2006
MANAGEMENT BONUS 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.
The Plan year
runs from January 1, 2006 through December 31,
2006.
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.
Bonuses for
Plan participants are based on both corporate performance and
individual performance in relation to pre-established objectives,
as follows:
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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.
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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.
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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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January 2006
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06 MBP Page -1-
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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.
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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.”
The components
of this calculation for bonus pool funding are: (1) EPS,
(2) Revenue Growth and (3) R&D Reinvestment
Rate.
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BONUS POOL FUNDING
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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.
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Earnings Per Share,
Revenue Growth and R&D Reinvestment Rate
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R&D
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TOTAL
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2006 EPS
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BONUS %
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REVENUE
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BONUS %
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REINVEST.
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BONUS %
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BONUS % OF
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RANGE
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OF TARGET
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GROWTH
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OF TARGET
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RATE
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OF TARGET
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TARGET
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0.0%
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7.6%
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0.0%
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15.75%
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0.0%
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0.0%
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50.0%
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8.6%
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2.0%
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16.00%
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2.0%
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54.0%
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60.0%
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9.6%
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4.0%
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16.25%
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4.0%
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68.0%
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70.0%
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10.6%
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6.0%
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16.50%
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6.0%
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82.0%
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80.0%
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11.6%
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8.0%
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16.75%
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8.0%
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96.0%
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90.0%
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12.6%
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10.0%
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17.00%
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10.0%
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110.0%
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95.0%
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13.6%
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13.8%
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17.25%
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13.8%
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122.5%
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100.0%
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14.6%
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17.5%
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17.50%
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17.5%
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135.0%
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105.0%
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15.6%
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21.3%
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17.75%
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21.3%
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147.5%
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110.0%
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16.6%
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25.0%
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18.00%
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25.0%
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160.0%
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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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January 2006
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06 MBP Page -2-
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BONUS POOL
DIFFERENTIATION BY BUSINESS UNIT/FUNCTION
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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.
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At the end of
the year, the President
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