATION BY BUSINESS UNIT/FUNCTION





			
	 ̈	 	Operating Income—The target bonus pool determined
by EPS, Revenue Growth and R&D Reinvestment Rate
performance is modified for each business
unit/function based on Operating Income results
vs. budget. That is, a business unit that exceeds
budget will receive a greater share of the total
Company pool than a business unit that is below
budget.




At the end of the year, the President and Chief Executive Officer of Allergan, Inc. may recommend
adjustments to the bonus funding levels to the Organization and Compensation Committee (the
“Committee”) after consideration of key operating results. When calculating corporate performance
for purposes of this Plan, the Committee has the discretion to include or exclude any or all of the
following items:





	 	•	 	extraordinary, unusual or non-recurring items
	 
	 	•	 	effects of accounting changes
	 
	 	•	 	effects of financing activities
	 
	 	•	 	expenses for restructuring or productivity initiatives
	 
	 	•	 	other non-operating items
	 
	 	•	 	spending for acquisitions
	 
	 	•	 	effects of divestitures
	 
	 	•	 	amortization of acquired intangible assets




 

INDIVIDUAL BONUS AWARD CALCULATION



Target bonus awards are expressed as a percentage of the participant’s year-end annualized
base salary. The target percentages vary by salary grade (see Attachment No. 1).



A participant’s actual bonus award may vary above or below the targeted level based on the
supervisor’s evaluation of his or her performance in relation to the predetermined MBOs. Each
participant’s actual bonus award may be modified down to 0% or up to 150% of his or her target
bonus amount. However, the total of all bonus awards given within each business unit must total no
more than 100% of the total bonus pool dollars allocated to that business unit.



 

METHOD OF PAYMENT



For grade 8 Directors and above, bonuses are paid in cash up to a maximum bonus pool equal to
100% of participants’ bonus targets and performance over such pool is paid in restricted stock or
restricted stock units with cliff vesting two years from the award effective date. Any payment in
the form of stock will be issued under the Incentive Compensation Plan. Upon normal retirement
(defined as termination of employment after the Plan participant has attained age 55, provided that
such participant has been employed by the Company for a minimum of 5 years), all of the
restrictions imposed on the recipient’s restricted stock shall lapse as of the recipient’s last
date of employment. For grade 7 participants, all bonuses are paid in cash. Bonus awards are paid
following the close of the Plan year after the review and authorization of bonuses by the
Committee. Bonuses will be paid within 30 days following management communication of the award,
through the participant’s normal payroll channel. In the event of a Change in Control (as defined
in Attachment No. 2), bonuses will be paid within 30 days of the effective date of the Change in
Control.




 





			
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CHANGE IN CONTROL



If a Change in Control occurs after the close of the Plan year and Company performance
supports bonus pool funding, participants will be paid a bonus based on performance in relation to
the EPS, Revenue Growth and R&D Reinvestment Rate targets.



If the Change in Control occurs during the Plan year, participants will be paid a bonus prorated to
the effective date of the Change in Control and EPS, Revenue Growth and R&D Reinvestment Rate
performance will be deemed to be the greater of:





	 	•	 	100% of the EPS, Revenue Growth and R&D Reinvestment Rate targets or
	 
	 	•	 	the prorated actual year-to-date performance




In either case, a participant’s actual bonus may vary above or below the targeted level according
to the provisions outlined in “Individual Bonus Award Calculation” above. Participants must be
employed by the Company or its successor on the effective date of the Change in Control in order to
receive the prorated payment, unless their employment is terminated for retirement, death,
disability or otherwise without cause. For purposes of this plan, “cause” shall be limited to only
three types of events: the willful refusal to comply with a lawful, written instruction of the
Board so long as the instruction is consistent with the scope and responsibilities of the
participant’s position prior to the Change in Control; dishonesty which results in a material
financial loss to the Company (or to any of its affiliated companies) or material injury to its
public reputation (or to the public reputation of any of its affiliated companies); or conviction
of any felony involving an act of moral turpitude.



 

GENERAL



Management reserves the right to define corporate performance and individual performance and
to review, alter, amend, or terminate the Plan at any time subject to approval of the Committee.
This Plan does not constitute a contract of employment and cannot be relied upon as such. Any
questions regarding this Plan should be directed to the Human Resources department or the Vice
President, Compensation and Benefits. This Management Bonus Plan document supersedes any previous
document you may have received.




 





			
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ATTACHMENT NO. 1




ALLERGAN




2006 MANAGEMENT BONUS PLAN




TARGET AWARDS




	 	 	 	 	 
	Salary Grade	 	US Target Bonus	 	Intl Target Bonus
	7E
	 	12%	 	15%
	8E
	 	17%	 	20%
	9E
	 	23%	 	25%
	10E
	 	25%	 	30%
	11E
	 	35%	 	35%
	12E
	 	35%	 	40%
	13E
	 	40%	 	45%
	14E
	 	50%	 	 
	15E
	 	60%	 	 
	16E
	 	70%	 	 






 





			
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ATTACHMENT NO. 2




CHANGE IN CONTROL DEFINITION



“Change in Control” shall mean the following and shall be deemed to occur if any of the
following events occur:




     (a) Any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”), is or becomes the “beneficial
owner,” as defined in Rule 13d-3 under the Exchange Act (a “Beneficial Owner”), directly or
indirectly, of securities of Allergan, Inc., a Delaware corporation (“Allergan”) representing (i)
20% or more of the combined voting power of Allergan’s then outstanding voting securities, which
acquisition is not approved in advance of the acquisition or within 30 days after the acquisition
by a majority of the Incumbent Board (as hereinafter defined) or (ii) 33% or more of the combined
voting power of Allergan’s then outstanding voting securities, without regard to whether such
acquisition is approved by the Incumbent Board;



     (b) Individuals who, as of the date hereof, constitute the Board of Directors of Allergan
(the “Incumbent Board”), cease for any reason to constitute at least a majority of the Board of
Directors, provided that any person becoming a director subsequent to the date hereof whose
election, or nomination for election by Allergan’s stockholders, is approved by a vote of at least
a majority of the directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of Allergan, as such terms
are used Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall, for the purposes
of this Agreement, be considered as though such person were a member of the Incumbent Board of
Allergan;



     (c) The consummation of a merger, consolidation or reorganization involving Allergan, other
than one which satisfies both of the following conditions:



          (1) a merger, consolidation or reorganization which would result in the voting securities of
Allergan outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of another entity) at least 55% of the
combined voting power of the voting securities of Allergan or such other entity resulting from the
merger, consolidation or reorganization (the “Surviving Corporation”) outstanding immediately after
such merger, consolidation or reorganization and being held in substantially the same proportion as
the ownership in Allergan’s voting securities immediately before such merger, consolidation or
reorganization, and



          (2) a merger, consolidation or reorganization in which no Person is or becomes the
Beneficial Owner directly or indirectly, of securities of Allergan representing 20% or more of the
combined voting power of Allergan’s then outstanding voting securities; or



     (d) The stockholders of Allergan approve a plan of complete liquidation of Allergan or an
agreement for the sale or other disposition by Allergan of all or substantially all of Allergan’s
assets.


Notwithstanding the preceding provisions of this Section, a Change in Control shall not be deemed
to have occurred if the Person described in the preceding provisions of this Section is (1) an
underwriter or underwriting syndicate that has acquired the ownership of any of Allergan’s then
outstanding voting securities solely in connection with a public offering of Allergan’s securities,
(2) Allergan or any subsidiary of Allergan or (3) an employee stock ownership plan or other
employee benefit plan maintained by Allergan (or any of its affiliated companies) that is qualified
under the provisions of the Internal Revenue Code of 1986, as amended. In addition,
notwithstanding the preceding provisions of this Section, a Change in Control shall not be deemed
to have occurred if the Person described in the preceding provisions of this Section becomes a
Beneficial Owner of more than the permitted amount of outstanding securities as a result of the
acquisition of voting securities by Allergan which, by reducing the number of voting securities
outstanding, increases the proportional number of shares beneficially owned by such Person,
provided, that if a Change in Control would occur but for the operation of this sentence and such
Person becomes the Beneficial Owner of any additional voting securities (other than through the
exercise of options granted under any stock option plan of Allergan or through a stock dividend or
stock split), then a Change in Control shall occur.




 





			
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