-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
L/UuXozRIdTeg2ToJ39iG85lj8Sk7VKQT4cBuUAWMk2uU58XYoEit7z/v85HBWLt
j51EtUjiXntDno34IHDA9Q==
<SEC-DOCUMENT>0001095811-01-001715.txt : 20010326
<SEC-HEADER>0001095811-01-001715.hdr.sgml : 20010326
ACCESSION NUMBER: 0001095811-01-001715
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 9
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010323
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ALLERGAN INC
CENTRAL INDEX KEY: 0000850693
STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834]
IRS NUMBER: 951622442
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-10269
FILM NUMBER: 1577318
BUSINESS ADDRESS:
STREET 1: 2525 DUPONT DRIVE
CITY: IRVINE
STATE: CA
ZIP: 92612
BUSINESS PHONE: 7142464500
MAIL ADDRESS:
STREET 1: P.O. BOX 19534
CITY: IRVINE
STATE: CA
ZIP: 92713-9534
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>a70026e10-k405.txt
<DESCRIPTION>FORM 10-K405 PERIOD ENDED DECEMBER 31, 2000
<TEXT>
<PAGE> 1
================================================================================
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
COMMISSION FILE NO. 1-10269
ALLERGAN, INC.
(Exact name of Registrant as Specified in its Charter)
DELAWARE 95-1622442
(State of Incorporation) (I.R.S. Employer
Identification No.)
2525 DUPONT DRIVE
IRVINE, CALIFORNIA 92612
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (714) 246-4500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which each class registered
Common Stock, $0.01 par value New York Stock Exchange
Preferred Share Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The aggregate market value of the registrant's voting stock held by
non-affiliates was approximately $10,977,000,000 on January 26, 2001, based upon
the closing price on the New York Stock Exchange on such date.
Common Stock outstanding as of January 26, 2001 - 134,254,772 shares
(including 2,486,079 shares held in treasury).
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II, III and IV incorporate certain information by reference
from the registrant's proxy statement for the annual meeting of stockholders to
be held on April 25, 2001, which proxy statement was filed with the Securities
and Exchange Commission on March 23, 2001.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I
Item 1. Business....................................................1
Item 2. Properties.................................................13
Item 3. Legal Proceedings..........................................13
Item 4. Submission of Matters to a Vote of Security Holders........14
Item I-A. Executive Officers of Allergan, Inc........................14
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters........................................17
Item 6. Selected Financial Data....................................17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.17
Item 8. Financial Statements and Supplementary Data................17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................17
PART III
Item 10. Directors and Executive Officers of Allergan, Inc..........18
Item 11. Executive Compensation ....................................18
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................18
Item 13. Certain Relationships and Related Transactions.............18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K................................................19
SIGNATURES ..........................................................S-1
INDEX OF EXHIBITS .......................................................S-3
SCHEDULE ..........................................................S-8
EXHIBITS .......................(Attached to this Report on Form 10-K)
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Allergan, Inc. ("Allergan" or the "Company") is a provider of eye care
and specialty pharmaceutical products throughout the world with products in the
eye care pharmaceutical, ophthalmic surgical device, over-the-counter contact
lens care, movement disorder, and dermatological markets. Its worldwide
consolidated revenues are principally generated by prescription and
non-prescription pharmaceutical products in the areas of ophthalmology and skin
care, neurotoxins, intraocular lenses and other ophthalmic surgical products,
and contact lens care products.
Allergan was originally incorporated in California in 1948, became known
as Allergan Corporation in 1950, and reincorporated in Delaware in 1977. In
1980, the Company was acquired by SmithKline Beecham plc (then known as
"SmithKline Corporation" and herein "SmithKline"). The Company operated as a
wholly-owned subsidiary of SmithKline from 1980 until 1989 when Allergan again
became a stand-alone public company through a spin-off distribution by
SmithKline.
On December 9, 1999 the Company implemented a two-for-one stock split
effected as a dividend to stockholders of record on November 18, 1999. All
historical information contained in this report has been adjusted to reflect the
1999 stock split.
ALLERGAN BUSINESSES
The following table sets forth, for the periods indicated, the net sales
from continuing operations for each of the Company's specialty therapeutics
businesses and product lines:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
2000 1999 1998
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Specialty Pharmaceuticals:
Eye Care Pharmaceuticals $ 675.3 $ 571.2 $ 505.3
Skin Care 68.7 76.6 80.6
Botox(R)/Neuromuscular 239.5 175.8 125.3
-------- -------- --------
Total 983.5 823.6 711.2
Medical Devices and OTC Product Lines:
Ophthalmic Surgical 250.4 222.9 193.6
Contact Lens Care 328.7 359.7 356.9
-------- -------- --------
Total 579.1 582.6 550.5
Total Product Net Sales $1,562.6 $1,406.2 $1,261.7
======== ======== ========
Domestic 51.7% 48.1% 46.2%
International 48.3% 51.9% 53.8%
</TABLE>
See Note 14 of Notes to Consolidated Financial Statements on pages A-36 to A-37
of the Company's Proxy Statement filed on March 23, 2001 for further information
concerning foreign and domestic operations.
1
<PAGE> 4
SPECIALTY PHARMACEUTICAL BUSINESS
Eye Care Pharmaceutical Product Line
Allergan develops, manufactures and markets a broad range of
prescription and non-prescription products designed to treat diseases and
disorders of the eye, including glaucoma, inflammation, infection and allergy.
In addition, the specialty over-the-counter product line consists of products
designed to treat ocular surface disease, including artificial tears and ocular
decongestants.
GLAUCOMA
The largest segment of the market for ophthalmic prescription drugs is
for the treatment of glaucoma, a sight-threatening disease characterized by
elevated intraocular pressure leading to optic nerve damage. Allergan's largest
selling eye care pharmaceutical product is Alphagan(R) ophthalmic solution,
which was approved by the United States Food and Drug Administration ("FDA") in
September 1996 for the treatment of open-angle glaucoma and ocular hypertension.
Sales of Alphagan(R) ophthalmic solution represented 15%, 12% and 9% of total
Company sales in 2000, 1999 and 1998, respectively. The period of new chemical
entity exclusivity in the United States for Alphagan(R) ophthalmic solution
extends for five years from the date of approval. Allergan sells Alphagan(R)
ophthalmic solution in 69 countries worldwide.
Allergan filed two new drug applications ("NDAs") with the FDA in 2000
for glaucoma products. In the third quarter of 2000, Allergan filed an NDA in
the U.S. and in the fourth quarter of 2000 filed a Marketing Authorization
Application ("MAA") in Europe for Lumigan(TM), a topical treatment for elevated
intraocular pressure in patients with glaucoma or ocular hypertension. The FDA
approved Lumigan(TM) in March 2001 for the reduction of elevated intraocular
pressure ("IOP") in patients with open-angle glaucoma or ocular hypertension who
are intolerant of other IOP lowering medications or insufficiently responsive
(failed to achieve target IOP determined after multiple measurements over time)
to another IOP-lowering medication. The second NDA was for Alphagan(R) P, a
reformulation containing brimonodine, the active ingredient in Alphagan(R)
ophthalmic solution, preserved with Purite(R). The FDA also approved Alphagan(R)
P in March 2001 for the lowering of IOP in patients with open-angle glaucoma and
ocular hypertension. Alphagan(R) P ophthalmic solution lowers IOP by reducing
aqueous humor production and increasing uveoscleral outflow, while data suggests
that Lumigan(TM) ophthalmic solution lowers IOP by increasing the outflow of
aqueous humor through trabecular meshwork and uveoscleral routes. The Company
intends to launch both products in 2001.
The Company also markets Betagan(R) ophthalmic solution, a topical beta
blocker used in the treatment of glaucoma, and Propine(R) ophthalmic solution,
which is used alone or in combination with other drugs when initial drug therapy
for glaucoma becomes inadequate. Patent protection for both products expired in
the United States in 1991 and they both face generic competition from several
companies including Bausch & Lomb and Alcon Laboratories, Inc. (a division of
Nestle). In addition, the Company markets its own generic version of these two
products.
INFLAMMATION
Allergan's leading ophthalmic anti-inflammatory product is Acular(R)(1)
ophthalmic solution. It is indicated for the relief of itch associated with
seasonal allergic conjunctivitis and for the treatment of postoperative
inflammation in patients who have undergone cataract extraction. Acular(R) PF
was the first unit-dose, preservative-free topical nonsteroidal
anti-
- --------
(1) Acular(R)is a registered trademark of and is licensed from its developer
Syntex (U.S.A.) Inc.
2
<PAGE> 5
inflammatory drug (NSAID) in the United States, and is indicated for the
reduction of ocular pain and photophobia following incisional refractive
surgery. Pred Forte(R) and FML(R) Liquifilm(R) ophthalmic suspensions are
Allergan's products in the ocular corticosteroid inflammation market.
INFECTION
Allergan's major products in the anti-infective market are
Ocuflox(R)/Oflox(R)/Exocin(R) ophthalmic solution, a fluroquinolone which treats
bacterial conjunctivitis and corneal ulcers, Blephamide(R) ophthalmic
suspension, a topical anti-inflammatory and anti-infective, and Polytrim(R)
ophthalmic solution, a synthetic antimicrobial which treats surface ocular
bacterial infections. Blephamide(R), Pred Forte(R) and Polytrim(R) ophthalmic
solutions no longer have patent protection and face generic competition. McNeil
Consumer Healthcare, a subsidiary of Johnson & Johnson, is Allergan's marketing
partner for Ocuflox(R) ophthalmic solution in the U.S. pediatric and selected
general practitioner markets.
ALLERGY
Allergan launched Alocril(R) ophthalmic solution in early 2000.
Alocril(R) is indicated for the treatment of itch associated with allergic
conjunctivitis. The allergy market, is by its nature, a seasonal market, peaking
during the Spring months.
OCULAR SURFACE DISEASE
In addition to its eye care pharmaceuticals, Allergan markets a variety
of artificial tear products for various needs, under a range of brand names
worldwide, led by the Refresh(R) brand. In the United States, the Refresh(R)
brand includes Refresh Plus(R), Refresh Tears(R), and Refresh P.M.(R) Allergan
also markets Celluvisc(R) in the United States for severe dry eye. Other
Allergan brands marketed around the world include the, Liquifilm Tears(R) and
Lacri-Lube(R) S.O.P.(R) products as well as Lerin(R), a decongestant.
Allergan has filed an NDA and an MAA for Restasis(TM), a prescription
ophthalmic emulsion product for the treatment of chronic dry eye disease. In
2001, Allergan plans to initiate a six-month confirmatory study to support these
applications.
Skin Care Product Line
Allergan's skin care business is currently comprised of three main
product lines: tazarotene products in cream and gel formulations marketed under
Tazorac(R) in the United States and Canada and as Zorac(R) elsewhere; Azelex(R),
an acne product; and the M.D. Forte(R) line of alpha hydroxy acid products.
Allergan promotes its skin care products primarily in the United States.
In June 1997, the Company received approval from the FDA to market
Tazorac(R) gel for the treatment of plaque psoriasis and acne. The FDA approved
the cream formulation of Tazorac(R) in October 2000 for the treatment of
psoriasis. Allergan filed a Supplemental NDA in December 2000 for the acne
indication of Tazorac(R) cream. Allergan promotes Tazorac(R) in the United
States, along with its co-promotion partner, 3M Pharmaceuticals. Outside of the
U.S., Allergan has engaged Pierre Fabre Dermatologie and Bioglan Pharma PLC as
its promotion partners for Zorac(R) in Europe, the Middle East and Africa.
Azelex(R)cream is approved for the topical treatment of mild to moderate
inflammatory acne vulgaris. Allergan launched Azelex(R)cream in the U.S. in
December 1995.
3
<PAGE> 6
The Company also develops and markets glycolic acid-based skin care
products. In 1999, the Company divested its aesthetician salon and retail-based
alpha hydroxy acid products as part of an initiative to focus on the M.D.
Forte(R) line of alpha hydroxy acid products. M.D. Forte(R) products are
marketed to and dispensed by physicians.
Botox(R)/Neuromuscular
Allergan's Botox(R) (Botulinum Toxin Type A) Purified Neurotoxin Complex
is used in the treatment of certain neuromuscular disorders which are
characterized by involuntary muscle contractions or spasms. Sales of Botox(R)
Purified Neurotoxin Complex represented 15%, 13% and 10% of total Company sales
in 2000, 1999 and 1998, respectively. The Company markets Botox(R) Purified
Neurotoxin Complex in the United States and in 66 other countries.
The approved indications for Botox(R) in the United States are for the
treatment of blepharospasm (the uncontrollable contraction of the eyelid muscles
which can force the eye closed and result in functional blindness); strabismus
(misalignment of the eyes) in people 12 years of age and over; and cervical
dystonia in adults (along with the associated pain). Outside of the U.S.,
Botox(R) Purified Neurotoxin Complex is also approved for hemifacial spasm,
pediatric cerebral palsy and upper limb spasticity associated with debilities
occurring after a stroke.
The Company is pursuing new approved indications for Botox(R) Purified
Neurotoxin Complex, including brow furrow, pediatric cerebral palsy, headache,
hyperhidrosis (excessive sweating), back spasm, spasticity, anal fissure and
temporal mandibular joint disease.
The Company manufactures bulk toxin raw material necessary to produce
Botox(R) Purified Neurotoxin Complex. The process to create bulk toxin is
technically complicated and difficult. Any failure of the Company to maintain an
adequate supply of bulk toxin could result in an interruption in the supply of
Botox(R) Purified Neurotoxin Complex with a resulting decrease in sales of the
product.
MEDICAL DEVICES AND OTC PRODUCT LINES
Ophthalmic Surgical Product Line
Allergan's ophthalmic surgical business develops, manufactures and
markets intraocular lenses ("IOLs"), surgically related pharmaceuticals,
phacoemulsification equipment and other ophthalmic refractive surgical products.
The largest segment of the surgical market is for the treatment of
cataracts. Cataracts are a condition, usually age related, in which the natural
lens of the eye becomes progressively clouded. This clouding obstructs the
passage of light and can eventually lead to blindness. Most patients affected by
cataracts can be surgically treated by removing the clouded lens and replacing
it with an IOL. The Company currently offers a line of products used in the
performance of cataract surgery, including silicone monofocal and multi-focal
IOLs, an acrylic IOL and PMMA IOLs.
Sales of all models of the Company's IOLs represented 11% of total
Company sales in each of 2000 and 1999 and 10% of total Company sales in 1998.
Foldable IOLs marketed by Allergan for small incision cataract surgery include
the Array(R) multifocal silicone IOL; its line of monofocal silicone IOLs
(PhacoflexII(R)SI-30NB(R), SI-40NB(R), and PhacoflexII(R)SI-55NB(R)); and the
Sensar(R) acrylic IOL, which was introduced in Europe in 1998 and was approved
for marketing in the United States in February 2000. Along with foldable IOLs,
the Company also markets a series of insertion systems for each of its foldable
lens models,
4
<PAGE> 7
referred to as The UnFolder(R) implantation systems. The systems assist the
surgeon in achieving controlled release of the IOL in incisions as small as 2.8
mm.
Phacoemulsification is a method of cataract extraction that uses
ultrasound waves to break the natural lens into small fragments that can be
removed through a hollow needle. Allergan currently markets the Prestige(R),
AMO(R)Diplomax(R) and Sovereign(TM) phacoemulsification systems. Allergan also
markets AMO(R)Vitrax(R), a viscoelastic used to maintain the anterior chamber
and protect endothelial cells during cataract surgery. And, in 1998, the Company
became a distributor of BioLon(TM)2 viscoelastic in the United States under an
agreement with Akorn, Inc. The Company has partnered with Allegiance Healthcare
Corporation to provide custom surgical procedure packs to its U.S. and European
customers.
In 2000, Allergan entered the refractive surgery market with the
Amadeus(R) microkeratome. Surgeons use microkeratomes in LASIK procedures to cut
a flap of corneal tissue that is folded back during the laser procedure and then
folded back to its original position. Allergan is the exclusive worldwide
distributor of the Amadeus(R) microkeratome and SurePass(R) microkeratome
blades, which are manufactured by SIS AG, Surgical Instrument Systems in
Switzerland. Allergan also has a U.S. co-marketing agreement with VISX
Incorporated, which sells excimer laser systems for vision correction.
Contact Lens Care Product Line
The Company has been active in the contact lens care market since 1960.
On a worldwide basis, it develops, manufactures and markets a broad range of
products for use with every available type of contact lens. These products
include disinfecting solutions to destroy harmful microorganisms in and on the
surface of contact lenses; daily cleaners to remove undesirable film and
deposits from contact lenses; enzymatic cleaners to remove protein deposits from
contact lenses; and lens rewetting drops to provide added wearing comfort.
In the area of disinfecting products for soft contact lenses, the
Company offers products that can be used in both the hydrogen peroxide and
convenient chemical systems. Allergan's leading hydrogen peroxide system
products are the Oxysept 1Step(R)/UltraCare(R) hydrogen peroxide
neutralizer/disinfection system, with a color indicator which turns the solution
pink to indicate the disinfectant tablet has dissolved. Complete(R) brand
Multi-Purpose solution is the Company's convenient, one-bottle chemical
disinfection system for soft contact lenses. The Company currently markets
Complete(R) brand Multi-Purpose solution worldwide, including Japan as of 1999.
Complete(R) brand ComfortPLUS(TM) Multi-Purpose solution, the Company's latest
product upgrade, contains a proprietary comfort formulation for longer, more
comfortable contact lens wear.
In November 1995, the Company acquired the worldwide contact lens care
business of Pilkington Barnes Hind. Included in the acquisition was the Consept
F(R) Cleaning and Disinfecting System, the first approved non-heat disinfection
system for soft contact lenses in Japan. This acquisition significantly
increased the Company's contact lens care product business in Japan.
In 2000 Allergan launched a new eye drop for contact lens wearers called
Refresh Contacts(R) to help provide comfort and protection from dryness and
irritation.
Also in 2000, Allergan entered into a strategic global alliance with the
Vistakon Division of Johnson & Johnson Vision Care, Inc., makers of the
Acuvue(R) brand contact lenses. This alliance includes research, educational,
marketing, and co-detailing initiatives.
5
<PAGE> 8
Sales of the Company's hydrogen peroxide disinfection systems
represented 5%, 7% and 10% of total Company sales in 2000, 1999 and 1998,
respectively. The Company's Contact Lens Care business continues to be impacted
by trends in the contact lens and lens care marketplace, including technological
and medical advances in surgical techniques for the correction of vision
impairment. Cheaper one-bottle chemical disinfection systems have gained
popularity among soft contact lens wearers instead of peroxide-based lens care
products which have historically been Allergan's strongest family of lens care
products. The Company's primary strategy is to focus its sales and marketing
resources on aggressive growth of Complete(R) brand Multi-Purpose solution which
grew faster than its segment on a worldwide basis in 2000. Also, the growing use
and acceptance of daily contact lenses, along with the other factors above,
could have the effect of reducing demand for lens care products generally. While
the Company believes it has established appropriate marketing and sales plans to
mitigate the impact of these trends upon its Contact Lens Care business, no
assurance can be given in this regard.
EMPLOYEE RELATIONS
At December 31, 2000, the Company employed 6,181 persons throughout the
world, including 2,308 in the United States. None of the Company's U.S.-based
employees are represented by unions. The Company considers that its relations
with its employees are, in general, very good.
INTERNATIONAL OPERATIONS
Allergan's international sales have represented approximately 48.3%,
51.9% and 53.8% of total sales for the years ended December 31, 2000, 1999 and
1998, respectively. Allergan established its first foreign subsidiary in 1964
and the Company's products are sold in approximately 120 countries. Marketing
activities are coordinated on a worldwide basis, and resident management teams
provide leadership and infrastructure for customer focused rapid introduction of
new products in the local markets.
SALES AND MARKETING
Allergan maintains a global marketing team, as well as regional sales
and marketing organizations. Allergan's sales efforts and promotional activities
are primarily aimed at eye care professionals, as well as neurologists and
dermatologists, who use, prescribe and recommend its products. In addition,
Allergan advertises in professional journals and has an extensive direct mail
program of descriptive product literature and scientific information to
specialists in the ophthalmic, dermatological and movement disorder fields. The
Company has also developed training modules and seminars to update physicians
regarding evolving technology. Allergan has also utilized direct-to-consumer
advertising of its contact lens care products, Refresh(R) products and Array(R)
multifocal silicone IOL.
The Company's products are sold to drug wholesalers, independent and
chain drug stores, pharmacies, commercial optical chains, opticians, mass
merchandisers, food stores, hospitals, ambulatory surgery centers and medical
practitioners, including neurologists, dermatologists and plastic surgeons. At
December 31, 2000, the Company employed approximately 1,600 sales
representatives throughout the world. The Company also utilizes distributors for
its products in the smaller international markets.
6
<PAGE> 9
RESEARCH AND DEVELOPMENT
The Company's global research and development efforts focus on eye care,
skin care and neuromuscular products that are safe, effective, convenient and
have an economic benefit. The Company's own research and development activities
are supplemented by a commitment to identifying and obtaining new technologies
through in-licensing, technological collaborations, joint ventures and
acquisition efforts, including the establishment of research relationships with
academic institutions and individual researchers.
At December 31, 2000, there were, in the aggregate, approximately 1,000
people involved in the Company's research and development efforts. The Company's
research and development expenditures for 2000, 1999 and 1998 were $195.6
million, $168.4 million and $125.4 million, respectively, excluding amounts
spent by the Company on behalf of Allergan Specialty Therapeutics, Inc.
Research and development efforts for the ophthalmic pharmaceuticals
business focus primarily on new therapeutic products for glaucoma, inflammation,
retinal diseases, dry eye, allergy and new anti-infective pharmaceuticals for
eye care. Below is a summary of major research and development projects in the
ophthalmic pharmaceutical segment:
- - In its glaucoma research, the Company is pursuing two approaches. The first
is to improve upon agents for lowering intraocular pressure, and the second
is to develop drugs that directly protect the optic nerve.
- - In the retinal disease area, Allergan is continuing programs to treat
age-related macular degeneration.
- - Allergan continues to pursue ocular allergy, anti-inflammatory and
anti-infective products.
Research and development activities for the surgical business
concentrate on improved cataract surgical systems, implantation instruments and
methods, and new IOL materials and designs.
For the skin care business, Allergan's research and development team is
working on expanded indications and formulations for tazarotene. The team is
also working on an anti-acne approach based on enzyme inhibitors.
Research and development efforts for neuromuscular disorders focus on
expanding the uses for Botox(R) (Botulinum Toxin Type A) Purified Neurotoxin
Complex to include treatment for pediatric cerebral palsy, spasticity, headache,
lower back pain, anal fissure, brow furrow, hyperhidrosis and temporal
mandibular joint disease. Allergan is also pursuing new toxin based products.
Research and development in the contact lens care business is aimed at
systems that are effective and more convenient for patients to use, and thus
lead to a higher rate of compliance with recommended lens care procedures.
Improved compliance can enhance safety and extend the time a patient will be a
contact lens wearer.
Allergan is also working to leverage its technologies in therapeutic
areas outside of its current specialites, such as the use of its
receptor-selective retinoid technology in therapeutic areas such as cancer,
diabetes, dyslipidermia and bone disease and alpha agonists in the treatment of
neuropathic pain.
In 1997 the Company formed a new subsidiary, Allergan Specialty
Therapeutics, Inc. ("ASTI"), to conduct research and development of potential
pharmaceutical products based on the Company's retinoid and neuroprotective
technologies. In March 1998, the Company distributed all ASTI Class A Common
Stock to the Company's stockholders, who
7
<PAGE> 10
received one share of ASTI Class A Common Stock for each 20 shares of Allergan
common stock held as of the record date.
As the sole holder of ASTI's outstanding Class B Common Stock following
the distribution and under the terms of ASTI's Restated Certificate of
Incorporation, the Company has the option to repurchase all of the outstanding
shares of ASTI Class A Common Stock under specified conditions. Under the terms
of a technology license agreement and a license option agreement between the
Company and ASTI, the Company has also granted certain technology licenses and
agreed to make specified payments on sales of certain products in exchange for
the payment by ASTI of a technology fee and the option to independently develop
certain compounds funded by ASTI prior to the filing of an Investigational New
Drug application with the FDA with respect thereto and to license any products
and technology developed by ASTI. The Company will recognize the technology fee
as revenue as it is earned and received.
ASTI's technology and product research and development activities take
place under a research and development agreement with the Company. The Company
will recognize revenues and related costs as services are performed under such
contracts. It is currently expected that most of ASTI's funds will be directed
toward continuing the research and development of products based on retinoid and
neuroprotective technologies. In addition, ASTI may fund the research and
development of pharmaceutical products in therapeutic categories of interest to
the Company other than those based on retinoid and neuroprotective technologies,
but that complement the Company's product pipeline or otherwise are believed to
provide a potential commercialization opportunity for the Company.
The continuing introduction of new products supplied by the Company's
research and development efforts and in-licensing opportunities is critical to
the success of the Company. There are intrinsic uncertainties associated with
the research and development efforts and the regulatory process. There is no
assurance that any of the research projects or pending drug marketing approval
applications will result in new products that the Company can commercialize.
Delays or failures in one or more significant research projects and pending drug
marketing approval applications could have a material adverse impact on the
future operations of the Company.
COMPETITION
Allergan faces strong competition in all of its markets worldwide.
Numerous companies are engaged in the development, manufacture and marketing of
health care products competitive with those manufactured by Allergan. Major eye
care competitors include Alcon Laboratories, Inc. (a subsidiary of Nestle),
Bausch & Lomb and its acquired businesses, Chiron Vision and Storz Ophthalmics,
Novartis Ophthalmics, Merck & Co., Inc. and Pharmacia Ophthalmics. These
competitors have equivalent or, in most cases, greater resources than Allergan.
The Company's skin care business competes against a number of companies,
including among others Dermik, a division of Aventis, Galderma, a joint venture
between Nestle and L'Oreal, Bristol-Myers Squibb, Schering-Plough Corporation,
Johnson & Johnson and Hoffman-La Roche Inc., which all have greater resources
than Allergan. In the market for neurotoxins, the Company has two competitors:
Beaufour Ipsen, which sells in Europe, Latin America, Asia and New Zealand, and
Athena Neurosciences, Inc., a subsidiary of Elan Corporation, PLC, in the United
States and Europe. In marketing its products to health care professionals,
pharmacy benefits management companies, health care maintenance organizations,
and various other national and regional health care providers and managed care
entities, the Company competes primarily on the basis of product technology,
value-added services and price. The Company believes that it competes favorably
in its product markets.
8
<PAGE> 11
GOVERNMENT REGULATION
Drugs, biologics and medical devices, including IOLs and contact lens
care products, are subject to regulation by the FDA, state agencies and, in
varying degrees, by foreign health agencies. Government regulation of most of
the Company's products generally requires extensive testing of new products and
filing applications for approval by the FDA prior to sale in the United States
and by foreign health agencies prior to sale as well. The FDA and foreign health
agencies review these applications and determine whether the product is safe and
effective. The process of developing data to support a premarket application and
governmental review is costly and takes many years to complete.
In general, manufacturers of drugs, medical devices and biologicals are
operating in a rigorous regulatory environment. The total cost of providing
health care services has been and will continue to be subject to review by
governmental agencies and legislative bodies in the major world markets,
including the United States, which are faced with significant pressure to lower
health care costs.
Internationally, the regulation of drugs and medical devices is also
complex. In Europe, the Company's products are subject to extensive regulatory
requirements. As in the United States, the marketing of medicinal products has
for many years been subject to the granting of marketing authorizations by
medicine agencies. Particular emphasis is also being placed on more
sophisticated and faster procedures for reporting of adverse events to the
competent authorities. The European Union ("EU") procedures for the
authorization of medicinal products are currently being reviewed by the European
Commission and proposals for improving the efficiency of operation of both the
mutual recognition and centralized procedure are expected later this year.
Additionally, new rules have been introduced or are under discussion in several
areas such as the harmonization of clinical research laws and the law relating
to orphan drugs and orphan indications.
The EU regulatory regime for medical devices became mandatory in June
1998. It requires that medical devices may only be placed on the market if they
do not compromise safety and health when properly installed, maintained and used
in accordance with their intended purpose. National laws conforming to this EU
legislation regulate the Company's IOLs and contact lens care products under the
medical devices regulatory system rather than the more extensive system for
medicinal products under which they were formerly regulated. The EU medical
device laws require manufacturers to declare that their products conform to the
essential regulatory requirements after which the products may be placed on the
market bearing CE marking. The manufacturers' quality systems for products in
all but the lowest risk classification are also subject to certification and
audit by an independent notified body.
In Japan, where the Company currently sells surgical products, consumer
eye care products and Botox(R), the regulatory process is equally complex.
Premarketing approval and clinical studies are required, as is governmental
pricing approval for medical devices and pharmaceuticals. The regulatory regime
for pharmaceuticals in Japan has historically been so lengthy and costly that it
has been cost prohibitive for Allergan, primarily because Japan required the
repetition of all relevant clinical studies in Japan. In the future the process
in Japan may become more financially attractive as Japan is in the process of
implementing changes to comply with the International Conference on
Harmonization, an agreement among Japan, the U.S. and the E.U. to facilitate the
registration of drugs utilizing data collected outside of the country. The
timeline for completion of these changes and the rules during this period of
transition are not certain and in this period registration of pharmaceutical
products will remain unpredictable; however, the opportunity to realize value
from Allergan's newly developed products in Japan may increase as the
environment in Japan moves closer to that of the E.U. and U.S.
9
<PAGE> 12
In the United States, a significant percentage of the patients who
receive the Company's IOLs are covered by the federal Medicare program. When a
cataract extraction with IOL implantation is performed in an ambulatory surgery
center ("ASC"), Medicare provides the ASC with a fixed facility fee which
includes a recommended $150 allowance to cover the cost of the IOL. The
reimbursement rate for Array(R) multifocal IOLs implanted in ASCs until May 2005
is $200 after HCFA awarded "new technology IOL" status to the Array(R)
multifocal IOL in 2000. When the procedure is performed in a hospital outpatient
department, the hospital's reimbursement is determined using a complex formula
that blends the hospital's costs with the $150 allowance paid to ASCs for IOLs
that are not "new technology IOLs." For the Array(R) multifocal IOL, Medicare
reimburses the hospital based on the actual acquisition cost of the IOL by the
hospital.
Proposals to amend Medicare coverage to include pharmaceuticals are
currently in debate in the United States. Such coverage could impose price
controls on the Company's products. If implemented, price controls could
materially and adversely affect the Company's revenues and financial condition.
The Company cannot predict the likelihood or pace of any significant
legislative action in these areas, nor can it predict whether or in what form
health care legislation being formulated by various governments will be passed.
Medicare reimbursement rates are subject to change at any time. The Company also
cannot predict with precision what effect such governmental measures would have
if they were ultimately enacted into law. However, in general, the Company
believes that such legislative activity will likely continue, and the adoption
of such measures can be expected to have some impact on the Company's business.
PATENTS, TRADEMARKS AND LICENSES
Allergan owns, or is licensed under, numerous patents relating to its
products, product uses and manufacturing processes. It has numerous patents
issued in the United States and corresponding foreign patents issued in many of
the major countries in which it does business. Allergan believes that its
patents and licenses are important to its business, but that with the exception
of those relating to Alphagan(R) and Lumigan(TM) ophthalmic solutions, no one
patent or license is currently of material importance in relation to its overall
sales. Allergan markets its products under various trademarks and considers
these trademarks to be valuable because of their contribution to the market
identification of the various products.
10
<PAGE> 13
ENVIRONMENTAL MATTERS
The Company is subject to federal, state, local and foreign
environmental laws and regulations. The Company believes that its operations
comply in all material respects with applicable environmental laws and
regulations in each country where the Company has a business presence. Although
Allergan continues to make capital expenditures for environmental protection, it
does not anticipate any significant expenditures in order to comply with such
laws and regulations which would have a material impact on the Company's capital
expenditures, earnings or competitive position. The Company is not aware of any
pending litigation or significant financial obligations arising from current or
past environmental practices that are likely to have a material adverse impact
on the Company's financial position. There can be no assurance, however, that
environmental problems relating to properties owned or operated by the Company
will not develop in the future, and the Company cannot predict whether any such
problems, if they were to develop, could require significant expenditures on the
part of the Company. In addition, the Company is unable to predict what
legislation or regulations may be adopted or enacted in the future with respect
to environmental protection and waste disposal.
CERTAIN FACTORS AND TRENDS AFFECTING ALLERGAN AND ITS BUSINESSES
Certain statements made by the Company in this report and in other reports and
statements released by the Company constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, such
as comments which express the Company's opinions about trends and factors which
may impact future operating results. Disclosures that use words such as the
Company "believes," "anticipates," "expects" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from expectations. Any such forward-looking statements, whether made
in this report or elsewhere, should be considered in context with the various
disclosures made by the Company about its businesses including, without
limitation, the factors discussed below.
- - The pharmaceutical industry and other health care-related industries
continue to experience consolidation, resulting in larger, more diversified
companies with greater resources than the Company. Among other things, these
larger companies can spread their research and development costs over much
broader revenue bases than Allergan and can influence customer and
distributor buying decisions.
- - Until December 2000, the Company was the only manufacturer of an
FDA-approved neurotoxin. Another company has now received FDA approval of a
neurotoxin. The Company's sales of Botox(R) Purified Neurotoxin Complex
could be materially and negatively impacted by this new competition.
- - The manufacturing process to create bulk toxin raw material necessary to
produce Botox(R) Purified Neurotoxin Complex is technically complicated. Any
failure of the Company to maintain an adequate supply of bulk toxin and
finished product could result in an interruption in the supply of Botox(R)
Purified Neurotoxin Complex and a resulting decrease in sales of the
product.
- - The Company's Contact Lens Care business continues to be impacted by trends
in the contact lens and lens care marketplace, including technological and
medical advances in surgical techniques for the correction of vision
impairment. Cheaper one-bottle chemical disinfection systems continue to
gain popularity among soft contact lens wearers instead of peroxide-based
lens care products which historically have been Allergan's strongest family
of lens care products. The Company's primary strategy is to focus its sales
and marketing resources on aggressive growth of Complete(R)brand
Multi-
11
<PAGE> 14
Purpose solution which grew faster than its segment on a worldwide basis in
2000. Also, the growing use and acceptance of daily contact lenses and
laser-correction procedures, along with the other factors above, could have
the effect of reducing demand for lens care products generally. While the
Company believes it has established appropriate marketing and sales plans to
mitigate the impact of these trends upon its Contact Lens Care business, no
assurance can be given in this regard.
- - The Company has in the past been, and continues to be, subject to product
liability claims. In addition, the Company has in the past and may in the
future recall or issue field corrections related to its products due to
manufacturing deficiencies, labeling errors or other safety or regulatory
reasons. There can be no assurance that the Company will not experience
material losses due to product liability claims or product recalls or
corrections.
- - Sales of the Company's surgical and pharmaceutical products have been and
are expected to continue to be impacted by continuing pricing pressures
resulting from various government initiatives as well as from the purchasing
and operational decisions made by managed care organizations.
- - A continuing political issue of debate in the United States is the propriety
of expanding Medicare coverage to include pharmaceutical products. If
measures to accomplish that coverage become law, and if these measures
impose price controls on the Company's products, the Company's revenues and
financial condition are likely to be materially and adversely affected.
- - The Company collects and pays a substantial portion of its sales and
expenditures in currencies other than the U.S. dollar. Therefore,
fluctuations in foreign currency exchange rates affect the Company's
operating results. The Company can provide no assurance that future exchange
rate movements will not have a material adverse effect on the Company's
sales, gross profit or operating expenses.
- - The Company's business is also subject to other risks generally associated
with doing business abroad, such as political unrest and changing economic
conditions with countries where the Company's products are sold or
manufactured. Management cannot provide assurances that it can successfully
manage these risks or avoid their effects.
- - Patent protection is generally important in the pharmaceutical industry.
Therefore, Allergan's future financial success may depend in part on
obtaining patent protection for technologies incorporated into products. No
assurance can be given that patents will be issued covering any products, or
that any existing patents or patents issued in the future will be of
commercial benefit. In addition, it is impossible to anticipate the breadth
or degree of protection that any such patents will afford, and there can be
no assurance that any such patents will not be successfully challenged in
the future. If the Company is unsuccessful in obtaining or preserving patent
protection, or if any products rely on unpatented proprietary technology,
there can be no assurance that others will not commercialize products
substantially identical to such products. Furthermore, although Allergan has
a corporate policy not to infringe the valid and enforceable patents of
others, Allergan cannot provide assurances that its products will not
infringe patents held by third parties. In such event, licenses from such
third parties may not be available or may not be available on commercially
attractive terms. Please see Item 3 on page 13 for information on current
patent litigation.
- - The Company sells its pharmaceutical products primarily through wholesalers.
Wholesaler purchases may exceed customer demand, resulting in reduced
wholesaler purchases in later quarters. The Company can give no assurances
that wholesaler purchases will not decline as a result of this potential
excess buying.
12
<PAGE> 15
- - Future performance of the Company will be affected by the introduction of
new products such as Lumigan(TM) and FDA approval of new indications for
current products such as Botox(R) Purified Neurotoxin Complex. The Company
has allocated significant resources to the development and introduction of
new products and indications. The successful development, regulatory
approval and market acceptance of the products and indications cannot be
assured.
- - There are intrinsic uncertainties associated with research & development
efforts and the regulatory process both of which are discussed in greater
details in the "Research and Development" and the "Government Regulation"
sections of this report on Form 10-K, which are incorporated herein by
reference.
ITEM 2. PROPERTIES
Allergan's operations are conducted in owned and leased facilities
located throughout the world. The Company believes its present facilities are
adequate for its current needs. Its headquarters and primary administrative and
research facilities are located in Irvine, California. The Company has three
additional facilities in California, two for raw material support (one leased
and one owned) and one leased administrative facility. The Company owns one
facility in Texas for manufacturing and warehousing, and the Company operates
two facilities in Puerto Rico for manufacturing and warehousing. One of the
Puerto Rico facilities is leased and the other is owned. As previously
announced, the Company intends to close the facility that it owns in 2001.
Outside of the United States and Puerto Rico, the Company owns and
operates three manufacturing and warehousing facilities located in Brazil,
Ireland and China. Other material facilities include one owned facility for
administration and warehousing in Argentina; leased warehouse facilities in
Mexico and Japan; leased administrative facilities in Australia, Brazil, Canada,
France, Germany, Hong Kong, Ireland, Italy, Japan, Spain and the United Kingdom;
and one leased facility in Japan used for administration and research and
development.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various litigation and
claims arising in the ordinary course of business which Allergan considers to be
normal in view of the size and nature of its business.
On March 1, 2001, after concluding that Pharmacia Corporation planned to
file a patent infringement lawsuit against Allergan regarding the
investigational glaucoma drug, Lumigan(TM), Allergan filed a declaratory relief
lawsuit against Pharmacia (and related entities) in United States District Court
for the District of Delaware. In the lawsuit, Allergan asked the court to issue
a ruling that Lumigan(TM) does not infringe certain patents owned or controlled
by Pharmacia and also that such patents are not valid. On March 21, 2001,
Pharmacia filed an answer to the complaint, denying Allergan's allegations.
Pharmacia and Columbia University also filed a counterclaim against Allergan,
alleging that Allergan infringes the same two patents that Allergan identified
in its complaint. See "Certain Factors and Trends Affecting Allergan and its
Businesses" for further information about the risks and uncertainties associated
with patents.
Although the ultimate outcome of any pending litigation and claims
cannot be precisely ascertained at this time, Allergan believes that the
liability, if any, resulting from the aggregate amount of uninsured damages for
outstanding lawsuits, investigations and asserted claims will not have a
material adverse effect on its consolidated financial position and results of
operation. However, in view of the unpredictable nature of such matters, no
assurances can be given in this regard.
13
<PAGE> 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter during the fourth quarter of the
fiscal year covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
ITEM I-A. EXECUTIVE OFFICERS OF ALLERGAN, INC.
The executive officers of the Company and their ages as of March 1, 2001
are as follows:
<TABLE>
<S> <C> <C>
David E.I. Pyott 47 President and Chief Executive Officer
F. Michael Ball 45 Corporate Vice President and President,
North America Region and Global Eye Rx
Business
Eric K. Brandt 38 Corporate Vice President, Chief
Financial Officer and President, Global
Consumer Eye Care Business (Principal
Financial Officer)
David A. Fellows 44 Corporate Vice President and President,
Asia Pacific Region
James M. Hindman, CPA 40 Senior Vice President and Controller
(Principal Accounting Officer)
Lester J. Kaplan, Ph.D. 50 Corporate Vice President and President,
Research and Development and Global
BOTOX(R)
George M. Lasezkay, Pharm.D., J.D. 49 Corporate Vice President, Corporate
Development
Nelson R. A. Marques 50 Corporate Vice President and President,
Latin America Region
James V. Mazzo 43 Corporate Vice President and President,
Europe/Africa/Middle East Region and
Global Surgical Business
Jacqueline Schiavo 52 Corporate Vice President,
Worldwide Operations
Francis R. Tunney, Jr. 53 Corporate Vice President -
Administration and Secretary
</TABLE>
Officers are appointed by and hold office at the pleasure of the Board
of Directors.
Mr. Pyott became President and Chief Executive Officer in January 1998.
Previously, he was head of the Nutrition Division and a member of the executive
committee of Novartis AG from 1995 until December 1997. From 1992 to 1995 Mr.
Pyott was President and Chief Executive Officer of Sandoz Nutrition Corp.,
Minneapolis,
14
<PAGE> 17
Minnesota and General Manager of Sandoz Nutrition, Barcelona, Spain from 1990 to
1992. Prior to that Mr. Pyott held various positions within Sandoz Nutrition
group from 1980.
Mr. Ball has been Corporate Vice President and President, North America
Region and Global Eye Rx Business since May 1998 and prior to that was Corporate
Vice President and President, North America Region since April 1996. He joined
the Company in 1995 as Senior Vice President, U.S. Eye Care after 12 years with
Syntex Corporation, where he held a variety of positions including President,
Syntex Inc. Canada and Senior Vice President, Syntex Laboratories.
Mr. Brandt has been Corporate Vice President and Chief Financial Officer
since May 1999 and in January 2001 he also assumed the duties of President,
Global Consumer Eye Care Business. Prior to joining the Company, Mr. Brandt held
various positions with the Boston Consulting Group ("BCG") from 1989,
culminating in Vice President and Partner, and a senior member of the BCG Health
Care practice. While at BCG, Mr. Brandt was involved in high level consulting
engagements with top global pharmaceutical, managed care and medical device
companies, focusing on corporate finance, shareholder value and post-merger
integration. Mr. Brandt joined the Company in 1999.
Mr. Fellows has been Corporate Vice President and President of the Asia
Pacific Region since June 1997 and prior thereto, was Senior Vice President,
U.S. Eye Care Marketing since June 1996. From 1993 to 1996, he was Senior Vice
President, Therapeutics Strategic Marketing, and from 1991 until 1993, he was
Vice President, Pharmaceuticals Strategic Marketing. Mr. Fellows joined the
Company in 1980.
Mr. Hindman has been Senior Vice President and Controller since January
2000 and prior thereto was Vice President, Financial Planning & Analysis since
February 1997. Prior to that he served 12 years in a variety of positions at the
Company, including Plant Controller, Director of Manufacturing Planning and
Reporting, Director of Finance (Northwest Europe), and Assistant Corporate
Controller. Mr. Hindman first joined the Company in 1984.
Dr. Kaplan has been Corporate Vice President and President, Research and
Development and Global BOTOX(R) since May 1998 and had been Corporate Vice
President, Science and Technology since July 1996. From 1992 until 1996, he was
Corporate Vice President, Research and Development. He had been Senior Vice
President, Pharmaceutical Research and Development since 1991 and Senior Vice
President, Research and Development since 1989. Dr. Kaplan first joined the
Company in 1983.
Dr. Lasezkay has been Corporate Vice President, Corporate Development
since October 1998 and had been Vice President, Corporate Development since July
1996. He had been Assistant General Counsel of the Company since 1995 and Senior
Counsel to the Company since 1989 when he first joined the Company.
Mr. Marques has been Corporate Vice President and President, Latin
America Region since October 1998. Prior to that he served 18 years with Alcon,
where he held a variety of positions, including President, Alcon Laboratories do
Brasil Ltda. from 1994 until 1998. Mr. Marques joined the Company in 1998.
Mr. Mazzo has been Corporate Vice President and President,
Europe/Africa/Middle East Region since April 1998 and in January 2001 he also
assumed the duties of President, Global Surgical Business. From May 1998 to
January 2001, Mr. Mazzo was also the President of Global Lens Care Products. He
had been Senior Vice President Eyecare/Rx Sales and Marketing, U.S. since June
1997 during which time he served as acting President Europe/Africa/Middle East
Region from October - December 1997. Prior
15
<PAGE> 18
to that, he served 11 years in a variety of positions at the Company, including
Director, Marketing (Canada), Vice President and Managing Director (Italy) and
Senior Vice President Northern Europe. Mr. Mazzo first joined the Company in
1980.
Ms. Schiavo has been Corporate Vice President, Worldwide Operations
since 1992. She was Senior Vice President, Operations from 1991 and Vice
President, Operations from 1989. Ms. Schiavo first joined the Company in 1980.
Mr. Tunney has been Corporate Vice President - Administration, and
Secretary since January 2001. Prior thereto he served as Corporate Vice
President-Administration, General Counsel and Secretary of the Company since
1998. Since 1998 he has also served as the Company's Chief Ethics Officer. From
1991 through 1998 he was Corporate Vice President, General Counsel and Secretary
and prior thereto was Senior Vice President, General Counsel and Secretary from
1989 through 1991. Mr. Tunney first joined SmithKline Beckman Corporation, the
Company's former parent, in 1979.
16
<PAGE> 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The section entitled "Market Prices of Common Stock and Dividends" on
page A-49 of the Proxy Statement is incorporated herein by reference.
On November 1, 2000, the Company issued and sold $657,451,000 aggregate
principal amount at maturity of Liquid Yield Option(TM) Notes due November 1,
2020 ("LYONs") at an initial offering price of $608.41 per $1,000 face amount.
The LYONs were sold by Merrill Lynch & Co. to qualified institutional buyers in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended, pursuant to Rule 144A promulgated thereunder. The discount to
Merrill Lynch was $15.21 per $1,000 aggregate principal amount at maturity of
the LYONs. Holders may convert their LYONs at any time on or before the maturity
date, unless the LYONs have been previously redeemed or purchased, into 5.7615
shares of Allergan Common Stock per LYON.
Allergan subsequently registered the LYONs pursuant to Registration
Statement 333-50524, effective December 8, 2000.
ITEM 6. SELECTED FINANCIAL DATA
The table entitled "Selected Financial Data" on page A-48 of the Proxy
Statement is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three-Year Period Ended December 31,
2000" on pages A-2 to A-12 of the Proxy Statement is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The section entitled "Quantitative and Qualitative Market Risk Factors"
on pages A-13 to A-17 of the Proxy Statement is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, including the notes thereto, included on
pages A-18 to A-44 of the Proxy Statement, together with the sections entitled
"Independent Auditors' Report" and "Quarterly Results (Unaudited)" of the Proxy
Statement included on pages A-46 and A-47, respectively, are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
<PAGE> 20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF ALLERGAN, INC.
Information under this Item is included on pages 2-4 of the Proxy
Statement in the section entitled "Election of Directors" and is incorporated
herein by reference. Information with respect to executive officers is included
on pages 14-16 of this Form 10-K.
The information required by Item 405 of Regulation S-K is included on
page 8 of the Proxy Statement under the section entitled "Section 16(a)
Beneficial Ownership Reporting Compliance" and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation," and the subsection
entitled "Director Compensation" included in the Proxy Statement on pages 15-23
and pages 6-7, respectively, are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The common stock information in the section entitled "Security
Ownership of Certain Beneficial Owners and Management" on pages 13-14 of the
Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections entitled "Other Matters" and "Compensation Committee
Interlocks and Insider Participation" on page 7 and page 24, respectively, of
the Proxy Statement are incorporated herein by reference.
18
<PAGE> 21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Index to Financial Statements*
<TABLE>
<CAPTION>
PAGE(S) IN
PROXY STATEMENT
---------------
<S> <C>
1. Financial Statements included in Part II of this report:
Independent Auditors' Report .................................. A-46
Consolidated Balance Sheets at December 31, 2000 and
December 31, 1999 ............................................. A-18
Consolidated Statements of Operations for Each of the Years
in the Three Year Period Ended December 31, 2000 .............. A-19
Consolidated Statements of Stockholders' Equity for
Each of the Years in the Three Year Period
Ended December 31, 2000 ....................................... A-20
Consolidated Statements of Cash Flows for Each of the Years
in the Three Year Period Ended December 31, 2000 .............. A-21
Notes to Consolidated Financial Statements ....................A-22 to A-44
</TABLE>
* Incorporated by reference from the indicated pages of the Company's Proxy
Statement filed with the Securities and Exchange Commission on March 23,
2001.
2. Schedules Supporting the Consolidated Financial Statements:
<TABLE>
<CAPTION>
PAGE IN
THIS REPORT
-----------
<S> <C>
Schedule numbered in accordance with Rule 5-04 of
Regulation S-X:
II Valuation and Qualifying Accounts.......................... S-8
</TABLE>
All other schedules have been omitted for the reason that the required
information is presented in financial statements or notes thereto, the
amounts involved are not significant or the schedules are not
applicable.
(b) Reports on Form 8-K
On November 1, 2000, the Company filed a Current Report on Form 8-K
with the Securities and Exchange Commission. The filing related to
Allergan's issuance of $657,451,000 in aggregate principal amount at
maturity of Liquid Yield Option(TM) Notes due November 1, 2020 (Zero
Coupon -- Subordinated) at an initial offering price of $608.41 per
$1,000 face amount of LYONs.
(c) Item 601 Exhibits
Reference is made to the Index of Exhibits beginning at page S-3 of
this report.
(d) Other Financial Statements
There are no financial statements required to be filed by Regulation
S-X which are excluded from the Proxy Statement by Rule 14 a-3(b)(1).
19
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 23, 2001 ALLERGAN, INC.
By /S/ DAVID E.I. PYOTT
--------------------------------------
David E.I. Pyott
President, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Date: March 23, 2001 By /S/ DAVID E.I. PYOTT
--------------------------------------
David E.I. Pyott
President, Chief Executive Officer
Date: February 26, 2001 By /S/ ERIC K. BRANDT
--------------------------------------
Eric K. Brandt
Corporate Vice President,
Chief Financial Officer and President,
Global Consumer Eye Care Business
(Principal Financial Officer)
Date: March 23, 2001 By /S/ JAMES M. HINDMAN
--------------------------------------
James M. Hindman
Senior Vice President and Controller
(Principal Accounting Officer)
Date: March 1, 2001 By /S/ HERBERT W. BOYER
--------------------------------------
Herbert W. Boyer, Ph.D.,
Chairman of the Board
Date: February 23, 2001 By /S/ RONALD M. CRESSWELL
--------------------------------------
Ronald M. Cresswell, Director
Date: March 5, 2001 By /S/ HANDEL E. EVANS
--------------------------------------
Handel E. Evans, Director
Date: March 23, 2001 By /S/ MICHAEL R. GALLAGHER
--------------------------------------
Michael R. Gallagher, Director
Date: March 23, 2001 By /S/ WILLIAM R. GRANT
--------------------------------------
William R. Grant, Director
S-1
<PAGE> 23
Date: March 23, 2001 By /S/ GAVIN S. HERBERT
--------------------------------------
Gavin S. Herbert, Director and
Chairman Emeritus
Date: March 6, 2001 By /S/ LESTER J. KAPLAN
--------------------------------------
Lester J. Kaplan, Ph.D., Director
Date: March 23, 2001 By /S/ KAREN R. OSAR
--------------------------------------
Karen R. Osar, Director
Date: March 23, 2001 By /S/ LOUIS T. ROSSO
--------------------------------------
Louis T. Rosso, Director
Date: March 23, 2001 By /S/ LEONARD D. SCHAEFFER
--------------------------------------
Leonard D. Schaeffer, Director
Date: March 23, 2001 By /S/ ANTHONY H. WILD
--------------------------------------
Anthony H. Wild, Director
S-2
<PAGE> 24
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company as filed with
the State of Delaware on May 22, 1989 (incorporated by reference to
Exhibit 3.1 to Registration Statement on Form S-1 No. 33-28855,
filed May 24, 1989)
3.2 Certificate of Amendment of Certificate of Incorporation of
Allergan, Inc. (incorporated by reference to the Company's Report
on Form 10-Q for the Quarter ended June 30, 2000)
3.3 Bylaws of the Company (incorporated by reference to Exhibit 3 to
the Company's Report on Form 10-Q for the Quarter ended June 30,
1995)
3.4 First Amendment to Allergan, Inc. Bylaws (incorporated by reference
to Exhibit 3.1 to the Company's Report on Form 10-Q for the Quarter
ended September 24, 1999)
4.1 Certificate of Designations of Series A Junior Participating
Preferred Stock as filed with the State of Delaware on February 1,
2000 (incorporated by reference to Exhibit 4.1 to the Company's
Report on Form 10-K for the Fiscal Year ended December 31, 1999)
4.2 Rights Agreement, dated January 25, 2000, between Allergan, Inc.
and First Chicago Trust Company of New York (incorporated by
reference to Exhibit 4 to the Company's Current Report on Form 8-K
filed on January 28, 2000)
4.3 Indenture between the Company and BankAmerica National Trust
Company (incorporated by reference to Exhibit 4 filed with the
Company's Registration Statement 33-69746)
4.4 Indenture, dated as of November 1, 2000, between the Company and
U.S. Trust National Association (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K, filed on
November 1, 2000)
4.5 Registration Rights Agreement, dated November 1, 2000, between the
Company and Merrill Lynch & Co., Merrill Lynch, Pierce Fenner &
Smith Incorporated (incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K, filed on November 1, 2000)
10.1 Form of director and executive officer Indemnity Agreement
(incorporated by reference to Exhibit 10.4 to the Company's Report
on Form 10-K for the Fiscal Year ended December 31, 1992)
</TABLE>
S-3
<PAGE> 25
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.2 Form of Allergan change in control severance agreement
(incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on January 28, 2000)*
10.3 Allergan, Inc. 1989 Nonemployee Director Stock Plan, as amended and
restated (incorporated by reference to Exhibit B to the Company's
Proxy Statement filed on March 16, 2000)*
10.4 Allergan, Inc. Deferred Directors' Fee Program amended and restated
as of November 15, 1999 (incorporated by reference to Exhibit 4 to
Registration Statement on Form S-8 No. 333-94155, filed January 6,
2000)*
10.5 Allergan, Inc. 1989 Incentive Compensation Plan, as amended and
restated
10.6 Allergan, Inc. Employee Stock Ownership Plan (restated 2000)
(incorporated by reference to Exhibit 10.1 to the Company's Report
on Form 10-Q for the Quarter ended June 30, 2000)
10.7 First Amendment to Allergan, Inc. Employee Stock Ownership Plan
(restated 2000)
10.8 Allergan, Inc. Savings and Investment Plan (restated 2000)
(incorporated by reference to Exhibit 10.3 to the Company's Report
on Form 10-Q for the Quarter ended June 30, 2000)
10.9 First Amendment to Allergan, Inc. Savings and Investment Plan
(restated 2000)
10.10 Restated Allergan, Inc. Pension Plan (incorporated by reference to
Exhibit 10.3 to the Company's Report on Form 10-Q for the Quarter
ended March 31, 1996)
10.11 First Amendment to the Allergan, Inc. Pension Plan (incorporated by
reference to Exhibit 10.14 to the Company's Report on Form 10-K for
the Fiscal Year ended December 31, 1997)
10.12 Second Amendment to the Allergan, Inc. Pension Plan (incorporated
by reference to Exhibit 10.2 to the Company's Report on Form 10-Q
for the Quarter ended June 26, 1998)
10.13 Third Amendment to the Allergan, Inc. Pension Plan (incorporated by
reference to Exhibit 10.2 to the Company's Report on Form 10-Q for
the Quarter ended September 24, 1999)
10.14 Fourth Amendment to the Allergan, Inc. Pension Plan (incorporated
by reference to Exhibit 10.10 to the Company's Current Report on
Form 8-K filed on January 28, 2000)
</TABLE>
S-4
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.15 Restated Allergan, Inc. Supplemental Retirement Income Plan
(incorporated by reference to Exhibit 10.5 to the Company's Report
on Form 10-Q for the Quarter ended March 31, 1996)*
10.16 First Amendment to Allergan, Inc. Supplemental Retirement Income
Plan (incorporated by reference to Exhibit 10.4 to the Company's
Report on Form 10-Q for the Quarter ended September 24, 1999)*
10.17 Second Amendment to Allergan, Inc. Supplemental Retirement Income
Plan (incorporated by reference to Exhibit 10.12 to the Company's
Current Report on Form 8-K filed on January 28, 2000)*
10.18 Restated Allergan, Inc. Supplemental Executive Benefit Plan
(incorporated by reference to Exhibit 10.6 to the Company's Report
on Form 10-Q for the Quarter ended March 31, 1996)*
10.19 First Amendment to Allergan, Inc. Supplemental Executive Benefit
Plan (incorporated by reference to Exhibit 10.3 to the Company's
Report on Form 10-Q for the Quarter ended September 24, 1999)*
10.20 Second Amendment to Allergan, Inc. Supplemental Executive Benefit
Plan (incorporated by reference to Exhibit 10.11 to the Company's
Current Report on Form 8-K filed on January 28, 2000)*
10.21 Allergan, Inc. Executive Bonus Plan (incorporated by reference to
Exhibit C to the Company's Proxy Statement dated March 23, 1999,
filed in definitive form on March 22, 1999) *
10.22 First Amendment to Allergan, Inc. Executive Bonus Plan
(incorporated by reference to Exhibit 10.2 to the Company's Current
Report on Form 8-K filed on January 28, 2000)*
10.23 Allergan, Inc. 2001 Management Bonus Plan*
10.24 Allergan, Inc. Executive Deferred Compensation Plan amended and
restated, effective January 1, 2000 (incorporated by reference to
Exhibit 4 to Registration Statement on Form S-8 No. 333-94157,
filed January 6, 2000)*
10.25 First Amendment to Allergan, Inc. Executive Deferred Compensation
Plan (restated 2000) (incorporated by reference to Exhibit 10.5 to
the Company's Report on 10-Q for the Quarter ended June 30, 2000) *
10.26 Allergan, Inc. Premium Priced Stock Option Plan (incorporated by
reference to Exhibit B to the Company's Proxy Statement filed on
March 23, 2001)*
</TABLE>
S-5
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.27 Distribution Agreement dated March 4, 1994 between Allergan, Inc.
and Merrill Lynch & Co. and J.P. Morgan Securities Inc.
(incorporated by reference to Exhibit 10.14 to the Company's Report
on Form 10-K for the fiscal year ended December 31, 1993)
10.28 $250,000,000 Credit Agreement dated as of December 22, 1993 and
amended and restated as of May 10, 1996 among the Company, as
Borrower and Guarantor, the Eligible Subsidiaries Referred to
Therein, the Banks Listed Therein, Morgan Guaranty Trust Company of
New York, as Agent and Bank of America National Trust and Savings
Association, as Co-Agent (the "Credit Agreement") (incorporated by
reference to Exhibit 10.7 to the Company's Report on Form 10-Q for
the Quarter ended March 31, 1996)
10.29 Amendment No. 1 to the Credit Agreement, dated March 5, 1998
(incorporated by reference to Exhibit 10.1 to the Company's Report
on Form 10-Q for the Quarter ended June 26, 1998)
10.30 Amended and Restated Credit Agreement, dated March 24, 1998
10.31 Amendment No. 1 to the Amended and Restated Credit Agreement, dated
December 8, 2000
10.32 Letter Agreement between Allergan, Inc. and William C. Shepherd
dated September 27, 1997 (incorporated by reference to Exhibit
10.22 to the Company's Report on Form 10-K for the Fiscal Year
ended December 31, 1997)*
10.33 Technology License Agreement dated as of March 6, 1998 among
Allergan, Inc. and certain of its affiliates and Allergan Specialty
Therapeutics, Inc. ("ASTI") (incorporated by reference to Exhibit
10.23 to the Company's Report on Form 10-K for the Fiscal Year
ended December 31, 1997)
10.34 Research and Development Agreement dated as of March 6, 1998
between Allergan, Inc. and ASTI (incorporated by reference to
Exhibit 10.2 to the Company's Report on Form 10-Q for the Quarter
ended March 27, 1998)
10.35 License Option Agreement dated as of March 6, 1998 between
Allergan, Inc. and ASTI (incorporated by reference to Exhibit 10.25
to the Company's Report on Form 10-K for the Fiscal Year ended
December 31, 1997)
10.36 Distribution Agreement dated as of March 6, 1998 between Allergan,
Inc. and ASTI (incorporated by reference to Exhibit 10.26 to the
Company's Report on Form 10-K for the Fiscal Year ended December
31, 1997)
</TABLE>
S-6
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
21 List of Subsidiaries of the Company
23 Report and consent of KPMG LLP to the incorporation of their
reports herein to Registration Statements Nos. 33-29527, 33-29528,
33-44770, 33-48908, 33-66874, 333-09091, 333-04859, 333-25891,
33-55061, 33-69746, 333-64559, 333-70407, 333-94155, 333-94157,
333-43580, 333-43584, and 333-50524.
</TABLE>
* Management contract or compensatory plan, contract or arrangement required to
be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
S-7
<PAGE> 29
SCHEDULE II
ALLERGAN, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING AT END
OF YEAR ADDITIONS DEDUCTIONS OF YEAR
------- --------- ---------- -------
<S> <C> <C> <C> <C>
2000 $5.4 $0.1(a) $1.5(b) $4.0
---- ------- ------- ----
1999 $6.7 $0.3(a) $1.6(b) $5.4
---- ------- ------- ----
1998 $6.8 $1.1(a) $1.2(b) $6.7
---- ------- ------- ----
</TABLE>
- ---------------
(a) Provision charged to earnings.
(b) Accounts written off.
S-8
<PAGE> 30
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.5 Allergan, Inc. 1989 Incentive Compensation Plan, as amended and
restated
10.7 First Amendment to Allergan, Inc. Employee Stock Ownership Plan
(restated 2000)
10.9 First Amendment to Allergan, Inc. Savings and Investment Plan (restated
2000)
10.23 Allergan, Inc. 2001 Management Bonus Plan*
10.30 Amended and Restated Credit Agreement, dated March 24, 1998
10.31 Amendment No. 1 to the Amended and Restated Credit Agreement, dated
December 8, 2000
21 List of Subsidiaries of the Company
23 Report and consent of KPMG LLP to the incorporation of their reports
herein to Registration Statements Nos. 33-29527, 33-29528, 33-44770,
33-48908, 33-66874, 333-09091, 333-04859, 333-25891, 33-55061,
33-69746, 333-64559, 333-70407, 333-94155, 333-94157, 333-43580,
333-43584, and 333-50524.
* Management contract or compensatory plan, contract or arrangement required to
be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>2
<FILENAME>a70026ex10-5.txt
<DESCRIPTION>EXHIBIT 10.5
<TEXT>
<PAGE> 1
EXHIBIT 10.5
ALLERGAN, INC.
1989 INCENTIVE COMPENSATION PLAN
(AS AMENDED AND RESTATED, NOVEMBER 2000 AND AS ADJUSTED FOR 1999 STOCK SPLIT)
I. GENERAL PROVISIONS
1.1 PURPOSES OF THE PLAN
Allergan, Inc. ("Allergan") has adopted this 1989 Incentive Compensation
Plan (the "Plan") to advance the interests of Allergan and its stockholders by
affording to key management and other Employees of Allergan and its subsidiaries
an opportunity to acquire or increase a proprietary interest in the Company or
to otherwise benefit from the success of the Company through the grant to such
Employees of Incentive Awards under the terms and conditions set forth herein.
By thus encouraging such Employees to become owners of Allergan's shares and by
granting such Employees other incentive compensation that is measured by the
increased market value of Allergan's shares or another appropriate measure of
the success and profitability of the Company, the Company seeks to attract,
retain and motivate those highly competent individuals upon whose judgment,
initiative, leadership and continued efforts the success of the Company in large
measure depends.
1.2 DEFINITIONS
As used herein the following terms shall have the meanings set forth
below:
(a) "Allergan" means Allergan, Inc., a Delaware corporation, or any
successor thereto.
(b) "Board" means the Board of Directors of Allergan.
(c) "Cause" means, with respect to the discharge by the Company of any
Participant, any conduct that under Company policies as set forth from time to
time in the Allergan Supervisors Manual (or any successor thereto) would be
considered to constitute "serious misconduct" that would justify immediate
termination without benefit of a counseling review or severance pay.
(d) "Change in Control" means the following and shall be deemed to occur
if any of the following events occur:
(i) Any "person," as such term is used in Sections 13(d) and 14(d)
of 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 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
<PAGE> 2
then outstanding voting securities, without regard to whether such
acquisition is approved by the Incumbent Board;
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board"), cease for any reason to constitute at least a
majority of the Board, 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 in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act)
shall, for the purposes of this Plan, be considered as though such person
were a member of the Incumbent Board of Allergan;
(iii) The consummation of a merger, consolidation or
reorganization involving Allergan, other than one which satisfies both of
the following conditions:
(A) 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
(B) 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
(iv) The stockholders of Allergan approve a plan of complete
liquidation of the Allergan or an agreement for the sale or other
disposition by the Allergan of all or substantially all of the Allergan's
assets.
Notwithstanding the preceding provisions of this Paragraph (d), a Change in
Control shall not be deemed to have occurred if the Person described in the
preceding provisions of this Paragraph (d) is (1) an underwriter or underwriting
syndicate that has acquired 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 the Allergan or any of its
subsidiaries that is qualified under the provisions of the Code. In addition,
notwithstanding the preceding provisions of this Paragraph (d), a Change in
Control shall not be deemed to have occurred if the Person described in the
preceding provisions of this Paragraph (d) becomes a Beneficial Owner of more
than the permitted amount of outstanding securities as a result of the
acquisition of voting securities by
2
<PAGE> 3
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.
(e) "Code" means the Internal Revenue Code of 1986, as amended. Where the
context so requires, a reference to a particular Code section shall also refer
to any successor provision of the Code to such section.
(f) "Committee" means the committee appointed by the Board to administer
the Plan. The Committee shall be composed entirely of members who meet the
requirements of Section 1.4(a) hereof.
(g) "Common Stock" means the common stock of Allergan, $0.01 par value.
(h) "Company" means Allergan and any present or future parent or
subsidiary corporations (as defined in Section 425 of the Code) with respect to
Allergan, or any successors to such corporations.
(i) "Dividend Equivalent" means an amount payable in cash, Common Stock
or a combination thereof to a holder of a Stock Option, Stock Appreciation Right
or other Incentive Award denominated in shares of Common Stock that is
equivalent to the amount of dividends paid to stockholders with respect to a
number of shares of Common Stock equal to the number of shares upon which such
Incentive Award is based.
(j) "Employee" means any individual classified by the Company as a
regular, full-time employee of the Company whose income is subject to
withholding of income tax and/or for whom Social Security contributions are made
by the Company except that such term shall not include any individual who (a)
performs services for the Company and who 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.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
Where the context so requires, a reference to a particular section of the
Exchange Act shall also refer to any successor provision to such section.
(l) "Fair Market Value" means the fair market value of a share of Common
Stock as determined by the Committee on the basis of such factors as it may deem
appropriate.
(m) "Incentive Award" means any Stock Option, Restricted Stock, Stock
Appreciation Right, Stock Payment, Performance Award or other award granted or
sold under the Plan.
3
<PAGE> 4
(n) "Incentive Stock Option" means an incentive stock option, as defined
under Section 422 of the Code and the regulations thereunder.
(o) "Nonqualified Stock Option" means a stock option other than an
Incentive Stock Option.
(p) "Option" or "Stock Option" means a right to purchase Common Stock and
refers to both Incentive Stock Options and Nonqualified Stock Options.
(q) "Participant" means any Employee selected by the Committee to receive
an Incentive Award pursuant to this Plan.
(r) "Payment Event" means the event or events giving rise to the right to
payment of a Performance Award.
(s) "Performance Award" means an award, payable in cash, Common Stock or
a combination thereof, the terms and conditions of which may be determined by
the Committee at the time the Performance Award is granted.
(t) "Plan" means the Allergan, Inc. 1989 Incentive Compensation Plan as
set forth herein, as amended from time to time.
(u) "Purchase Price" means the purchase price (if any) to be paid by a
Participant for Restricted Stock as determined by the Committee (which price
shall be at least equal to the minimum price required under applicable laws and
regulations for the issuance of Common Stock which is nontransferable and
subject to a substantial risk of forfeiture until specific conditions are met).
(v) "Restricted Stock" means Common Stock which is the subject of an
Incentive Award under this Plan and which is nontransferable and subject to a
substantial risk of forfeiture until specific conditions are met as set forth in
this Plan and in any statement evidencing the grant of such Incentive Award.
(w) "Securities Act" means the Securities Act of 1933, as amended.
(x) "Stock Appreciation Right" or "Right" means a right granted pursuant
to Section VI of the Plan to receive a number of shares of Common Stock or, in
the discretion of the Committee, an amount of cash or a combination of shares
and cash, based on the increase in the Fair Market Value of the shares subject
to the right during such period as is specified by the Committee.
(y) "Stock Payment" means a payment in shares of the Company's Common
Stock to replace all or any portion of the compensation (other than base salary)
that would otherwise become payable to any Employee of the Company.
4
<PAGE> 5
1.3 SHARES OF COMMON STOCK SUBJECT TO THE PLAN
(a) Subject to the provisions of Section 1.3(c) and Section 8.1 of the
Plan, the maximum number of shares of Common Stock that may be issued pursuant
to Incentive Awards under the Plan shall be:
(i) During the period commencing with the inception of the Plan
through February 29, 1992 (the "Transition Date"), the aggregate number
of shares that may be issued pursuant to or issuable upon exercise of
Incentive Awards granted prior to the Transition Date shall be 10,000,000
shares.
(ii) After the Transition Date, the aggregate number of shares
that may be issued pursuant to or issuable upon exercise of Incentive
Awards granted during any calendar year shall be up to 1.5% of the
Outstanding Shares (as defined below) plus (A) with respect to calendar
years 1993 and thereafter, any unused shares available under this Section
1.3(a)(ii) from prior years and (B) any shares issued or issuable under
Incentive Awards granted after the Transition Date which by virtue of
Section 1.3(c) below again become available for the grant of further
Incentive Awards.
(For purposes of Section 1.3(a)(ii) above, the term "Outstanding Shares" means
the number of shares of Common Stock outstanding on December 31 of the year
preceding the year for which the calculation is to be made; provided that, for
purposes of determining the maximum aggregate number of shares which may be
issued pursuant to or issuable upon exercise of Incentive Awards granted during
calendar 1992 after the Transition Date, "Outstanding Shares" shall mean the
number of shares of Common Stock outstanding on the Transition Date.)
(b) The Common Stock to be issued under this Plan will be made available,
at the discretion of the Board or the Committee, either from authorized but
unissued shares of Common Stock or from previously issued shares of Common Stock
reacquired by the Company, including shares purchased on the open market.
(c) Shares of Common Stock subject to unexercised portions of any
Incentive Award granted under this Plan that expire, terminate or are cancelled,
and shares of Common Stock issued pursuant to an Incentive Award under this Plan
that are reacquired by the Company pursuant to the terms of the Incentive Award
under which such shares were issued, will again become available for the grant
of further Incentive Awards under this Plan.
(d) Notwithstanding Section 1.3(a) (ii) above, the maximum number of
shares issuable upon the exercise of Incentive Awards granted in the form of
Incentive Stock Options after the Transition Date shall be the lesser of the
amount determined pursuant to Section 1.3 (a) (ii) above and 10,000,000 shares.
(e) The maximum number of shares of Common Stock with respect to which
Stock Options may be granted to an executive officer in any given calendar year
is 800,000 Options per executive officer.
5
<PAGE> 6
1.4 ADMINISTRATION OF THE PLAN
(a) The Plan will be administered by the Committee, which will consist of
two or more persons appointed by the Board (i) who are not eligible to receive
Incentive Awards under the Plan and (ii) who have not been eligible at any time
within one year before appointment to the Committee for selection as persons to
whom Incentive Awards may be granted pursuant to the Plan, or to whom shares may
be allocated, or stock options, stock appreciation rights or similar rights may
be granted, pursuant to any other discretionary plan of Allergan (or any
affiliate thereof, within the meaning of the Exchange Act and the regulations
thereunder) entitling the participants therein to acquire stock, stock options,
stock appreciation rights or similar rights of Allergan (or any affiliate
thereof, within the meaning of the Exchange Act and the regulations thereunder).
Notwithstanding anything contained herein, no person shall be disqualified from
being a member of the Committee merely because such person is entitled to
receive grants of restricted stock pursuant to the Allergan, Inc. 1989
Nonemployee Director Stock Plan or any successor thereto providing for the
automatic grant, without the intervention of any administrative discretion, of
stock options, restricted stock or other stock-based incentive compensation
awards.
(b) The Committee has and may exercise such powers and authority of the
Board as may be necessary or appropriate for the Committee to carry out its
functions as described in the Plan. The Committee has authority in its
discretion to select the eligible Employees to whom, and the time or times at
which, Incentive Awards shall be granted or sold, the nature of each Incentive
Award, the number of shares of Common Stock or the number of rights that make up
each Incentive Award, the period for the exercise of each Incentive Award, the
performance criteria (which need not be identical) utilized to measure the value
of Performance Awards and such other terms and conditions applicable to each
individual Incentive Award as the Committee shall determine. The Committee may
grant at any time new Incentive Awards to a Participant who has previously
received Incentive Awards or other grants (including other stock options)
whether such prior Incentive Awards or such other grants are still outstanding,
have previously been exercised in whole or in part, or are cancelled in
connection with the issuance of new Incentive Awards. The Committee may grant
Incentive Awards singly or in combination or in tandem with other Incentive
Awards as it determines in its discretion. The purchase price or initial value
and any and all other terms and conditions of the Incentive Awards may be
established by the Committee without regard to existing Incentive Awards or
other grants. Further, the Committee may, with the consent of a Participant,
amend in a manner consistent with the Plan the terms of any existing Incentive
Award previously granted to such Participant.
(c) Subject to the express provisions of the Plan, the Committee has the
authority to interpret the Plan, to determine the terms and conditions of
Incentive Awards and to make all other determinations necessary or advisable for
the administration of the Plan. The Committee has authority to prescribe, amend
and rescind rules and regulations relating to the Plan. All interpretations,
determinations and actions by the Committee shall be final, conclusive and
binding upon all parties. Any action of the Committee with respect to the
administration of the Plan shall be taken pursuant to a majority vote or by the
unanimous written consent of its members.
6
<PAGE> 7
(d) No member of the Board or the Committee nor any designee thereof will
be liable for any action or determination made in good faith by the Board or the
Committee with respect to the Plan or any transaction arising under the Plan.
1.5 PARTICIPATION
(a) All Employees who are key Employees of the Company, as determined by
the Committee, are eligible to receive Incentive Awards under the Plan. In no
event may any member of the Board who is not an Employee be granted an Incentive
Award under the Plan.
(b) At the time of the grant of each Incentive Award pursuant to this
Plan, the Committee shall deliver, or cause to be delivered, to the Participant
to whom the Incentive Award is granted a statement evidencing the Incentive
Award and setting forth such terms and conditions applicable to the Incentive
Award as the Committee may in its discretion determine consistent with the Plan.
II. DIVIDEND EQUIVALENTS
A Participant may in the discretion of the Committee be granted, at no
additional cost, Dividend Equivalents based on the dividends declared on the
Common Stock on record dates during the period between the date an Incentive
Award is granted and the date such Incentive Award is exercised or such other
period as is determined by the Committee and specified in the instrument that
evidences the grant of the Incentive Award. Such Dividend Equivalents shall be
converted to additional shares or cash by such formula as may be determined by
the Committee.
Dividend Equivalents shall be computed as of each dividend record date in
such manner as may be determined by the Committee and shall be payable to
Participants at such time or time as the Committee in its discretion may
determine.
III. OPTIONS
3.1 OPTION PRICE
The purchase price of Common Stock under each Option (the "Option
Exercise Price") will be determined by the Committee at the date such Option is
granted. The Option Exercise Price may be less than the Fair Market Value on the
date of grant of the Common Stock subject to the Option; provided, however, that
in no event shall the Option Exercise Price be less than the par value of the
shares of Common Stock subject to the Option; and further provided that in the
case of an Incentive Stock Option the Option Exercise Price shall be not less
than the Fair Market Value on the date of grant of the Common Stock subject to
such Option or such other amount as is necessary to enable such Option to be
treated as an "incentive stock option" within the meaning of Code Section 422A.
7
<PAGE> 8
3.2 OPTION PERIOD
Options may be exercised as determined by the Committee, but, in the case
of an Incentive Stock Option, in no event after ten years from the date of grant
of such Option or such other period as is necessary to enable such Option to be
treated as an "incentive stock option" within the meaning of Code Section 422A.
3.3 EXERCISE OF OPTIONS
At the time of the exercise of an Option, the purchase price shall be
paid in full in cash or other equivalent consideration acceptable to the
Committee and consistent with the Plan's purpose and applicable law, including
without limitation Common Stock or Restricted Stock or other contingent awards
denominated in either stock or cash. Any shares of Company Stock assigned and
delivered to the Company in payment or partial payment of the purchase price
will be valued at their Fair Market Value on the exercise date. No fractional
shares will be issued pursuant to the exercise of an Option nor will any cash
payment be made in lieu of fractional shares.
3.4 LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTIONS
The aggregate Fair Market Value (determined at the time the Option is
granted) with respect to which Incentive Stock Options are exercisable for the
first time by any Employee during any calendar year (under all stock option
plans of the Company) shall not exceed $100,000 or such other limit as is
prescribed by the Code. Any Options granted as Incentive Stock Options pursuant
to the Plan in excess of such limitation shall be treated as Nonqualified Stock
Options.
3.5 TERMINATION OF EMPLOYMENT
(a) Except as otherwise provided in a written agreement between the
Company and the Participant, in the event of the termination of a Participant's
employment with the Company for Cause, all of the Participant's unexercised
Options and/or Rights shall expire as of the date of such termination.
(b) Except as otherwise provided in a written agreement between the
Company and the Participant, in the event of a Participant's termination of
employment for:
(i) Any reason other than for Cause, death, total disability (as
defined in the instrument evidencing the grant of the Option), normal
retirement (as defined in the instrument evidencing the grant of the
Option) or Job Elimination (as defined below), the Participant's Options
and/or Rights shall expire and become unexercisable as of the earlier of
(A) the date such Options and/or Rights expire in accordance with their
terms or (B) three calendar months after the date of termination.
(ii) Death or total disability, effective for terminations after
July 24, 2000, all of the Participant's unvested Options and/or Rights
shall become vested as of the last date of
8
<PAGE> 9
employment, and the Participant (or his or her successor in interest)
shall have twelve (12) months after the date of termination within which
to exercise Options and/or Rights that have not expired on or before such
date, regardless of the date upon which such Options or Rights would
otherwise expire in accordance with their terms.
(iii) Normal retirement, the Participant's Options and/or Rights
shall expire and become unexercisable as of the earlier of (A) the date
such Options and/or Rights expire in accordance with their terms or (B)
three (3) years after the date of termination.
(iv) Job Elimination, all of the Participant's unvested Options
and/or Rights shall become vested as of the last date of employment, and
the Participant's Options and/or Rights shall expire and become
unexercisable as of the earlier of (A) the date such Options and/or
Rights expire in accordancd with their terms or (B) three calendar months
after the date of termination. "Job Elimination" occurs when a Particpant
ceases to be an Employee of the Company as a result of a reduction in
force or transfer to a new organization outside of the Company as a
result of a divestiture. A "reduction in force" occurs under the Plan
when no alternative job is offered to the Participant at the Company and
there is a net headcount reduction (i.e. if the Participant is replaced,
there is no reduction in force, even if the duties of the position
change).
(c) Notwithstanding anything to the contrary in Paragraphs (a) or (b)
above, the Committee may in its discretion designate such shorter or longer
periods to exercise Options and/or Rights following a Participant's termination
of employment; provided, however, that any shorter periods determined by the
Committee shall be effective only if provided for in the instrument that
evidences the grant to the Participant of such Options and/or Rights or if such
shorter period is agreed to in writing by the Participant. In the case of an
Incentive Stock Option, notwithstanding anything to the contrary herein, in no
event shall such Option be exercisable after the expiration of ten years from
the date such Option is granted (or such other period as is provided in Code
Section 422A). This Plan provides for automatic acceleration of vesting of
Options and/or Rights in the event of a Participant's termination due to death
or total disability after July 24, 2000 or Job Elimination. In all other
situations, with the exception of terminations for Cause, Options and/or Rights
shall be exercisable by a Participant (or his successor in interest) following
such Participant's termination of employment only to the extent that
installments thereof had become exercisable on or prior to the date of such
termination; provided, however, that the Committee, in its discretion, may elect
to accelerate the vesting of all or any portion of any Options and/or Rights
that had not become exercisable on or prior to the date of such termination.
3.6 GRANT OF OPTIONS IN SUBSTITUTION FOR SMITHKLINE BECKMAN CORPORATION
OPTIONS
In accordance with the provisions of Section 7.05 of that certain
Distribution Agreement dated as of April 11, 1989, among SmithKline Beckman
Corporation ("SKB"), Allergan and Beckman Instruments, Inc. (the "Distribution
Agreement") and notwithstanding anything to the contrary in this Plan, in the
event that as of the Distribution Date (as defined in the Distribution
Agreement) an Employee (or other person described in Section 7.05(b) of the
Distribution Agreement) shall hold an outstanding option granted under any
employee stock option plan of
9
<PAGE> 10
SKB (an "SKB Option") there shall be granted to such Employee (or other person)
pursuant to this Plan, in substitution for such SKB Option, an Option to
purchase Common Stock (a "Substitute Option"). The number of shares subject to
such Substitute Option, the Option Exercise Price of such Substitute Option and
the other terms and conditions of such Substitute Option shall be determined by
the Committee in accordance with Section 425(a) of the Code or any other
reasonably comparable method designed to preserve the gain in the SKB Option at
the time of the substitution.
IV. PERFORMANCE AWARDS
4.1 GRANT OF PERFORMANCE AWARDS
The Committee shall determine the performance criteria (which need not be
identical) to be utilized to calculate the value of the Performance Awards, the
term of such Performance Awards, the Payment Event, and the form and time of
payment of Performance Awards. The specific terms and conditions of each
Performance Award shall be set forth in a written statement evidencing the grant
of such Performance Award.
4.2 PAYMENT OF AWARD; LIMITATION
Upon the occurrence of a Payment Event, payment of a Performance Award
will be made to the Participant in cash or in shares of Common Stock valued at
Fair Market Value on the date of the Payment Event or a combination of Common
Stock and cash, as the Committee in its discretion may determine. The Committee
may impose a limitation on the amount payable upon the occurrence of a Payment
Event, which limitation shall be set forth in the written statement evidencing
the grant of the Performance Award.
4.3 EXPIRATION OF PERFORMANCE AWARD
If any Participant's employment with the Company is terminated for any
reason other than normal retirement (as defined in the instrument evidencing the
grant of the Performance Award), death, or disability prior to the occurrence of
the Payment Event, all of the Participant's rights under the Performance Award
shall expire and terminate unless otherwise determined by the Committee. In the
event of termination of employment by reason of death, disability or normal
retirement, the Committee, in its discretion, may determine what portions, if
any, of the Performance Award should be paid to the Participant.
V. RESTRICTED STOCK
5.1 AWARD OF RESTRICTED STOCK
The Committee may grant awards of Restricted Stock to Employees. The
Committee shall determine the Purchase Price (if any), the terms of payment of
the Purchase Price, the restrictions upon the Restricted Stock, and when such
restrictions shall lapse. The terms and conditions of the Restricted Stock shall
be set forth in the statement evidencing the grant of such award of Restricted
Stock.
10
<PAGE> 11
5.2 REQUIREMENTS OF RESTRICTED STOCK
All shares of Restricted Stock granted or sold, pursuant to the Plan will
be subject to the following conditions:
(a) The shares may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, alienated or encumbered until the
restrictions are removed or expire;
(b) The Committee may require that the certificates representing
Restricted Stock granted or sold to a Participant pursuant to the Plan remain in
the physical custody of an escrow holder or the Company until all restrictions
are removed or expire;
(c) Each certificate representing Restricted Stock granted or sold to a
Participant pursuant to the Plan will bear such legend or legends making
reference to the restrictions imposed upon such Restricted Stock as the
Committee in its discretion deems necessary or appropriate to enforce such
restrictions; and
(d) The Committee may impose such other conditions on Restricted Stock as
the Committee may deem advisable including, without limitation, restrictions
under the Securities Act, under the Exchange Act, under the requirements of any
stock exchange upon which such Restricted Stock or shares of the same class are
then listed and under any blue sky or other securities laws applicable to such
shares.
5.3 LAPSE OF RESTRICTIONS
The restrictions imposed upon Restricted Stock pursuant to Section 5.2
above will lapse in accordance with such schedule or other conditions as are
determined by the Committee and set forth in the statement evidencing the grant
or sale of the Restricted Stock.
5.4 RIGHTS OF PARTICIPANT
Subject to the provisions of Section 5.2 or restrictions imposed pursuant
to Section 5.2, the Participant will have all rights of a stockholder with
respect to the Restricted Stock granted or sold to such Participant under the
Plan, including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.
5.5 TERMINATION OF EMPLOYMENT
Effective July 24, 2000, upon a Participant's termination of employment
for death or total disability (as defined in the instrument evidencing the
Restricted Stock award), all of the restrictions imposed on the Participant's
Restricted Stock shall lapse as of the Participant's last date of employment.
Upon a Participant's termination of employment due to Job Elimination, the
terminating Participant shall have the restrictions lapse on each grant of
Restricted Stock in an amount equal to the number of shares of Restricted Stock
granted multiplied by a fraction, the numerator of which is the number of full
calendar months from the date of grant until the
11
<PAGE> 12
Participant's last day of employment and the denominator of which is the
number of months during which the restriction would have been in effect pursuant
to each original grant. In all other cases, unless the Committee in its
discretion determines otherwise, upon a Participant's termination of employment
for any reason, all of the Participant's Restricted Stock remaining subject to
restrictions imposed pursuant to this Plan on the date of such termination of
employment shall be repurchased by the Company at the Purchase Price (if any).
VI. STOCK APPRECIATION RIGHTS
6.1 GRANTING OF STOCK APPRECIATION RIGHTS
The Committee may approve the grant to eligible Employees of Stock
Appreciation Rights related or unrelated to Options, at any time.
(a) A Stock Appreciation Right granted in connection with an Option
granted under this Plan will entitle the holder of the related Option, upon
exercise of the Stock Appreciation Right, to surrender such Option, or any
portion thereof to the extent unexercised, with respect to the number of shares
as to which such Stock Appreciation Right is exercised, and to receive payment
of an amount computed pursuant to Section 6.1(c). Such Option will, to the
extent surrendered, then cease to be exercisable.
(b) Subject to Section 6.1(g), a Stock Appreciation Right granted in
connection with an Option hereunder will be exercisable at such time or times,
and only to the extent that, the related Option is exercisable, and will not be
transferable except to the extent that such related Option may be transferable.
(c) Upon the exercise of a Stock Appreciation Right related to an Option,
the Holder will be entitled to receive payment of an amount determined by
multiplying: (i) the difference obtained by subtracting the Option Exercise
Price of a share of Common Stock specified in the related Option from the Fair
Market Value of a share of Common Stock on the date of exercise of such Stock
Appreciation Right (or as of such other date or as of the occurrence of such
event as may have been specified in the instrument evidencing the grant of the
Stock Appreciation Right), by (ii) the number of shares as to which such Stock
Appreciation Right is exercised.
(d) The Committee may grant Stock Appreciation Rights unrelated to
Options to eligible Employees. Section 6.1(c) shall be used to determine the
amount payable at exercise under such Stock Appreciation Right, except that in
lieu of the Option Exercise Price specified in the related Option the initial
base amount specified in the Incentive Award shall be used.
(e) Notwithstanding the foregoing, the Committee, in its discretion, may
place a dollar limitation on the maximum amount that will be payable upon the
exercise of a Stock Appreciation Right under the Plan.
(f) Payment of the amount determined under the foregoing provisions of
this Section 6.2 may be made solely in whole shares of Common Stock valued at
their Fair Market Value on the date of exercise of the Stock Appreciation Right
or, alternatively, at the sole discretion of the
12
<PAGE> 13
Committee, in cash or in a combination of cash and shares of Common Stock as the
Committee deems advisable. The Committee is hereby vested with full discretion
to determine the form in which payment of a Stock Appreciation Right will be
made and to consent to or disapprove the election of a Participant to receive
cash in full or partial settlement of a Stock Appreciation Right. If the
Committee decides to make full payment in shares of Common Stock, and the amount
payable results in a fractional share, payment for the fractional share will be
made in cash.
(g) The Committee may, at the time a Stock Appreciation Right is granted,
impose such conditions on the exercise of the Stock Appreciation Right as may be
required to satisfy the requirements of Rule 16b-3 under the Exchange Act (or
any other comparable provisions in effect at the time or times in question).
6.2 TERMINATION OF EMPLOYMENT
Section 3.5 will govern the treatment of Stock Appreciation Rights upon
the termination of a Participant's employment with the Company.
VII. STOCK PAYMENTS
The Committee may approve Stock Payments of the Company's Common Stock to
any Employee of the Company for all or any portion of the compensation (other
than base salary) that would otherwise become payable to an Employee in cash.
VIII. OTHER PROVISIONS
8.1 ADJUSTMENT PROVISIONS
(a) Subject to Section 8.1(b) below, (i) if the outstanding shares of
Common Stock of the Company are increased, decreased or exchanged for a
different number or kind of shares or other securities, or if additional shares
or new or different shares or other securities are distributed in respect of
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), through merger, consolidation, sale or exchange of all or
substantially all of the properties of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, spin-off or other distribution with respect to such shares of Common
Stock (or any stock or securities received with respect to such Common Stock),
or (ii) if the value of the outstanding shares of Common Stock of the Company is
reduced by reason of an extraordinary cash dividend, an appropriate and
proportionate adjustment shall be made in (x) the maximum number and kind of
shares provided in Section 1.3 (including the maximum amounts referred to in
Section 1.3(d) and (e)), (y) the number and kind of shares or other securities
subject to then outstanding Incentive Awards, and (z) the price for each share
or other unit of any other securities subject to then outstanding Incentive
Awards. No fractional interests will be issued under the Plan resulting from any
such adjustments.
(b) In addition to the adjustments permitted by Section 8.1(a) above,
except as otherwise expressly provided in the statement evidencing the grant of
an Incentive Award, upon the
13
<PAGE> 14
occurrence of a Change in Control of the Company any outstanding Incentive
Awards not theretofore exercisable, payable or free from restrictions, as the
case may be, shall immediately become exercisable, payable or free from
restrictions (other than restrictions required by applicable law or any national
securities exchange upon which any securities of the Company are then listed),
as the case may be, in their entirety and any shares of Common Stock acquired
pursuant to an Incentive Award which are not fully vested shall immediately
become fully vested, notwithstanding any of the other provisions of the Plan.
8.2 SECTION 16 PERSONS
Notwithstanding any other provisions in this Plan, any Incentive Award
granted hereunder to an Employee who is then subject to Section 16 of the
Exchange Act shall be subject to the following limitations:
(a) The Incentive Award may provide for the issuance of shares of Common
Stock as a stock bonus for no consideration other than services rendered or to
be rendered. In the event of an Incentive Award under which shares of Common
Stock are or may in the future be issued for any other type of consideration,
the amount of such consideration shall either (1) be equal to the amount (such
as the par value of such shares) required to be received by the Company in order
to assure compliance with applicable state law, (2) be equal to or greater than
50% of the fair market value of such shares on the date of grant of such
Incentive Award, or (3) in the case of Stock Options granted pursuant to Section
3.6 above, be the amount determined pursuant to the applicable substitution
formula. For such purposes, the fair market value of shares of Common Stock
shall be calculated on the basis of the closing price of stock of that class on
the day in question (or, if such day is not a trading day in the U.S. securities
markets, on the nearest preceding trading day), as reported with respect to the
principal market (or the composite of the markets, if more than one) in which
such shares are then traded, or, if no such closing prices are reported, on the
basis of the mean between the high bid and low asked prices that day on the
principal market or national quotation system on which such shares are then
quoted or, if not so quoted, as furnished by a professional securities dealer
making a market in such shares selected by the Board or the Committee.
(b) Any Stock Option or similar right (including a Stock Appreciation
Right) granted to such Employee pursuant to the Plan shall not be transferable
other than by will or the laws of descent and distribution and shall be
exercisable during such Employee's lifetime only by him or by his guardian or
legal representative. No Incentive Award granted to such Employee and no right
of such Employee under the Plan, contingent or otherwise, will be assignable or
made subject to any encumbrance, pledge or charge of any nature except that,
under such rules and regulations as the Committee may establish pursuant to the
terms of the Plan, a beneficiary may be designated with respect to an Incentive
Award in the event of death of such Employee. If such beneficiary is the
executor or administrator of the estate of the Employee, any rights with respect
to such Incentive Award may be transferred to the person or persons or entity
(including a trust) entitled thereto under the will of such Employee.
14
<PAGE> 15
8.3 CONTINUATION OF EMPLOYMENT
(a) Nothing in the Plan or in any statement evidencing the grant of an
Incentive Award pursuant to the Plan shall be construed to create or imply any
contract of employment between any Participant and the Company, to confer upon
any Participant any right to continue in the employ of the Company, or to confer
upon the Company any right to require any Participant's continued employment.
Except as expressly provided in the Plan or in any statement evidencing the
grant of an Incentive Award pursuant to the Plan, the Company shall have the
right to deal with each Participant in the same manner as if the Plan and any
such statement evidencing the grant of an Incentive Award pursuant to the Plan
did not exist, including, without limitation, with respect to all matters
related to the hiring, discharge, compensation and conditions of the employment
of the Participant. Unless otherwise expressly set forth in a separate
employment agreement between the Company and such Participant, the Company may
terminate the employment of any Participant with the Company at any time for any
reason, with or without cause.
(b) Any question(s) as to whether and when there has been a termination
of a Participant's employment, the reason (if any) for such termination, and/or
the consequences thereof under the terms of the Plan or any statement evidencing
the grant of an Incentive Award pursuant to the Plan shall be determined by the
Committee's and the Committee's determination thereof shall be final and
binding.
8.4 COMPLIANCE WITH GOVERNMENT REGULATIONS
No shares of Common Stock will be issued pursuant to an Incentive Award
unless and until all applicable requirements imposed by federal and state
securities and other laws, rules and regulations and by any regulatory agencies
having jurisdiction and by any stock exchanges upon which the Common Stock may
be listed have been fully met. As a condition precedent to the issuance of
shares of Common Stock pursuant to an Incentive Award, the Company may require
the Participant to take any reasonable action to comply with such requirements.
8.5 ADDITIONAL CONDITIONS
The award of any benefit under this Plan may also be subject to such
other provisions (whether or not applicable to the benefit award to any other
Participant) as the Committee determines appropriate including, without
limitation, provisions to assist the Participant in financing the purchase of
Common Stock through the exercise of Stock Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of Common
Stock acquired under any form of benefit, provisions giving the Company the
right to repurchase shares of Common Stock acquired under any form of benefit in
the event the Participant elects to dispose of such shares, and provisions to
comply with federal and state securities laws and federal and state income tax
withholding requirements.
15
<PAGE> 16
8.6 PRIVILEGES OF STOCK OWNERSHIP
No Participant and no beneficiary or other person claiming under or
through such Participant will have any right, title or interest in or to any
shares of Common Stock allocated or reserved under the Plan or subject to any
Incentive Award, except as to such shares of Common Stock, if any, that have
been issued to such Participant in accordance with the terms and conditions of
the applicable Incentive Award; provided, however, that Participants who have
received Restricted Stock shall have only those rights with respect to such
stock as are set forth in this Plan and the statement evidencing the grant or
sale of such Restricted Stock.
8.7 AMENDMENT AND TERMINATION OF PLAN: AMENDMENT OF INCENTIVE AWARDS
(a) The Board may alter, amend, suspend or terminate the Plan at any
time. No such action of the Board, unless taken with the approval of the
stockholders of the Company, may increase the maximum number of shares that may
be sold or issued under the Plan or alter the class of Employees eligible to
participate in the Plan. With respect to any other amendments of the Plan, the
Board may in its discretion determine that such amendments shall only become
effective upon approval by the stockholders of the Company, if the Board
determines that such stockholder approval may be advisable, such as for the
purpose of obtaining or retaining any statutory or regulatory benefits under
federal or state securities law, federal or state tax law or any other laws or
for the purposes of satisfying applicable stock exchange listing requirements.
(b) The Committee may, with the consent of a Participant, make such
modifications in the terms and conditions of an Incentive Award as it deems
advisable. Without limiting the generality of the foregoing, the Committee may,
with the consent of the Participant, from time to time to adjust or reduce the
purchase price of Options held by such Participant by cancellation of such
Options and granting of Options to purchase the same or a lesser number of
shares at lower purchase prices or by modification, extension or renewal of such
Options.
(c) Except as otherwise provided in this Plan or in the statement
evidencing the grant of the Incentive Award, no amendment, suspension or
termination of the Plan will, without the consent of the Participant, alter,
terminate, impair or adversely affect any right or obligation under any
Incentive Award previously granted under the Plan.
8.8 OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option,
incentive or other compensation plans in effect for the Company, nor shall the
Plan preclude the Company from establishing any other forms of incentive or
other compensation for Employees of the Company.
8.9 PLAN BINDING ON SUCCESSORS
The Plan shall be binding upon the successors and assigns of the Company.
16
<PAGE> 17
8.10 SINGULAR, PLURAL; GENDER
Whenever used herein, nouns in the singular shall include the plural, and
the masculine pronoun shall include the feminine gender.
8.11 HEADINGS, ETC., NO PART OF PLAN
Heading of Articles and Sections hereof are inserted for convenience and
reference; they constitute no part of the Plan.
8.12 PARTICIPATION BY FOREIGN EMPLOYEES
Notwithstanding anything to the contrary herein, the Committee may, in
order to fulfill the purposes of the Plan, modify grants of Incentive Awards to
Participants who are foreign nationals or employed outside of the United States
to recognize differences in applicable law, tax policy or local custom.
IX. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective on the later of (a) the date of its
adoption by the Board, (b) the date of its approval by the holders of the
outstanding shares of Common Stock (either by a vote of a majority of such
outstanding shares present in person or by proxy and entitled to vote at a
meeting of stockholders of the Company or by written consent) or (c) the date of
the distribution by SKB (as defined in Section 3.6 above) of the stock of
Allergan pursuant to the terms of the Distribution Agreement (as defined in
Section 3.6 above). The Plan shall terminate at such time as the Board, in its
discretion, shall determine. No Incentive Award may be granted under the Plan
after the date of such termination, but such termination shall not affect any
Incentive Award theretofore granted.
17
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>3
<FILENAME>a70026ex10-7.txt
<DESCRIPTION>EXHIBIT 10.7
<TEXT>
<PAGE> 1
EXHIBIT 10.7
FIRST AMENDMENT TO
ALLERGAN, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(RESTATED 2000)
The ALLERGAN, INC. EMPLOYEE STOCK OWNERSHIP PLAN (the "Plan") is hereby
amended to read as follows:
1. The first paragraph of Section 2.9 of the Plan is hereby amended to
read as follows:
2.9 Compensation. "Compensation" shall mean the
amounts paid during a Plan Year to an Employee by the Company
for services rendered, including base earnings, commissions
and similar incentive compensation, cost of living allowances
earned within the United States of America, holiday pay,
overtime earnings, pay received for election board duty, pay
received for jury and witness duty, pay received for military
service (annual training), pay received for being available
for work, if required (call-in premium), amounts of salary
reduction elected by the Participant under a Code Section
401(k) cash or deferred arrangement or a Code Section 125
cafeteria plan, shift differential and premium,
sickness/accident related pay, vacation pay, vacation shift
premium, and bonus amounts paid under the following programs:
2. Section 2.19 of the Plan is hereby amended to read as follows:
2.19 Entry Date. "Entry Date" shall mean the date an
Eligible Employee commences participation in the Plan in
accordance with Section 3.1.
3. Section 3.1 of the Plan is hereby amended to read as follows:
3.1 Commencement of Participation. Each Eligible
Employee shall become a Participant on the date that
immediately follows the later of:
(a) The date such Eligible Employee performs
an Hour of Service as an Eligible Employee; or
(b) The date such Eligible Employee
completes six (6) months of Credited Service with a
Sponsor or Affiliated Company as an Employee.
Notwithstanding the foregoing, any Employee who is an
Eligible Employee on the Effective Date and who has satisfied
the requirements of
<PAGE> 2
paragraphs (a) and (b), above, as of the Effective Date shall
become a Participant on the Effective Date.
4. Section 4.2(a) of the Plan is hereby amended to read as follows:
(a) As of a date not later than the last day of each
Plan Year, an allocation shall be made to the ESOP Account of
each "Eligible Participant" of such Participant's allocable
share for such Plan Year of (i) Company contributions of
Company Stock contributed in kind to the Trust Fund and (ii)
Company contributions in other than Company Stock, which are
not used for other purposes described in Section 4.1. For the
purposes of this Section 4.2, the term "Eligible Participant"
shall include all Participants who are Eligible Employees on
the last business day of such Plan Year or who ceased to be
Eligible Employees during such Plan Year due to death,
Disability, or retirement at or after age 55 (as such
retirement is determined under the Allergan, Inc. Pension
Plan). Such allocations shall be made in the same proportion
that the Compensation for the Plan Year for such Eligible
Participant bears to the total Compensation of all Eligible
Participants for such Plan Year.
5. Section 5.3(a) of the Plan is hereby amended to read as follows:
(a) In the event that a distribution of the entire
vested portion of such a Participant's ESOP Account is made
pursuant to this Section 5.3, the non-vested portion shall be
forfeited as of such Participant's distribution date. In the
event such Participant is rehired by the Company prior to the
date such Participant incurs five consecutive Breaks in
Service, the amount so forfeited shall be reinstated to the
Participant's ESOP Account as of the Participant's
Reemployment Commencement Date (without regard to any interest
or investment earnings on such amount). For the purpose of
this paragraph (a), a Participant with no vested portion of
his or her ESOP Account shall be deemed to have received a
distribution pursuant to this paragraph (a) as of his or her
Severance Date.
6. Section 5.3(b) of the Plan is hereby amended to read as follows:
(b) In the event such a Participant who incurs a
Severance does not receive a distribution of the entire vested
portion of his or her ESOP Account, the non-vested portion
shall be forfeited as of such Participant's Severance Date. In
the event such Participant is rehired by the Company prior to
the date such Participant incurs five consecutive Breaks in
Service, the amount so forfeited plus an amount equal to the
rate of return, the amount forfeited would have received but
for forfeiture pursuant to this paragraph (b) shall be
reinstated to the Participant's ESOP Account as of the
Participant's Reemployment Commencement Date. The Company
shall be obligated to contribute to the Trust Fund any amounts
necessary
2
<PAGE> 3
after application of Section 4.3 to reinstate any ESOP Account
if reinstatement is required under the provisions of this
paragraph.
7. Section 5.9(c) of the Plan is hereby amended to read as follows:
(c) Notwithstanding the foregoing, a Participant who
elected to diversify the investment of a portion of his or her
ESOP Account pursuant to Section 5.12(d) shall not have the
right to receive such diversified portion in Company Stock,
but, rather, shall receive any distribution of such
diversified portion in cash.
IN WITNESS WHEREOF, Allergan, Inc. hereby executes this First Amendment
on the 14th day of December, 2000.
ALLERGAN, INC.
BY: /s/ Francis R. Tunney, Jr.
-----------------------------------------
Francis R. Tunney, Jr.,
Corporate Vice President--Administration,
General Counsel and Secretary
3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.9
<SEQUENCE>4
<FILENAME>a70026ex10-9.txt
<DESCRIPTION>EXHIBIT 10.9
<TEXT>
<PAGE> 1
EXHIBIT 10.9
FIRST AMENDMENT TO
ALLERGAN, INC.
SAVINGS AND INVESTMENT PLAN
(RESTATED 2000)
The ALLERGAN, INC. SAVINGS AND INVESTMENT PLAN (the "Plan") is hereby
amended to read as follows:
1. The first paragraph of Section 2.17 of the Plan is hereby amended to
read as follows:
2.17 Compensation. "Compensation" shall mean the
amounts paid during a Plan Year to an Employee by the Company
for services rendered, including base earnings, commissions
and similar incentive compensation, cost of living allowances
earned within the United States of America, holiday pay,
overtime earnings, pay received for election board duty, pay
received for jury and witness duty, pay received for military
service (annual training), pay received for being available
for work, if required (call-in premium), amounts of salary
reduction elected by the Participant under a Code Section
401(k) cash or deferred arrangement or a Code Section 125
cafeteria plan, shift differential and premium,
sickness/accident related pay, vacation pay, vacation shift
premium, and bonus amounts paid under the following programs:
2. Section 4.8 of the Plan is hereby amended by re-numbering paragraphs
(b) and (c) as paragraphs (c) and (d) and adding the following new
paragraph (b) to read as follows:
(b) Pursuant to procedures as the Committee may
prescribe (either in writing or practice), a former Eligible
Employee who commenced participation in the Plan pursuant to
Article III may make a Rollover Contribution to the Plan of
his or her ESOP Account from the Allergan, Inc. Employee Stock
Ownership Plan so long as he or she retains rights under the
Plan.
3. Section 8.7(a) of the Plan is hereby amended to read as follows:
(a) In the event that a distribution of the entire
vested portion of a Participant's Accounts is made to a
Participant due to a Severance when he or she is not fully
vested in such Accounts, the nonvested portion of the
Participant's Account(s) shall be forfeited as of the
Participant's distribution date. A Participant who incurs such
a Severance when no portion of his or her Accounts are vested
shall be deemed to have received a distribution pursuant to
this paragraph (a) as of his or her Severance Date.
IN WITNESS WHEREOF, Allergan, Inc. hereby executes this First Amendment
on the 14th day of December, 2000.
ALLERGAN, INC.
BY: /s/ Francis R. Tunney, Jr.
-----------------------------------------
Francis R. Tunney, Jr.,
Corporate Vice President--Administration,
General Counsel and Secretary
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23
<SEQUENCE>5
<FILENAME>a70026ex10-23.txt
<DESCRIPTION>EXHIBIT 10.23
<TEXT>
<PAGE> 1
Exhibit 10.23
[ALLERGAN LOGO]
2001
MANAGEMENT BONUS PLAN
JANUARY 2001
<PAGE> 2
- --------------------------------------------------------------------------------
PURPOSE OF THE PLAN
The Allergan, Inc. 2001 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, 2001 through December 31, 2001 for all
locations that have a fiscal year beginning January 1 and ending December 31.
For the international locations with fiscal years beginning December 1 and
ending November 1, the Plan year is December 1, 2000 to November 30, 2001.
- --------------------------------------------------------------------------------
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. For the locations where
the Plan year is January 1, 2001 through December 31, 2001, the participants
must be employed on or before June 30, 2001; for the locations where the Plan
year is December 1, 2000 through November 30, 2001, the participants must be
employed on or before May 31, 2001. 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 (defined as age 55 or over with at least 5 years of service),
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
o EARNINGS PER SHARE--Corporate performance is measured in terms of Allergan,
Inc.'s Earnings Per Share (EPS) performance. EPS is defined as 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.
o 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
- --------------------------------------------------------------------------------
January 2001 Page -1-
<PAGE> 3
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, or 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 two components of this calculation are: Earnings Per Share; and Operating
Income.
BONUS POOL FUNDING - Bonuses are funded when the Company achieves the threshold
level of EPS performance. The level of bonus funding is
first determined by EPS performance as outlined in the
table below.
o EARNINGS PER SHARE
2001 EPS RANGE BONUS % OF TARGET
-------------- -----------------
-$0.20 40%
-$0.15 50%
-$0.10 60%
-$0.08 66%
-$0.06 73%
-$0.04 81%
-$0.02 90%
TARGET 100%
+$0.02 110%
+$0.04 119%
+$0.06 127%
+$0.08 134%
+$0.10 140%
If actual EPS results fall between the performance levels shown
above, bonuses will be prorated accordingly.
- --------------------------------------------------------------------------------
January 2001 Page -2-
<PAGE> 4
- --------------------------------------------------------------------------------
BONUS POOL DIFFERENTIATION BY BUSINESS UNIT/FUNCTION
o OPERATING INCOME--The target bonus pool determined by EPS 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 EPS performance for purposes of this Plan,
the Committee has the discretion to include or exclude any or all of the
following items:
o extraordinary, unusual or non-recurring items
o effects of accounting changes
o effects of financing activities
o expenses for restructuring or productivity initiatives
o other non-operating items
o spending for acquisitions
o effects of divestitures
- --------------------------------------------------------------------------------
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 may receive from 0% 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
Cash 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 2001 Page -3-
<PAGE> 5
- --------------------------------------------------------------------------------
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 target.
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
performance will be deemed to be the greater of:
o 100% of the EPS target or
o the prorated actual year-to-date EPS 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. 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. This Management Bonus
Plan document supersedes any previous document you may have received.
- --------------------------------------------------------------------------------
January 2001 Page -4-
<PAGE> 6
ATTACHMENT NO. 1
[ALLERGAN LOGO]
2001 MANAGEMENT BONUS PLAN
TARGET AWARDS
SALARY GRADE TARGET BONUS*
------------ -------------
7E 10%
8E 15%
9E 20%
10E 25%
11E 30%
12E 35%
13E 40%
14E 50%
15E 55%
- --------
* As a percentage of year-end base salary.
- --------------------------------------------------------------------------------
January 2001 Page -5-
<PAGE> 7
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.
- --------------------------------------------------------------------------------
January 2001 Page -6-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.30
<SEQUENCE>6
<FILENAME>a70026ex10-30.txt
<DESCRIPTION>EXHIBIT 10.30
<TEXT>
<PAGE> 1
EXHIBIT 10.30
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of March 24, 1998 amending
and restating the Credit Agreement dated as of May 10, 1996 and amended as of
March 5, 1998 (the "CREDIT AGREEMENT") among ALLERGAN, INC. (the "COMPANY"), the
ELIGIBLE SUBSIDIARIES referred to therein, the BANKS party thereto, BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Co-Agent and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Agent (the "AGENT").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit Agreement to (i)
extend the Termination Date from May 10, 2001 to March 24, 2003 and (ii) change
the definitions of the Pricing Levels so that on and or after the date hereof
one rating, rather than two, will satisfy the requirement at each Pricing Level;
and
WHEREAS, the parties hereto wish to amend the Credit Agreement as set forth
herein and to restate the Credit Agreement in its entirety to read as set forth
in the Credit Agreement with the amendments specified below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit Agreement has the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall, after this Amendment and Restatement
becomes effective, refer to the Credit Agreement as amended hereby.
SECTION 2. Extension of Termination Date. The definition of "Termination
Date" in Section 1.01 of the Credit Agreement is amended by changing the dates
specified therein from "May 10, 2001" to "March 24, 2003".
SECTION 3. Pricing Levels. The definitions of "Level I Pricing", "Level II
Pricing", "Level III Pricing", "Level IV Pricing" and "Level V Pricing" in
Section 1.01 of the Credit Agreement are amended to read as follows:
1
<PAGE> 2
"LEVEL I PRICING" applies at any date if, at such date, the Company's
outstanding senior secured long-term debt securities are rated AA- or higher by
S&P or Aa3 or higher by Moody's.
"LEVEL II PRICING" applies at any date if, at such date, (i) the Company's
outstanding senior unsecured long-term debt securities are rated A or higher by
S&P or A2 or higher by Moody's and (ii) Level I Pricing does not apply.
"LEVEL III PRICING" applies at any date if, at such date, (i) the Company's
outstanding senior unsecured long-term debt securities are rated BBB+ or higher
by S&P or Baa1 or higher by Moody's and (ii) neither Level I Pricing nor Level
II Pricing applies.
"LEVEL IV PRICING" applies at any date if, at such date, (i) the Company's
outstanding senior unsecured long-term debt securities are rated BBB or higher
by S&P or Baa2 or higher by Moody's and (ii) none of Level I Pricing, Level II
Pricing or Level III Pricing applies.
"LEVEL V PRICING" applies at any date, if at such date, no other Pricing
Level applies.
SECTION 4. Representations of Company. The Company represents and warrants
that (i) the representations and warranties of the Company set forth in Article
4 of the Credit Agreement will be true on and as of the Amendment Effective Date
and (ii) no Default will have occurred and be continuing on such date.
SECTION 5. Governing Law. This Amendment and Restatement shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 6. Counterparts. This Amendment and Restatement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 7. Effectiveness. This Amendment and Restatement shall become
effective as of the date hereof on the date (the "AMENDMENT EFFECTIVE DATE")
when the Agent shall have received from each of the Company and the Banks a
counterpart hereof signed by such party or facsimile or other written
confirmation (in form satisfactory to the Agent) that such party has signed a
counterpart hereof.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Restatement to be duly executed as of the date first above written.
ALLERGAN, INC.
By: /s/ JEFFREY L. EDWARDS By: /s/ GARY A. PREM
-------------------------------- ------------------------------
Name: Jeffrey L. Edwards Name: Gary A. Prem
Title: Vice President, Treasurer Title: Assistant Treasurer
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ DIANA H. IMHOF
------------------------------
Name: Diana H. Imhof
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/ THERESE A. FONTAINE
------------------------------
Name: Therese A. Fontaine
Title: Vice President
CITICORP USA, INC.
By: /s/ CONNIE R. PESCAR
------------------------------
Name: Connie R. Pescar
Title: Vice President
ABN AMRO BANK N.V. LOS ANGELES
INTERNATIONAL BRANCH
/s/ ELLEN M. COLEMAN By: /s/ JOHN A. MILLER
- ------------------------------- ------------------------------
Ellen M. Coleman Name: John A. Miller
Vice President/Director Title: Group Vice President
3
<PAGE> 4
THE FIRST NATIONAL BANK OF
CHICAGO
By: /s/ MARK A. ISLEY
------------------------------
Name: Mark A. Isley
Title: First Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ STEVEN M. TAKEI
-----------------------------
Name: Steven M. Takei
Title: Senior Vice President
4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.31
<SEQUENCE>7
<FILENAME>a70026ex10-31.txt
<DESCRIPTION>EXHIBIT 10.31
<TEXT>
<PAGE> 1
EXHIBIT 10.31
AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT dated as of December 8, 2000, to the Amended and Restated Credit
Agreement dated as of March 24, 1998 amending and restating the Credit Agreement
dated as of May 10, 1996 and amended as of March 5, 1998 (the "CREDIT
AGREEMENT") among ALLERGAN, INC. (the "COMPANY"), the ELIGIBLE SUBSIDIARIES
referred to therein, the BANKS party thereto, BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Co-Agent and MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent (the "AGENT").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit Agreement as set
forth below:
NOW, THEREFORE, the parties hereto agree as follows,
SECTION 1. Defined Terms; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit Agreement has the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.
SECTION 2. Defined Terms. The defined term "Irish Affiliate Cash" is
deleted from Section 1.01 and the following defined term is added to Section
1.01: "Adjusted Cash" means an amount equal to 70% of the cash and cash
equivalents denominated in Dollars or in any currency which is readily
exchangeable into Dollars and which is not, at such time, subject to any form of
exchange control regulation, and which are payable by either their terms at an
address within the United States and by a United States resident or other person
having an address within the United States, owned by Allergan Pharmaceuticals
Holdings (Ireland) Limited ("APHIL"), a subsidiary of Allergan Holdings, Inc., a
Delaware corporation, or by the Company, such amount not to exceed $150,000,000
in respect of cash and cash equivalents owned by APHIL and $150,000,000 in
respect of cash and cash equivalents owned by the Company.
SECTION 3. Debt to Capitalization. Section 5.08 of the Credit Agreement is
amended to read as follows:
<PAGE> 2
SECTION 5.08. Debt to Capitalization. The ratio of (i) Consolidated
Debt less Adjusted Cash to (ii) Consolidated Debt less Adjusted Cash plus
Adjusted Consolidated Net Worth will at no time be greater than 0.45:1.
SECTION 4. Representations of Company. The Company represents and warrants
that (i) the representations and warranties of the Company set forth in Article
4 of the Credit Agreement will be true on and as of the Amendment Effective Date
and (ii) no Default will have occurred and be continuing on such date.
SECTION 5. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 6. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 7. Effectiveness. This Amendment shall become effective as of the
date hereof on the date (the "AMENDMENT EFFECTIVE DATE") when the Agent shall
have received from each of the Company and the Required Banks a counterpart
hereof signed by such party or facsimile or other written confirmation (in form
satisfactory to the Agent) that such party has signed a counterpart hereof.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
ALLERGAN, INC.
By: /s/ JEFFREY L. EDWARDS By: /s/ GARY PREM
---------------------------- ---------------------------------
Name: Jeffrey L. Edwards Name: Gary Prem
Title: SVP, Tax, Treasury & Title: Assistant Treasurer
Investor Relations
REVOLVING COMMITMENT
VEHICLE CORPORATION
(Morgan Guaranty Trust Company of
New York as Attorney-in-Fact for
Revolving Commitment Vehicle
Corporation)
By: /s/ ROBERT BOTTAMEDI
---------------------------------
Name: Robert Bottamedi
Title: Vice President
BANK OF AMERICA, N.A.
By: /s/ BRIAN SMITH
---------------------------------
Name: Brian Smith
Title: Associate
CITICORP USA, INC.
By: /s/ CONNIE R. PESCAR
---------------------------------
Name: Connie R. Pescar
Title: Vice President
Attorney-in-Fact
3
<PAGE> 4
ABN AMRO BANK N.V. LOS ANGELES
INTERNATIONAL BRANCH
/s/ MITSOO IRAVANI By: /s/ JOHN A. MILLER
- ------------------------ --------------------------------
Mitsoo Iravani Name: John A. Miller
Assistant Vice President Title: Senior Vice President
BANK ONE, N.A.
By: /s/ JOSEPH PERDENZA
--------------------------------
Name: Joseph Perdenza
Title: Assistant Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ JOHN A. WHITNER
-------------------------------
Name: John A. Whitner
Title: Senior Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ JILLIAN RICHARDSON
-------------------------------
Name: Jillian Richardson
Title: Vice President
4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>8
<FILENAME>a70026ex21.txt
<DESCRIPTION>EXHIBIT 21
<TEXT>
<PAGE> 1
EXHIBIT 21
ENTITIES OF ALLERGAN, INC.
PLACE OF INCORPORATION
NAME OF SUBSIDIARY OR ORGANIZATION
- ------------------ -----------------------
Allergan-Loa S.A. Argentina
Allergan S.A.I.C. y F. Argentina
Allergan Australia Pty Limited Australia
Amawind Pty Limited Australia
Pacific Eyecare Pty Limited Australia
Allergan N.V. Belgium
Allergan Produtos Farmaceuticos Ltda. Brazil
Allergan Inc. Canada
CrownPharma Canada Inc. Canada
Allergan Pharmaceuticals (Ireland) Ltd. Cayman Islands
Allergan Laboratorios Limitada Chile
Allergan (Hangzhou) Pharmaceutical Co., Ltd. China
Allergan de Colombia S.A. Colombia
Allergan de Costa Rica, S.A. Costa Rica
Allergan A/S Denmark
Allergan France S.A.S. France
Pharm-Allergan GmbH Germany
Allergan Asia Limited Hong Kong
Allergan Botox Limited Ireland
Allergan Sales, Limited Ireland
Allergan Services International, Limited Ireland
Allergan Trading International, Limited Ireland
CrownPharma Limited Ireland
Allergan Pharmaceuticals Holdings (Ireland) Limited Ireland (non-resident)
Allergan S.p.A. Italy
Allergan K.K. Japan
Allergan Korea Ltd. Korea
Allergan, S.A. de C.V. Mexico
Pharmac, S.A.M. Monaco
Allergan B.V. Netherlands
Allergan Services BV Netherlands
Allergan Holdings BV Netherlands Antilles
Allergan New Zealand Limited New Zealand
Allergan AS Norway
Allergan Pte. Ltd. (in liquidation) Singapore
Allergan Pharmaceuticals (Pty.) Ltd. South Africa
Allergan, S.A. Spain
Allergan Norden AB Sweden
Allergan AG Switzerland
Allergan Optik Mamulleri Sanayi Ve Ticaret Limited Turkey
Allergan Farnborough Limited (in liquidation) United Kingdom
Allergan Holdings Limited United Kingdom
Allergan Limited United Kingdom
Allergan Optical Irvine, Inc. United States/CA
Allergan Sales, Inc. United States/CA
AMO Puerto Rico, Inc. United States/CA
Herbert Laboratories United States/CA
Allergan America, Inc. United States/DE
Allergan Holdings, Inc. United States/DE
AMO Holdings, Inc. United States/DE
Pacific Pharma, Inc. United States/DE
Allergan de Venezuela, S.A. (inactive) Venezuela
Allergan India Limited (Joint Venture) India
The Allergan Foundation (Non-Profit Corporation United States/California
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>9
<FILENAME>a70026ex23.txt
<DESCRIPTION>EXHIBIT 23
<TEXT>
<PAGE> 1
EXHIBIT 23
ACCOUNTANTS' CONSENT AND REPORT
ON CONSOLIDATED SCHEDULE
To the Board of Directors and Stockholders
Allergan, Inc.:
Under date of January 29, 2001, we reported on the consolidated balance
sheets of Allergan, Inc. and subsidiaries as of December 31, 2000 and 1999, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 2000,
included in Exhibit A to the Allergan, Inc. Notice of Annual Meeting and Proxy
Statement. These consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the year ended
December 31, 2000. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule as listed in the index of exhibits to the annual
report on Form 10-K for the fiscal year ended December 31, 2000. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statement schedule
based on our audits. In our opinion, such schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth herein.
We consent to the incorporation by reference of our report dated January
29, 2001, in the Company's Registration Statements on Form S-8 (Nos. 33-29527,
33-29528, 33-44770, 33-48908, 33-66874, 333-09091, 333-04859, 333-25891,
333-43580, 333-43584, 333-64559, 333-70407, 333-94155 and 333-94157) and
Registration Statements on Form S-3 (Nos. 33-55061, 33-69746 and 333-50524).
/s/ KPMG LLP
Costa Mesa, California
March 21, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----