Document:

exv10w5

 

EXHIBIT 10.5

ALLERGAN, INC.

2003 NONEMPLOYEE DIRECTOR EQUITY INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

     This Non-qualified Stock Option Agreement (“Agreement”) is entered into as of April ___,
20___, (the “Date of Grant”) between Allergan, Inc., a Delaware corporation (the “Company”), and
                                        , a director of the Company (the “Director”).

     The Company has adopted and the stockholders of the Company have approved the 2003 Nonemployee
Director Equity Incentive Plan (the “Plan”). Pursuant to Section 3.1 of the Plan and in
consideration of the services rendered and to be rendered by the Director, the Company has granted
an option to the Director upon the terms and conditions set forth in the Plan and this Agreement.

     1. Number of Option Shares. This Agreement evidences the grant by the Company to the Director
of a non-qualified stock option (the “Option”) to purchase, from time to time, an aggregate of
2,500 shares (the “Option Shares”) of the Company’s Common Stock, par value $0.01 per share (the
“Common Stock”), under Section 3.1 of the Plan, subject to the terms and conditions and to
adjustment as set forth herein or in the Plan.

     2. Option Purchase Price. Upon exercise of vested Option Shares, the Director shall pay to
the Company
$           per Option Share (the “Option Purchase Price”) being exercised.

     3. Option Expiration Date. Unless terminated sooner in accordance with the provisions of the
Plan or this Agreement, the right to exercise the Option shall expire on the close of business on
the business day immediately preceding the tenth (10th) anniversary of the Date of Grant
(the “Expiration Date”).

     4. Vesting Restrictions. Subject to the provisions of Section 5 of this Agreement and to
adjustment pursuant to Section 4.2 of the Plan, the Option shall become fully vested and
exercisable as to all Option Shares on the one (1) year anniversary of the Date of Grant.

     5. Effect of Certain Events on Vesting and Exercise.

          a. Termination of Service.

               (i) General. If the Director ceases to serve as a director of the Company for any
reason other than such Director’s death or total disability, any portion of the Option that has not
vested as of such termination of service shall be forfeited.

               (ii) Termination as a Result of Death or Disability. If the Director ceases to serve
as a director of the Company by reason of such Director’s death or total disability, the Option
shall vest immediately as to the entire number of Option Shares.

          b. Change of Control. Upon the occurrence of a Change of Control (as defined in Section 4.3
of the Plan), the Option shall vest immediately as to the entire number of Option Shares.

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          c. Exercise Period Following Termination of Service.

               (i) In the event the Director ceases to be a director by reason of such Director’s voluntary
resignation or removal for cause, any unexercised portion of the Option that is vested may be
exercised by the Director at any time within three (3) months following such termination of service
but in no event after the Expiration Date.

               (ii) In the event the Director ceases to be a director other than by reason of such Director’s
voluntary resignation or removal for cause, any unexercised portion of the Option that is vested
may be exercised by the Director or by the Director’s personal representative or by the person or
persons to whom the Option shall have been transferred by will or the laws of descent and
distribution at any time within twelve (12) months following such termination of service, but in no
event after the Expiration Date.

     6. Exercise of Option.

          a. All or a portion of the vested Option may be exercised in accordance with procedures
(including requisite holding periods) established from time to time by the Board.

          b. Payment of the aggregate Option Purchase Price for the number of vested Option Shares for
which the Option is being exercised shall be made (i) in cash or by check, (ii) by delivery of a
notice that the Director has placed a market sell order with a broker with respect to shares of
Common Stock then issuable upon exercise of the Option, and the broker pays a sufficient portion of
the net proceeds of the sale to the Company in satisfaction of the aggregate Option Purchase Price,
provided that the Company shall not deliver such shares until payment of such proceeds is received
by the Company, or (iii) by any combination of the foregoing. However, the Board of Directors may,
in its discretion, (x) allow payment, in whole or in part, through the delivery of shares of Common
Stock which have been owned by the Director for at least six (6) months, duly endorsed for transfer
to the Company with a Fair Market Value on the date of delivery equal to the aggregate Option
Purchase Price of the Option or exercised portion thereof, (y) allow payment, in whole or in part,
through the delivery of property of any kind which constitutes good and valuable consideration, or
(z) allow payment through any combination of the foregoing.

          c. The Director agrees, with respect to the Option, to pay to the Company an amount sufficient
to satisfy any taxes or other amounts required by any governmental authority to be withheld and
paid over to such authority for his or her account, or to otherwise make arrangements satisfactory
to the Board for the payment of such amounts.

          d. Subject to adjustment pursuant to Section 4.2 of the Plan, a minimum of six months shall
elapse between the Date of Grant and the sale of any of the Option Shares. No shares of Common
Stock shall be issued or transferred upon exercise of the Option unless and until all legal
requirements applicable to the issuance or transfer of such Common Stock have been complied with to
the satisfaction of the Board.

     7. No Assignability. The Option is not assignable or transferable by the Director, except by
will or by the laws of descent and distribution and shall not be subject to any encumbrance, pledge
or charge of any nature. During the lifetime of the Director, the Option may be exercised only by
the Director or, if the Director becomes disabled, by the Director’s guardian or legal
representative. The restrictions on exercise and transfer shall not be deemed to prohibit, to the
extent permitted by the Board, transfers to any one or more Permitted Transferees (as defined
below), subject to the following terms and conditions: (i) the Option shall not be assignable or
transferable by the Permitted Transferee other than by will or the laws of descent and
distribution; (ii) the Option which is transferred to a Permitted Transferee shall continue to be

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subject to all the terms and conditions of the Option as applicable to the Director (other
than the ability to further transfer the Option); and (iii) the Director and the Permitted
Transferee shall execute any and all documents requested by the Board, including, without
limitation documents to (x) confirm the status of the transferee as a Permitted Transferee, (y)
satisfy any requirements for an exemption for the transfer under applicable federal and state
securities laws and (z) evidence the transfer. For purposes of this Section 7, “Permitted
Transferee” shall mean, with respect to a Director, any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the Director’s household (other than a tenant or employee), a
trust in which these persons (or the Director) control the management of assets, and any other
entity in which these persons (or the Director) own more than fifty percent of the voting
interests, or any other transferee specifically approved by the Board after taking into account any
state or federal tax or securities laws applicable to transferable non-qualified stock options.

     8. General Terms. The Director acknowledges receipt of a copy of the Plan and the Plan
Prospectus. The Option and this Agreement are subject to, and the Company and the Director agree
to be bound by, the provisions of the Plan and the Plan Prospectus that apply to the Option. Such
provisions are incorporated herein by this reference. In the event of a conflict between the terms
of this Agreement and the Plan, the Plan shall be the controlling document. Capitalized terms used
but not defined herein shall have the respective meanings ascribed to them in the Plan.

     9. Other Provisions.

          a. Neither the Director nor any other person entitled to exercise the Option shall have any
rights as a stockholder with respect to any Option Shares until the date the Director or such other
person becomes the holder of record of such Option Shares following exercise of the Option.

          b. The Director acknowledges that the Company has the right to amend, suspend or terminate the
Plan in any respect whatsoever at any time (including, but not limited to, the power to amend the
number of shares subject to awards granted thereunder) except to the extent prohibited by law and
except that no such amendment, suspension or termination may, without the Director’s consent,
adversely affect the rights of the Director under the Option.

          c. In the event that any provision this Agreement is held to be invalid, void or
unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other
provision of this Agreement.

          d. The rights and obligations under this Agreement shall inure to the benefit of, and shall be
binding upon, the Company and its successors and assignees and the Director and the Director’s
heirs, executors, administrators, personal representations, transferees, assignees and successors
in interest.

          e. Any communication under this Agreement shall be in writing and addressed to the Company at
2525 Dupont Drive, Irvine, California 92612, Attention: General Counsel and to the Director at the
address given beneath the Director’s signature, or at such other address as either party may
hereafter designate in writing to the other.

          f. The interpretation, performance and enforcement of the Option and this Agreement shall be
governed by the internal laws of the State of California.

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          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.

	 	 	 	 	 
	 	 	THE COMPANY:
	 
	 	 	 	 
	 	 	ALLERGAN, INC.,
	 	 	a Delaware corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	     David E.I. Pyott,
	 

	 	 	 	     Chairman of the Board and Chief Executive Officer
	 
	 	 	 	 
	 	 	DIRECTOR:
	 
	 	 	 	 
	 	 	 

4exv10w35

 

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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	 	06 MBP Page -1-

 

 

			
	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.

 

			
	January 2006
	 	06 MBP Page -2-

 

 

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.

 

			
	January 2006
	 	06 MBP Page -3-

 

 

 

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.

 

			
	January 2006
	 	06 MBP Page -4-

 

 

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%	 	 

 

			
	January 2006
	 	06 MBP Page -5-

 

 

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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