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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, 1998
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
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The aggregate market value of the registrant's voting stock held by
non-affiliates was approximately $5,950,000,000 on March 8, 1999, based upon the
closing price on the New York Stock Exchange on such date.
Common Stock outstanding as of March 8, 1999 - 67,129,722 shares.
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 27, 1999, which proxy statement was filed with the Securities
and Exchange Commission on March 22, 1999.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.........................................................1
Item 2. Properties......................................................15
Item 3. Legal Proceedings...............................................16
Item 4. Submission of Matters to a Vote of Security Holders.............16
Item I-A. Executive Officers of Allergan, Inc.............................17
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.......................................................19
Item 6. Selected Financial Data.........................................19
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.........................................19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk......19
Item 8. Financial Statements and Supplementary Data.....................19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure......................................19
PART III
Item 10. Directors and Executive Officers of Allergan, Inc...............20
Item 11. Executive Compensation .........................................20
Item 12. Security Ownership of Certain Beneficial Owners and Management..20
Item 13. Certain Relationships and Related Transactions..................20
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K......................................................21
SIGNATURES ...........................................................22
INDEX OF EXHIBITS ...........................................................24
SCHEDULE ..........................................................S-1
EXHIBITS .......................(Attached to this Report on Form 10-K)
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Allergan, Inc. ("Allergan" or the "Company") is a leading 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 incorporated in California in 1948 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.
In November 1992, the Company sold its contact lens business in North
and South America. In August 1993, the Company sold its contact lens business
outside of the Americas.
During 1994, the Company acquired the Ioptex Research worldwide
intraocular lens product line. During 1995, the Company completed four
acquisitions. In January 1995, the Company acquired Optical Micro Systems, Inc.,
a U.S.-based developer and manufacturer of phacoemulsification surgical
equipment. In June 1995, the Company acquired Laboratorios Frumtost, S.A., a
manufacturer of ophthalmic and other pharmaceutical products in Brazil. In
August 1995, the Company purchased the assets of Herald Pharmacal, Inc., a
U.S.-based developer and manufacturer of glycolic acid-based, aesthetic skin
care products. In November 1995, the Company purchased the worldwide contact
lens care product business of Pilkington Barnes Hind. Also in 1995, Allergan
acquired 100% ownership interest in Santen-Allergan, its Japanese contact lens
care joint venture.
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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:
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YEAR ENDED DECEMBER 31
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1998 1997 1996
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(IN MILLIONS)
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Specialty Pharmaceuticals:
Eye Care Pharmaceuticals $ 505.3 $ 408.5 $ 425.1
Skin Care 80.6 80.6 64.7
Botox(R)/Neuromuscular 125.3 90.1 67.2
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Total 711.2 579.2 557.0
Medical Devices and OTC Product Lines:
Ophthalmic Surgical 193.6 182.2 184.0
Contact Lens Care 356.9 376.6 406.0
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Total 550.5 558.8 590.0
Total Product Net Sales $1,261.7 $1,138.0 $1,147.0
======== ======== ========
Domestic 46.2% 42.8% 41.4%
International 53.8% 57.2% 58.6%
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See Note 11 of Notes to Consolidated Financial Statements on pages A-34 to A-36
of the Company's Proxy Statement filed on March 22, 1999 for further information
concerning foreign and domestic operations.
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.
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. 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. 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. In March 1997,
Alphagan(R) was also approved in the United Kingdom, and in October 1997, the
Company received approval to market Alphagan(R) ophthalmic solution in 14 of the
15 member states of the European Union through the mutual recognition filing
process. Also, in March 1997, Alphagan(R) was approved in the United States for
acute post-surgical elevated pressure in the eye following argon laser
trabeculoplasty. In July 1998, the Company entered into an agreement with Santen
Pharmaceutical Co., Ltd., granting Santen exclusive distribution rights for
brimonidine (the compound marketed by Allergan under the Alphagan(R) brand name)
in Japan. Under this agreement, Santen agreed to assume responsibility for
future product development of brimonidine and for obtaining Industry of Health
approval in
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Japan. Allergan retained the option to co-promote or co-market brimonidine in
Japan with Santen.
The Company also markets Betagan(R) ophthalmic solution, a topical beta
blocker used in the initial 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.
The Company also markets several leading ophthalmic products to treat
ocular inflammation and infection. Pred Forte(R) and FML(R) Liquifilm(R)
ophthalmic suspensions are leading products in the ocular corticosteroid
inflammation market. Allergan's Acular(R)1 ophthalmic solution 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. In November 1997, the Company received approval from the FDA to
market Acular(R) PF, the first unit-dose, preservative-free topical nonsteroidal
anti-inflammatory drug (NSAID) in the United States, for the reduction of ocular
pain and photophobia following incisional refractive surgery. Allergan's major
products in the anti-infective market are Blephamide(R) ophthalmic suspension, a
topical anti-inflammatory and anti-infective, Polytrim(R) ophthalmic solution, a
synthetic antimicrobial which treats surface ocular bacterial infections, and
Ocuflox(R)/Oflox(R)/Exocin(R) ophthalmic solution, a fluroquinolone which treats
bacterial conjunctivitis. In May 1996, the Company received approval from the
FDA to market Ocuflox(R) ophthalmic solution for the treatment of corneal
ulcers. Blephamide(R), Pred Forte(R) and Polytrim(R) ophthalmic solutions no
longer have patent protection and face generic competition.
Skin Care Product Line
Building upon its strength in marketing to medical specialties and
taking advantage of synergies in research and development, Allergan's skin care
business develops, manufactures and markets therapeutic as well as cosmetic skin
care products, primarily in the United States. In June 1997, the Company
received approval from the FDA to market Tazorac(R) (tazarotene topical gel)
0.05% and 0.1% (the trade name for Zorac(R) topical gel in the United States and
Canada) for the treatment of plaque psoriasis and acne. Outside of the U.S., the
Company entered into an agreement in February 1999 with Pierre Fabre
Dermatologie, an affiliate of the private French company, Pierre Fabre, to
commercialize tazarotene (Zorac(R)) in continental Europe and nearby
territories. Under this agreement, the Company granted development, registration
and commercialization rights for Zorac(R) gel and certain successor products for
its European territory to Pierre Fabre in exchange for up front fees, milestone
payments upon successful launches in new markets and royalty payments on net
sales of Zorac(R) topical gel.
Azelex(R) cream for the topical treatment of mild to moderate
inflammatory acne vulgaris was launched in the U.S. in December 1995 and has
been well received in the market. The therapeutic product line also includes
Elimite(R) cream for the treatment of scabies, Naftin(R), a topical anti-fungal
gel and cream and Gris-Peg(R) tablets, a systemic anti-fungal product. Patent
protection for Elimite(R) cream in the United States has expired, and the
product now faces generic competition. The Company also develops, manufactures
and markets glycolic acid-based skin care products.
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(1) Acular(R) is a registered trademark of and is licensed from its developer
Syntex (U.S.A.) Inc.
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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. The Company markets
Botox(R) Purified Neurotoxin Complex in the United States and in 60 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) and
strabismus (misalignment of the eyes) in people 12 years of age and over.
The Company is working to expand the approved indications for Botox(R)
Purified Neurotoxin Complex in the United States. In 1998, the Company exercised
its option to acquire the exclusive worldwide rights to U.S. and foreign patents
for the use of botulinum toxin to treat migraine headaches, and the Company has
filed an investigational new drug application with the FDA for the migraine
headache indication for Botox(R). Clinical development for the migraine and
tension headache indications are currently in Phase 2. In addition, the Company
has orphan drug designations from the FDA for two indicated uses for Botox(R)
Purified Neurotoxin Complex: cervical dystonia and juvenile cerebral palsy. The
Company anticipates starting Phase 3 clinical trials in early 1999 in the United
States for the juvenile cerebral palsy indication, and the Company expects to
seek supplemental approval for the cervical dystonia indication during 1999. If
the Company gains approval for one or both uses before any other manufacturer of
the same designated botulinum toxin serotype, the Company will be entitled to
seven years of exclusive marketing rights in the United States for those uses.
Botox(R) is also in Phase 3 clinical development in the United States for
hyperfunctional facial lines (cosmetic brow furrows) and Phase 2/3 for back
pain, and the Company anticipates starting Phase 3 clinical development for
adult spasticity post-stroke in early 1999.
Outside of the United States, the Company is marketing Botox(R)
Purified Neurotoxin Complex in 60 countries around the world. The Company
continues to pursue expanded indications for Botox(R) outside of the U.S.
Botox(R) Purified Neurotoxin Complex has been approved in 31 countries outside
of the U.S. for the treatment of cervical dystonia and hemifacial spasm and in
16 countries outside of the U.S. for the treatment of lower limb spasticity in
pediatric cerebral palsy patients, two years of age or older. And, in 1998, the
Company filed an application in Europe to market Botox(R) Purified Neurotoxin
Complex for the treatment of upper limb spasticity associated with debilities
occurring after a stroke and expects to receive approval for this indication in
Switzerland in 1999.
There are intrinsic uncertainties associated with Research &
Development efforts and the regulatory process. There is no assurance that any
of the research projects or pending drug marketing approval applications
mentioned above will result in new approved indications for Botox(R) Purified
Neurotoxin Complex. 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 results of the Company's Botox(R) business.
The Company manufactures its own 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 and a resulting decrease in sales of the
product.
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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 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 full line of products used in the
performance of cataract surgery, including PMMA, silicone and acrylic IOLs.
Sales of all models of the Company's IOLs represented 11%, 11% and 10%
of total Company sales in 1996, 1997 and 1998, respectively. Intraocular lenses
marketed by Allergan for small incision cataract surgery include the
AMO(R)PhacoflexII(R)SI-30NB(R) foldable small incision IOL, introduced in April
1993, the AMO(R)SI-40NB(R) foldable small incision IOL, introduced in 1995, the
AMO(R)PhacoflexII(R)SI-55NB(R), introduced in 1997, and the Sensar(R) IOL, which
was introduced in Europe in 1998. Along with foldable IOLs, the Company also
markets a series of insertion systems for each of its foldable lens models,
referred to as The UnFolder(R) implantation systems. The systems assist the
surgeon in achieving controlled release of the IOL in the smallest incisions.
Small incision surgery is a less invasive procedure, and generally, smaller
incisions lead to less induced astigmatism and faster visual recovery for the
patient. The Array(R) multifocal IOL was approved for marketing in the United
States in September 1997. It is also available in Brazil and several European
countries including Germany, France and Italy. The Company believes that the
Array(R) multifocal IOL will be viewed by ophthalmic surgeons and cataract
patients as a significant improvement in IOL design, providing an improved
patient outcome due to enhanced near vision.
Small incision IOLs continue to grow in popularity along with
increasing use of phacoemulsification, 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. Phacoemulsification requires only a three to
four millimeter incision, compared to incisions of up to 12 millimeters for
other techniques. According to a 1997 survey of members of the American Society
of Cataract and Refractive Surgery, phacoemulsification is currently utilized in
more than 90% of cataract procedures in the United States. In 1993 Allergan
introduced the AMO(R)Prestige(R) phacoemulsification machine. AMO(R)Prestige(R)
makes small-incision cataract surgery easier than other phacoemulsification
machines by using a sophisticated microprocessor that monitors vacuum and fluid
in the eye. In January 1995, Allergan acquired Optical Micro Systems, Inc.
("OMS"). OMS develops and manufactures phacoemulsification equipment. This
acquisition, along with the acquisition of the Ioptex business in 1994, provided
the Company with additional IOL and phacoemulsification equipment product
offerings and proprietary technologies. The AMO(R)Diplomax(R)
phacoemulsification machine, launched in the U.S. by the Company in November
1995, is the first OMS phaco-technology system introduced since the acquisition.
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.
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(2) BioLon(TM) is a trademark owned and licensed from Bio-Technology General
Corporation.
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Contact Lens Care Product Line
The Company has been doing business 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; and enzymatic cleaners to remove protein deposits
from contact lenses. In the area of disinfecting products, the Company offers
products that can be used in each of the three disinfecting systems: hydrogen
peroxide systems, convenient chemical systems and thermal 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. In 1998, the Company
launched Complete(R) brand ComfortPLUS(TM) Multi-Purpose solution in the United
States and in 12 foreign countries. Complete(R) brand ComfortPLUS(TM)
Multi-Purpose solution contains a proprietary comfort formulation for longer,
more comfortable contact lens wear. One-bottle systems, including the Company's
product, continue to gain popularity with consumers.
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.
Sales of the Company's hydrogen peroxide disinfection systems
represented 12%, 11% and 10% of total Company sales in 1996, 1997 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. 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.
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, 1998, the Company employed 5,972 persons throughout the
world, including 2,371 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
The Company believes that international markets represent a significant
opportunity for continued growth. International sales have represented
approximately 58.6%, 57.2% and 53.8% of total sales for the years ended December
31, 1996, 1997 and 1998, respectively. Allergan believes that its
well-established international market presence provides it with an advantage,
enabling the Company to maximize the return on its investment in research,
product development and manufacturing.
Allergan established its first foreign subsidiary in 1964 and currently
sells products in approximately 100 countries. Marketing activities are
coordinated on a worldwide basis and
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resident management teams provide leadership and infrastructure for customer
focused rapid introduction of new products in the local markets.
SALES AND MARKETING
Allergan maintains global marketing and regional sales organizations.
Supplementing the sales efforts and promotional activities aimed at eye care
professionals, as well as neurologists outside the U.S., who use, prescribe and
recommend its products, Allergan has been focusing increasingly on managed care
providers. 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's specialty therapeutic products are sold to drug
wholesalers, independent and chain drug stores, commercial optical chains, mass
merchandisers, food stores, hospitals, ambulatory surgery centers and medical
practitioners, including neurologists. At December 31, 1998, the Company
employed approximately 1,300 sales representatives throughout the world.
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, 1998, there were, in the aggregate, over 800 people
involved in the Company's research and development efforts. The Company's
research and development expenditures for 1996, 1997 and 1998 were $118.3
million, $131.2 million and $125.4 million, respectively, excluding amounts
spent by the Company on behalf of Allergan Ligand Retinoid Therapeutics, Inc.
and Allergan Specialty Therapeutics, Inc.
Research and development efforts for the ophthalmic pharmaceuticals
business focus primarily on new therapeutic products for glaucoma, inflammation,
dry eye and allergy and on new anti-infective pharmaceuticals for eye care. The
Company is conducting research on new compounds that control intraocular
pressure by either reducing the inflow or production, or improving the outflow,
of aqueous humor. The Company is also conducting research and clinical trials on
a class of compounds called hypotensive lipids. Unlike beta-blockers that
decrease the inflow or production of aqueous humor, hypotensive lipids reduce
intraocular pressure by improving its outflow. The Company is also developing
Restatis(TM) cyclosporine ophthalmic emulsion for the treatment of moderate to
severe dry eye.
Research and development activities for the surgical business
concentrate on improved cataract surgical systems, implantation instruments and
methods, and new IOL materials and designs, including the Array(R) multifocal
IOL, designed to allow patients to see well over a range of distances and the
Sensar(TM), an acrylic foldable IOL. The Company received U.S. marketing
approval for the Array(R) multifocal IOL in September 1997.
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 cervical dystonia, juvenile cerebral palsy,
spasticity, migraine headache pain and back pain.
Research and development in the optical business is aimed at contact
lens care 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
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enhance safety and extend the time a patient will be a contact lens wearer. The
Company believes that continued development and commercialization of
disinfection systems that are both easy-to-use and efficacious will be important
for the future success of this part of the Company's business.
From 1992 to 1994, the Company and Ligand Pharmaceuticals Incorporated
("Ligand") operated a joint venture for the purpose of performing certain
research and development activities. In December 1994, Allergan and Ligand
formed a new research and development company, Allergan Ligand Retinoid
Therapeutics, Inc. ("ALRT") to function as the successor to the joint venture.
In June 1995, Ligand contributed $17.5 million to ALRT for a right to acquire
all of the stock of ALRT at specified future dates and amounts. At the same
time, the Company contributed $50.0 million to ALRT in exchange for rights to
acquire one half of all technologies and other assets, or a similar right to
acquire all of the stock of ALRT if Ligand did not exercise its right. The
Company accounted for its $50.0 million contribution as a charge to operating
expense at the time of the contribution. Allergan Pharmaceuticals (Ireland)
Ltd., Inc. ("Allergan Ireland"), a wholly owned subsidiary of the Company, also
purchased $6.0 million of Ligand common stock at the time of its contribution to
ALRT. Allergan Ireland sold part of its Ligand Common Stock in 1998 and
currently owns approximately 4% of the outstanding common stock of Ligand.
In November 1997, pursuant to the exercise of its stock purchase
option, Ligand acquired all of the stock of ALRT in exchange for $71.4 million.
At the same time, pursuant to the exercise of its asset purchase option,
Allergan acquired one-half of all technologies, cash (of which Allergan's share
was approximately $5.5 million) and other assets of ALRT in exchange for $8.9
million. The initial agreements between Allergan and Ligand provided for a joint
research, development and commercialization arrangement following such option
exercises. In connection with the option exercises, Allergan and Ligand amended
their agreements so that, among other things, ALRT compounds and development
programs were divided between Allergan and Ligand, and each party received
exclusive rights to ALRT technology for use with their respective compounds and
programs, subject to certain royalty and milestone payment obligations.
The Company performed contract research services for ALRT from 1995 to
1997. Revenues from such services represent a recovery of the research and
development costs incurred with an amount added to compensate the Company for
general corporate overhead costs.
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 November 1997, the Company filed a registration statement with
the Securities and Exchange Commission on behalf of ASTI relating to a proposed
special distribution of ASTI Class A Common Stock to the Company's stockholders.
The distribution of the ASTI shares was completed on March 10, 1998 to
stockholders of record on February 17, 1998.
Prior to the distribution, the Company contributed $200 million to
ASTI. The market value of ASTI stock was approximately $29 million at the date
of distribution. The Company recorded a dividend for the amount of the market
value of ASTI stock at the distribution. The remainder of the $200 million was
recorded as a charge against operating income. The Company's stockholders
received one share of ASTI Class A Common Stock for each 20 shares of common
stock held as of the record date. Based on 65,453,805 shares of Allergan common
stock outstanding as of February 17, 1998, approximately 3,272,700 shares of
ASTI Class A Common Stock were issued in the distribution. The Company's
stockholders were not required to pay any cash or other consideration for the
ASTI Class A Common Stock received in the distribution. The
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distribution was taxable as a dividend to each holder in the amount of the fair
market value of ASTI Shares distributed to such holder.
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 substantially all 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 Company has also entered into a series of collaboration agreements
to further its research and development efforts. In October 1996, the Company
entered into an exclusive collaboration agreement with SUGEN, Inc. to identify,
develop and commercialize novel pharmaceutical compounds utilizing SUGEN's
proprietary small molecule signal transduction inhibition technology for the
treatment of ophthalmic neovascular diseases, such as age-related macular
degeneration and diabetic retinopathy. Allergan assigned this agreement to ASTI
in 1998. In November 1996, the Company entered into a collaboration agreement
with Cambridge NeuroScience, Inc. ("CNSI") to develop new treatments for
glaucoma and other serious ophthalmic diseases. CNSI specializes in glutamate
ion channel-blocker and sodium channel technology. The Company has assigned its
CNSI collaborative rights to ASTI. In September 1997, the Company entered into
an exclusive collaboration agreement with ACADIA Pharmaceuticals Inc. (formerly
Receptor Technologies) to identify receptor-selective compounds with respect to
certain targets, develop receptor arrays and probes specific for G-protein
coupled and other receptors and facilitate the establishment of drug discovery
programs. And, in July 1998, the Company entered into a multi-year research and
development collaboration with the Parke-Davis Pharmaceutical Research Division
of Warner-Lambert Company to identify, develop and commercialize up to two RXR
subtype selective retinoid compounds for the treatment of metabolic diseases,
including adult onset diabetes, insulin resistant syndromes and dyslipidemias.
Also in July 1998, the Company entered into an agreement with Santen
Pharmaceutical Co., Ltd., whereby Santen assumed responsibility for future
product development of brimonidine and for obtaining Japanese marketing approval
in exchange for distribution rights in Japan. Brimonidine is a compound marketed
by Allergan under the brand name Alphagan(R).
The Company had entered into an option agreement with Peptech (UK) Ltd.
for the development and commercialization of certain therapeutic products based
on its GMDP (a synthetic glucosaminyl muramyl dipeptide) compound for
dermatology indications, such as psoriasis, ophthalmology and oncology, but that
option expired unexercised in October 1997.
9
<PAGE> 12
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 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 recently acquired businesses, Chiron Vision and Storz
Ophthalmics, CIBA Vision Ophthalmics (a division of Novartis), Merck & Co., Inc.
and Pharmacia Ophthalmics (a subsidiary of Pharmacia & Upjohn). 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, 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 one competitor in
Europe and New Zealand, Beaufour Ipsen, and anticipates competition in the
United States and Europe in late 1999 or 2000 from Athena Neurosciences, Inc., a
subsidiary of Elan Corporation, PLC. 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.
GOVERNMENT REGULATION
Drugs, biologics and medical devices, including intraocular lenses
(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 some 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 an increasingly more rigorous regulatory environment than has been
the case in previous years. 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.
In 1996, Congress examined the regulatory burdens imposed on drug and
medical device manufacturers by the FDA in its product approval processes. In
1997, Congress enacted legislation intended to ameliorate those burdens. Among
other things, the Food and Drug Administration Modernization Act of 1997
("FDAMA") extends the Prescription Drug User Fee Act for another five years;
expands access to investigational drugs; authorizes FDA to approve a new drug
application on the basis of the results of one clinical trial, if the results
are sufficient to establish effectiveness; provides incentives in the form of
extended market exclusivity for companies who conduct qualified pediatric
clinical studies; otherwise seeks to streamline and facilitate the drug approval
process; permits the
10
<PAGE> 13
dissemination of scientific and medical information regarding a product's
unapproved uses under specific circumstances; and expands FDAMA inspectional
authority over non-prescription drugs. FDAMA also seeks to improve the
regulation of medical devices. Much of FDAMA became effective in 1998, with
implementation regulations effective in late 1998. The Company has not
experienced material effects of FDAMA to date.
Internationally, the regulation of drugs and medical devices is
likewise becoming increasingly 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. Additionally, new rules have been
introduced or are under discussion in several areas such as the recognition by
the authorities in one Member State of the European Union ("EU") of the
assessment and approval to market provided in another Member State and the
harmonization of clinical research laws and labeling and patient package
information, which collectively are expected to assist companies such as
Allergan to bring products to market quickly once the first European approval is
received.
A new EU regulatory regime has been installed to cover medical devices.
This regulatory process 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 will 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 are currently regulated. The EU regulatory system for
cosmetics, which covers many of the Company's skin care products, has been
extended to include, among other aspects, formal maintenance of a technical
file, a safety assessment, data on undesirable effects, good manufacturing
practice and extended labeling requirements.
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 $150 allowance to cover the cost of the IOL. 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. In its effort to reduce Medicare expenditures,
Congress may lower the IOL allowance below $150. The Medicare Technical
Corrections Bill of 1994 directed the U.S. Health Care Financing Administration
("HCFA") to establish a system through which the agency would pay ASCs and
hospitals a rate above $150 for "advanced technology IOLs." HCFA has issued
proposed rules which would implement this mandate. Allergan is seeking, and
intends to file for, "advanced technology" status for the Array(R) multifocal
IOL.
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.
The Company also cannot predict exactly 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.
11
<PAGE> 14
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) ophthalmic solution and to hydrogen peroxide
disinfection systems, 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.
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
The Company believes that 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 which 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 which 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.
o 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.
o Two of the Company's ophthalmic pharmaceutical products, Betagan(R) and
Propine(R), are off patent in the U.S. and continue to face competition
from generic versions of these compounds as well as from recently
introduced new technology glaucoma products. Other significant products
such as Elimite(R) cream, Blephamide(R) ophthalmic
12
<PAGE> 15
suspension and Pred-Forte(R) ophthalmic suspension are also off patent and
may face similar generic competition.
o The Company is currently the only manufacturer of an FDA-approved
neurotoxin. The Company is aware, however, of another company seeking FDA
approval of a neurotoxin. If such approval is granted, the Company's sales
of Botox(R) Purified Neurotoxin Complex could be materially and negatively
impacted.
o 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. One-bottle chemical disinfection systems
have gained 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. 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.
o 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 or labeling errors. There can be no assurance
that the Company will not experience material losses due to product
liability claims or product recalls or corrections.
o 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.
Failure of the Array(R) multifocal IOL to be designated as an "advanced
technology IOL" by HCFA will adversely affect the Company's profit margin
for the product.
o A current 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.
o Uncertainties of the business include the success of the Company in
identifying information technology ("IT") and non-IT systems, applications
and relationships that are not year 2000 compliant, the nature and amount
of programming required to upgrade or replace each of the affected
programs, the availability, rate and magnitude of related labor and
consulting costs and the success of governmental agencies and the Company's
business partners, vendors and clients and customers in addressing the year
2000 issue. Further uncertainties and risks include the possibility of
errors in Allergan's remediation efforts, inabilities to obtain
replacements for non-compliant systems or equipment, delays in regulatory
approvals caused by governmental failures, failures in global banking
systems and capital markets, extended failures by utility companies or
common carriers and general economic downturn related to year 2000 failures
on a global basis. And, if the distributors or customers of the Company's
products should stockpile products in anticipation of possible product
shortages, this stockpiling could challenge the Company's capacity to
produce and distribute products to meet the excess demand. An even larger
risk associated with stockpiling is that excess demand for the Company's
products in 1999 could cause the Company to achieve stronger than expected
performance in 1999, followed by weaker than expected performance in 2000
as inventories created by stockpiling are dissipated. In
13
<PAGE> 16
addition, because pharmaceutical products have limited expiration dating,
if the Company manufactures more products in 1999 to meet excess demand and
then accepts as returns a large amount of products that were not consumed
prior to their expiration dating, the resulting loss to the Company could
materially and negatively impact the Company's results of operations. Even
though the Company expects an increased ability to avoid significant
disruptions of its business as a result of its year 2000 readiness program,
management cannot provide an assurance that there will be no material
adverse effects to the financial condition or results of operations of the
Company as a result of year 2000 issues. For additional information
regarding year 2000 risks and issues, see the section entitled "Year 2000"
at pages A-12 to A-15 in the Company's Proxy Statement, which is
incorporated herein by reference.
o 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.
o 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.
o 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.
o In the past three years, the Company has taken steps designed to improve
its gross profit margin, including continued emphasis on new products as
well as the closure of certain plants and other cost-cutting measures. In
particular, the Company announced comprehensive plans in the third quarter
of 1998 to streamline operations and reduce costs through global G&A
restructuring and manufacturing consolidation. Whether these steps will
succeed in improving gross profit margin depends in part on whether sales
of new products will result in a more favorable mix of products, and on
whether the anticipated cost savings can be achieved and sustained.
o The Company has allocated significant resources to the development and
introduction of new products. The successful development, regulatory
approval and market acceptance of the products cannot be assured.
o 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, respectively, which are incorporated herein by reference.
o The manufacturing process to create bulk toxin raw material necessary to
produce Botox(R) Purified Neurotoxin Complex 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 and a resulting decrease in sales of the
product.
o In February 1999, the Financial Accounting Standards Board released a
revised Exposure Draft of a Proposed Statement of Financial Accounting
Standards - Consolidated Financial Statements: Purpose and Policy. If
adopted as a SFAS, the terms of this Exposure Draft could require the
Company to include the financial
14
<PAGE> 17
position and results of operation of Allergan Specialty Therapeutics, Inc.
in its consolidated results on a retrospective basis. The Company is
currently evaluating the effect of implementation of this proposed
statement. By including the results of operations of ASTI, the Company's
consolidated results of operations could be adversely affected.
ITEM 2. PROPERTIES
Allergan's operations are conducted in owned and leased facilities
located throughout the world. Its primary administrative and research facilities
are located in Irvine, California. The following table describes the general
character of the major existing facilities as of March 1, 1999:
<TABLE>
<CAPTION>
LOCATION PRIMARY FUNCTION INTEREST
- -------- ---------------- --------
<S> <C> <C>
Irvine, California Headquarters, research Owned/Leased
and development, manufacturing*,
administrative, warehousing
Campbell, California Raw material support Leased
Costa Mesa, California Administrative Leased
Santa Ana, California Raw material support Owned
North Andover, Massachusetts* Manufacturing Leased
Lenoir, North Carolina* Manufacturing, warehousing Owned
Waco, Texas Manufacturing, warehousing Owned
Anasco, Puerto Rico Manufacturing, warehousing Leased
Hormigueros, Puerto Rico* Manufacturing, warehousing Owned
Buenos Aires, Argentina Administrative, warehousing Owned
Sydney, Australia Administrative, warehousing Owned
Sao Paulo, Brazil Administrative, manufacturing*, Owned/Leased
warehousing*
Guarulhos, Brazil Manufacturing, warehousing Owned
Markham, Canada Administrative Leased
Hangzhou, China Manufacturing, warehousing Owned/Leased
Sophia Antipolis, France Administrative Leased
Ettlingen, Germany Administrative Owned
Hong Kong Administrative, warehousing Leased
Dublin, Ireland Administrative Leased
Westport, Ireland Manufacturing, warehousing Owned
Rome, Italy Administrative Leased
Osaka, Japan Administrative Leased
Tokyo, Japan Administrative, research and Leased
development
Madrid, Spain Administrative Owned
High Wycombe, U.K. Administrative Leased
</TABLE>
- ---------------
* Indicates facilities the Company intends to close.
The Company believes its present facilities are adequate for its
current needs.
15
<PAGE> 18
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various litigation and
claims arising in the normal course of business which Allergan considers to be
normal in view of the size and nature of its business.
Although the ultimate outcome of any pending litigation and claims
cannot be precisely ascertained at this time, Allergan believes that any
liability resulting from the aggregate amount of uninsured damages for
outstanding lawsuits, investigations and 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.
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.
16
<PAGE> 19
ITEM I-A. EXECUTIVE OFFICERS OF ALLERGAN, INC.
The executive officers of the Company and their ages as of March 1,
1999 are as follows:
<TABLE>
<S> <C> <C>
David E.I. Pyott 45 President and Chief Executive Officer
F. Michael Ball 43 Corporate Vice President and President, North
America Region and Global Eye Rx Business
David A. Fellows 42 Corporate Vice President and President,
Asia Pacific Region
Lester J. Kaplan, Ph.D. 48 Corporate Vice President and President, Research
and Development and Global BOTOX(R)
George M. Lasezkay, 47 Corporate Vice President, Corporate Development
Pharm.D., J.D.
Nelson R. A. Marques 47 Corporate Vice President and President, Latin
America Region
James V. Mazzo 41 Corporate Vice President and President,
Europe/Africa/Middle East Region and Global
Lens Care Products
Jacqueline Schiavo 50 Corporate Vice President,
Worldwide Operations
Francis R. Tunney, Jr. 51 Corporate Vice President - Administration,
General Counsel and Secretary
Dwight J. Yoder 53 Senior Vice President and Controller
(Principal Accounting Officer)
</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 1996 until December 1997 and had held a similar
position at Sandoz International AG, from 1995 to 1996, prior to the merger of
Sandoz and Ciba to form Novartis. Also, while at Sandoz, Mr. Pyott was President
and Chief Executive Officer of Sandoz Nutrition Corp., Minneapolis, Minnesota
(1992-1995), General Manager of Sandoz Nutrition, Barcelona, Spain (1990-1992)
and held other positions within the 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.
17
<PAGE> 20
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.
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 from 1991 to 1992 and Senior
Vice President, Research and Development from 1989 to 1991. 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 from 1995 to July
1996 and Senior Counsel to the Company from 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 May 1998 he also
assumed the duties of President of the Global Lens Care Products business. He
had been Senior Vice President Eyecare/Rx Sales and Marketing, U.S. since June
1997. Prior 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 to 1992 and Vice
President, Operations from 1989 to 1991. Ms. Schiavo first joined the Company in
1980.
Mr. Tunney is Corporate Vice President - Administration, General
Counsel and Secretary of the Company. 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, the Company's former parent, in 1979.
Mr. Yoder has been Senior Vice President and Controller of the Company
since July 1996, prior to which he had been Vice President and Controller since
joining the Company in 1990. He is also the Chief Financial Officer of Allergan
Specialty Therapeutics, Inc.
18
<PAGE> 21
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-41 of the Proxy Statement is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The table entitled "Selected Financial Data" on page A-41 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,
1998" on pages A-2 to A-15 of the Proxy Statement is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The section entitled "Quantitative and Qualitative Disclosures About
Market Risk" on pages A-10 to A-12 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-16 to A-37 of the Proxy Statement, together with the sections entitled
"Independent Auditors' Report" and "Quarterly Results (Unaudited)" of the Proxy
Statement included on pages A-39 and A-40, respectively, are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
19
<PAGE> 22
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 17-18 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 15-18
and page 6, 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 pages 7-8 and page 24, respectively, of
the Proxy Statement are incorporated herein by reference.
20
<PAGE> 23
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-39
Consolidated Balance Sheets at December 31, 1998 and
December 31, 1997 ................................................... A-16
Consolidated Statements of Operations for Each of the Years
in the Three Year Period Ended December 31, 1998 .................... A-17
Consolidated Statements of Stockholders' Equity for
Each of the Years in the Three Year Period
Ended December 31, 1998 ............................................. A-18
Consolidated Statements of Cash Flows for Each of the Years
in the Three Year Period Ended December 31, 1998 .................... A-19
Notes to Consolidated Financial Statements ..........................A-20 to A-37
</TABLE>
- ---------------
* Incorporated by reference from the indicated pages of the Company's Proxy
Statement filed with the Securities and Exchange Commission on March 22, 1999.
<TABLE>
<CAPTION>
PAGE IN
THIS REPORT
-----------
<S> <C>
2. Schedules Supporting the Consolidated Financial Statements:
Schedule numbered in accordance with Rule 5-04 of Regulation S-X:
II -- Valuation and Qualifying Accounts............................ S-1
</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
No reports on Form 8-K were filed by the Company during the last
quarter of 1998.
(c) Item 601 Exhibits
Reference is made to the Index of Exhibits beginning at page 24 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).
21
<PAGE> 24
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 24, 1999 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 24, 1999 By /s/ DAVID E.I. PYOTT
--------------------------
David E.I. Pyott
President, Chief
Executive Officer
Date: March 24, 1999 By /s/ FRANCIS R. TUNNEY, JR.
--------------------------
Francis R. Tunney, Jr.
Corporate Vice President -
Administration, General
Counsel and Secretary
(Principal Financial Officer)
Date: March 24, 1999 By /s/ DWIGHT J. YODER
--------------------------
Dwight J. Yoder
Senior Vice President and
Controller (Principal
Accounting Officer)
Date: March 24, 1999 By /s/ HERBERT W. BOYER
--------------------------
Herbert W. Boyer, Ph.D.,
Chairman of the Board
Date: March 15, 1999 By /s/ RONALD M. CRESSWELL
--------------------------
Ronald M. Cresswell,
Director
Date: March 24, 1999 By /s/ HANDEL E. EVANS
--------------------------
Handel E. Evans, Director
Date: March 15, 1999 By /s/ MICHAEL R. GALLAGHER
--------------------------
Michael R. Gallagher,
Director
Date: March 24, 1999 By /s/ WILLIAM R. GRANT
--------------------------
William R. Grant, Director
22
<PAGE> 25
Date: March 24, 1999 By /s/ GAVIN S. HERBERT
--------------------------
Gavin S. Herbert, Director
and Chairman Emeritus
Date: March 24, 1999 By /s/ LESTER J. KAPLAN
--------------------------
Lester J. Kaplan, Ph.D.,
Director
Date: March 24, 1999 By /s/ KAREN R. OSAR
--------------------------
Karen R. Osar, Director
Date: March 24, 1999 By /s/ LOUIS T. ROSSO
--------------------------
Louis T. Rosso, Director
Date: March 24, 1999 By /s/ LEONARD D. SCHAEFFER
--------------------------
Leonard D. Schaeffer,
Director
Date: March 24, 1999 By /s/ HENRY WENDT
--------------------------
Henry Wendt, Director
23
<PAGE> 26
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 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)....
4.1 Certificate of Designation, Preferences and Rights of Series A
Participating Preferred Stock as filed with the State of Delaware on
May 22, 1989 (incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-1 No. 33-28855, filed May 24, 1989)..
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)*............
10.2 Allergan, Inc. 1989 Nonemployee Director Stock Plan, as amended and
restated (incorporated by reference to Exhibit 10.1 to the Company's
Report on Form 10-Q for the Quarter ended March 27, 1998)*............
10.3 Allergan, Inc. Deferred Directors' Fee Program (incorporated by
reference to Exhibit 10.6 to the Company's Report on Form 10-K for
the Fiscal Year ended December 31, 1991)*.............................
10.4 Allergan, Inc. 1989 Incentive Compensation Plan, as amended and
restated (incorporated by reference to Exhibit B to the Company's
Proxy Statement dated March 23, 1999, filed in definitive form on
March 22, 1999)*......................................................
10.5 Restated Allergan, Inc. Employee Stock Ownership Plan (incorporated
by reference to Exhibit 10.1 to the Company's Report on Form 10-Q
for the Quarter ended March 31, 1996).................................
10.6 First Amendment to Restated Allergan, Inc. Employee Stock Ownership
Plan (incorporated by reference to Exhibit 10.3 to the Company's
Report on Form 10-Q for the Quarter ended June 30, 1996)..............
</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.
24
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.7 Second Amendment to Restated Allergan, Inc. Employee Stock Ownership
Plan (incorporated by reference to Exhibit 10.7 to the Company's
Report on Form 10-K for the Fiscal Year ended December 31, 1997)......
10.8 Third Amendment to the Restated Allergan, Inc. Employee Stock
Ownership Plan (incorporated by reference to Exhibit 10.4 to the
Company's Report on Form 10-Q for the Quarter ended June 26, 1998)....
10.9 Restated Allergan, Inc. Savings and Investment Plan (incorporated by
reference to Exhibit 10.2 to the Company's Report on Form 10-Q for
the Quarter ended March 31, 1996).....................................
10.10 First Amendment to the Allergan, Inc. Savings and Investment Plan
(incorporated by reference to Exhibit 10.4 to the Company's Report
on Form 10-Q for the Quarter ended June 30, 1996).....................
10.11 Second Amendment to the Allergan, Inc. Savings and Investment Plan
(incorporated by reference to Exhibit 10.10 to the Company's Report
on Form 10-K for the Fiscal Year ended December 31, 1997).............
10.12 Third Amendment to the Allergan, Inc. Savings and Investment Plan.....
10.13 Form of Allergan change in control severance agreement (incorporated
by reference to Exhibit 10.11 to the Company's Report on Form 10-K
for the Fiscal Year ended December 31, 1997)*.........................
10.14 $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).....................................
10.15 Amendment No. 1 to the Credit Agreement (incorporated by reference
to Exhibit 10.1 to the Company's Report on Form 10-Q for the Quarter
ended June 26, 1998)..................................................
10.16 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)*................................................
</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.
25
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.17 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)*.............................
10.18 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)*.....................................
10.19 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)*...................
10.20 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)*...................
10.21 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 Allergan, Inc. 1999 Management Bonus Plan*............................
10.23 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).............
10.24 Allergan, Inc. Executive Deferred Compensation Plan dated as of
January 1, 1995 (incorporated by reference to Exhibit 10.15 to the
Company's Report on Form 10-K for the fiscal year ended December 31,
1994)*................................................................
10.25 First Amendment to the Executive Deferred Compensation Plan
(incorporated by reference to Exhibit 10.2 to the Company's Report
on Form 10-Q for the Quarter ended June 30, 1996)*....................
10.26 Second Amendment to the Executive Deferred Compensation Plan
(incorporated by reference to Exhibit 10.3 to the Company's Report
on Form 10-Q for the Quarter ended June 26, 1998)*....................
10.27 Allergan, Inc. Stock Price Incentive Plan (incorporated by reference
to Exhibit 10.21 to the Company's Report on Form 10-K for the Fiscal
Year ended December 31, 1997)*.........................................
</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.
26
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.28 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)*....................................................
10.29 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).....................................................
10.30 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)..................................................................
10.31 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)..................................................................
10.32 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)..................................................................
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, and 333-70407....................................
27 Financial Data Schedule...............................................
</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.
27
<PAGE> 30
SCHEDULE II
ALLERGAN, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING AT END
OF YEAR ADDITIONS DEDUCTIONS OF YEAR
---------- --------- ---------- -------
<S> <C> <C> <C> <C>
1998 $6.8 $1.1(a) $1.2(b) $6.7
---- ---- ---- ----
1997 $7.5 $1.8(a) $2.5(b) $6.8
---- ---- ---- ----
1996 $6.2 $4.1(a) $2.8(b) $7.5
---- ---- ---- ----
</TABLE>
- -----------
(a) Provision charged to earnings.
(b) Accounts written off.
S-1
<PAGE> 1
EXHIBIT 10.12
THIRD AMENDMENT TO ALLERGAN, INC.
SAVINGS AND INVESTMENT PLAN (RESTATED 1996)
The ALLERGAN, INC. SAVINGS AND INVESTMENT PLAN (the "Plan") is hereby amended to
read as follows:
1. Section 2.1 of the Plan is amended in its entirety, effective January 1,
1997, as follows:
2.1 Accounts. "Accounts" or "Participant's Accounts" shall
mean the After Tax Deposits Accounts, Before Tax Deposits Accounts,
Company Contribution Accounts, and Rollover Accounts maintained for
the various Participants.
2. Section 2.18 of the Plan is amended in its entirety, effective January
1, 1997, as follows:
2.18 Company Contributions Account. "Company Contributions
Account" shall mean a Participant's individual account in the Trust
Fund in which are held Company Contributions and the earnings thereon
and amounts transferred from a Participant's PAYSOP account in the
SmithKline Beckman Savings and Investment Plan to the Plan, if any.
Any amounts so transferred shall be fully vested.
3. Section 2.20 of the Plan is amended, effective January 1, 1997, to
delete "In determining the Compensation of an Employee, the rules of
Code Section 414(q)(6) shall apply, except that in applying such rules,
the term "family" shall include only the spouse of the Employee and any
lineal descendants of the Employee who have not attained age 19 before
the close of the Plan Year. If, as the result of the application of such
rules the applicable Compensation limit is exceeded, then the limitation
shall be prorated among the affected individuals in proportion to each
such individual's Compensation as determined under this Section prior to
the application of this limitation." from the last paragraph.
4. Section 2.20 of the Plan is amended in its entirety, effective January
1, 1998, as follows:
2.20 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, shift differential and premium,
<PAGE> 2
sickness/accident related pay, vacation pay, vacation shift premium,
and bonus amounts paid under the following programs:
(1) Sales bonus,
(2) "Management Bonus Payments" (MBP), either in cash or
in restricted stock,
(3) Group performance sharing payments, such as the
"Partners for Success;"
but excluding business expense reimbursements; Company gifts or the
value of Company gifts; Company stock related options and payments;
employee referral awards; flexible compensation credits paid in cash;
special overseas payments, allowances and adjustments including, but
not limited to, pay for cost of living adjustments and differentials
paid for service outside of the United States, expatriate
reimbursement payments, and tax equalization payments; forms of
imputed income; long-term disability pay; payment for loss of Company
car; Company car allowance; payments for patents or for writing
articles; relocation and moving expenses; retention and employment
incentive payments; severance pay; Share Value Plan or other
long-term incentive awards, bonuses or payments; "Impact Award"
payments; "Employee of the Year" payments; "Awards for Excellence"
payments; special group incentive or individual recognition payments
which are nonrecurring in nature; tuition reimbursement; and
contributions by the Company under the Plan or distributions
hereunder, any contributions or distributions pursuant to any other
plan sponsored by the Company and qualified under Code Section 401(a)
(other than contributions constituting salary reduction amounts
elected by the Participant under a Code Section 401(k) cash or
deferred arrangement, any payments under a health or welfare plan
sponsored by the Company, or premiums paid by the Company under any
insurance plan for the benefit of Employees. Compensation taken into
account for determining all benefits provided under the Plan for any
Plan Year shall not exceed $150,000 as adjusted at the time and in
such manner as permitted under Code Section 401(a)(17)(B). If the
period for determining Compensation used in calculating an Employee's
allocation for a Plan Year is a short Plan Year (i.e., shorter than
12 months), the Compensation limit is an amount equal to the
otherwise applicable Compensation limit multiplied by a fraction, the
numerator of which is the number of months in the short Plan Year,
and the denominator of which is 12. Notwithstanding the foregoing,
for purposes of applying the provisions of Articles XI and XII, an
Employee's Compensation shall be determined pursuant to the
definition of "Compensation" as set forth in Sections 13.6 or
14.2(i), as the case may be.
2
<PAGE> 3
5. Section 2.22 of the Plan is amended, effective December 12, 1994, by
adding the following Paragraph (h):
(h) Notwithstanding any provision of the Plan to the contrary,
contributions, benefits and service credit with respect to qualified
military service will be provided in accordance with Code Section
414(u).
6. Section 2.26 of the Plan is amended in its entirety, effective the later
of January 1, 1999 or, the date the merger of the Allergan, Inc. Puerto
Rico Savings and Investment Plan into the Plan is approved by the United
States and Puerto Rico tax authorities, as follows:
Section 2.26 Eligible Employee. "Eligible Employee" shall mean
any United States-based payroll Employee and any Puerto Rico-based
payroll Employee of the Company and any expatriate Employee of the
Company who is a United States citizen or permanent resident, but
excluding any non-resident alien of the United States and Puerto
Rico, any non-regular manufacturing site transition Employee, any
Leased Employee, and any Employee covered by a collective bargaining
agreement.
7. Section 2.29 of the Plan is amended in its entirety, effective the later
of January 1, 1999 or, the date the merger of the Allergan, Inc. Puerto
Rico Savings and Investment Plan into the Plan is approved by the United
States and Puerto Rico tax authorities, as follows:
Section 2.29 Employee. "Employee" shall mean any person who is
employed by the Sponsor or an Affiliated Company in any capacity, any
portion of whose income is subject to withholding or income tax
and/or for whom Social Security contribution are made by the Sponsor
or an Affiliated Company, as well as any other person qualifying as a
common-law employee or Puerto Rico-based employee of the Sponsor or
an Affiliated Company except that such term shall not include (i) any
individual who performs services for the Sponsor or an Affiliated
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 Sponsor or an Affiliated Company and (ii) any
individual who performs services for the Sponsor or an Affiliated
Company pursuant to an agreement between the Sponsor or an Affiliated
Company and any other person including a leasing organization except
to the extent such individual is a Leased Employee.
8. Section 2.34 of the Plan is amended in its entirety, effective January
1, 1997, as follows:
2.34 Highly Compensated Employee. "Highly Compensated
Employee" shall mean:
(a) An Employee who performed services for the Employer
during the Plan Year or preceding Plan Year and is a member of
one or more of the following groups:
3
<PAGE> 4
(i) Employees who at any time during the Plan Year
or preceding Plan Year were Five Percent Owners (as
defined in Section 14.2).
(ii) Employees who received Compensation during the
preceding Plan Year from the Employer in excess of $80,000
(as adjusted in such manner as permitted under Code
Section 414(q)(1)).
(b) For the purpose of this Section, the term
"Compensation" means compensation as defined in Code Section
415(c)(3), as set forth in Section 13.6.
(c) The term "Highly Compensated Employee" includes a
Former Highly Compensated Employee. A Former Highly Compensated
Former Employee is any Employee who was (i) a Highly Compensated
Employee when he or she terminated employment with the Employer
or (ii) a Highly Compensated Employee at any time after attaining
age 55. Notwithstanding the foregoing, an Employee who separated
from service prior to 1987 shall be treated as a Former Highly
Compensated Former Employee only if during the separation year
(or year preceding the separation year) or any year after the
Employee attains age 55 (or the last year ending before the
Employee's 55th birthday), the Employee either received
Compensation in excess of $50,000 or was a 5% owner.
(d) For the purpose of this Section, the term "Employer"
shall mean the Sponsor and any Affiliated Company.
(e) The determination of who is a Highly Compensated
Employee, including the determination of the Compensation that is
considered, shall be made in accordance with Code Section 414(q)
and the Regulations and to the extent permitted thereunder, the
Committee, for administrative convenience, may establish rules
and procedures for purposes of identifying Highly Compensated
Employees, which rules and procedures may result in an Eligible
Employee being deemed to be a Highly Compensated Employee for
purposes of the limitations of Article IV and Article VI, whether
or not such Eligible Employee is a Highly Compensated Employee
described in Code Section 414(q).
9. Section 2.37 of the Plan is amended in its entirety, effective January
1, 1997, as follows:
2.37 Leased Employee. "Leased Employee" shall mean any person
(other than an Employee of the recipient) who pursuant to an
agreement between the recipient and any other person ("leasing
organization") has performed services for the recipient (or for the
recipient and related persons
4
<PAGE> 5
determined in accordance with Code Section 414(n)(6)) on a
substantially full time basis for a period of at least one (1) year,
and such services are performed under the primary direction or
control by recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to
services performed for the recipient employer shall be treated as
provided by the recipient employer. A Leased Employee shall not be
considered an Employee of the recipient if Leased Employees do not
constitute more than 20 percent of the recipient's nonhighly
compensated workforce and such Leased Employee is covered by a money
purchase pension plan providing (i) a nonintegrated employer
contribution rate of at least ten (10) percent of compensation as
defined under Code Section 415(c)(3); (ii) immediate participation;
and (iii) full and immediate vesting.
10. Article II of the Plan is amended, effective January 1, 1997, by
deleting Section 2.52 regarding the Stock Credit Account and
redesignating Sections 2.53, 2.54, 2.55, 2.56, 2.57, and 2.58 as
Sections 2.52, 2.53, 2.54, 2.55, 2.56, and 2.57, respectively.
11. Section 3.1 of the Plan is amended in its entirety, effective January 1,
1997, as follows:
3.1 Participation.
(a) Each Eligible Employee shall be eligible to participate in
the Plan on his or her Employment Commencement Date.
(b) If an Eligible Employee's employment with the Company
terminates after the Employee has become a Participant in the Plan,
the Employee shall become eligible to participate in the Plan
immediately upon his or her Reemployment Commencement Date.
12. Section 4.1 of the Plan is amended, effective January 1, 1999, by adding
the following Paragraph (d):
(d) Notwithstanding the above Paragraphs, an Eligible Employee
shall be deemed to have elected to defer the receipt of a three
percent (3%) of his or her Compensation and to have such deferred
amount contributed directly by the Company to the Plan as Before Tax
Deposits if such Eligible Employee fails to file an election for any
Plan Year within the time period prescribed by the Committee (or, in
the case of newly hired Eligible Employee, the Eligible Employee
fails to file an election when hired or prior to the date
compensation for the first pay period is currently available). A
deemed election under this Paragraph (d) shall be effective as of the
first pay period of the Plan Year (or, in the case of newly hired
Eligible Employee, the first pay period following his or her date of
hire) and shall remain in effect until superseded by a subsequent
affirmative election by the Eligible Employee. Deferred amounts
contributed directly by the Company to the Plan
5
<PAGE> 6
under this Paragraph (d) shall be invested in the Balanced Fund
described in Section 5.5(b) until superseded by a subsequent election
by the Eligible Employee.
13. Section 4.2(a) of the Plan is amended in its entirety, effective January
1, 1999, as follows:
(a) Participants may elect to contribute a whole percentage of
his/her Compensation to the Plan as Before Tax Deposits not to exceed
twenty percent (20%) when aggregated with the After Tax Deposits
contributed by such Participant pursuant to Paragraph (b) below.
Notwithstanding the foregoing, no Participant shall be permitted to
make Before Tax Deposits to the Plan during any calendar year in
excess of $7,000, or such larger amount as may be determined by the
Secretary of the Treasury pursuant to Code Section 402(g)(2), or
which exceed the limitations set forth in Section 4.3. For purposes
of the dollar limitation, the Before Tax Deposits of a Participant
for any taxable year is the sum of all Before Tax Deposits under the
Plan and all salary reduction amounts under any other qualified cash
or deferred arrangement (as defined in Code Section 401(k)), a
simplified employee pension (as defined in Code Section 408(k) and
Code Section 402(h)(1)(B)), a deferred compensation plan under Code
Section 457, a trust described in Code Section 501(c)(18) and any
salary reduction amount used to purchase an annuity contract under
Code Section 403(b) whether or not sponsored by the Company but shall
not include any amounts properly distributed as excess annual
additions.
14. Section 4.2(b) of the Plan is amended in its entirety, effective January
1, 1999 as follows:
(b) Each Participant may elect to contribute a whole
percentage of his/her Compensation to the Plan as After Tax Deposits
not to exceed twenty percent (20%) when aggregated with the amount of
his/her Before Tax Deposits. Notwithstanding the foregoing, no
Participant shall be permitted to make After Tax Deposits to the Plan
during any Plan Year which exceed the limitations set forth in
Section 6.13.
15. Section 4.3(b)(i) of the Plan is amended in its entirety, effective
January 1, 1997, as follows:
(i) "Actual Deferral Percentage" shall mean, with respect to
the group of Highly Compensated Participants and the group of all
other Participants for a Plan Year, the ratio, calculated separately
and to the nearest one-hundredth of one percent for each Participant
in such group, as follows:
(1) For a Highly Compensated Participant, the ratio of
such Participant's Compensation Deferral Contributions for the
current Plan Year to such Participant's Compensation for the
current Plan Year; provided, however, that the Actual Deferral
Percentage of a Highly Compensated
6
<PAGE> 7
Participant with no Compensation Deferral Contributions made on
his or her behalf shall be zero.
(2) For any other Participant, the ratio of such
Participant's Compensation Deferral Contributions for the
preceding Plan Year to such Participant's Compensation for the
preceding Plan Year; provided, however, that the Actual Deferral
Percentage of a Participant with no Compensation Deferral
Contributions made on his or her behalf shall be zero.
To the extent determined by the Committee and in accordance
with regulations issued by the Secretary of the Treasury, qualified
nonelective contributions on behalf of a Participant that satisfy the
requirements of Code Section 401(k)(3)(c)(ii) may also be taken into
account for the purpose of determining the Actual Deferral Percentage
of a Participant.
16. Section 4.3(b)(v) of the Plan is amended in its entirety, effective
January 1, 1998, as follows:
(v) "Compensation" shall mean compensation as described below:
(1) Compensation means compensation determined by the
Company in accordance with the requirements of Code Section
414(s) and the Regulations thereunder.
(2) For purposes of this Section 4.3, for Plan Years
beginning on or after January 1, 1998, Compensation may, at the
Company's election, exclude amounts which are excludable from a
Participant's gross income under Code Section 125 (pertaining to
cafeteria plans) and Code Section 402(e)(3) (pertaining to 401(k)
salary reductions). The Company may change its election provided
such change does not discriminate in favor of Highly Compensated
Employees.
(3) Compensation taken into account for any Plan Year
shall not exceed $150,000 as adjusted at the time and in such
manner as permitted under Code Section 401(a)(17)(B).
17. Section 4.3 of the Plan is amended, effective January 1, 1997, by
deleting Paragraph (e) regarding family aggregation and redesignating
Paragraphs (f), (g), and (h) as Paragraphs (e), (f), and (g),
respectively.
18. Section 4.5(b) of the Plan is amended in its entirety, effective January
1, 1997, as follows:
(b) For purposes of satisfying the Actual Deferral Percentage
test of Section 4.3(a), the amount of any excess Compensation
Deferral Contributions by a Highly Compensated Participant shall be
determined by
7
<PAGE> 8
the Committee by application of a leveling method under
which the Compensation Deferral Contributions of the Highly
Compensated Participant who has the highest dollar amount of
Compensation Deferral Contributions for such Plan Year is reduced to
the extent required to cause such Highly Compensated Participant's
Compensation Deferral Contributions to equal the Compensation
Deferral Contributions of the Highly Compensated Participant with the
next highest Compensation Deferral Contributions; provided, however,
if a lesser amount, when added to the total dollar amount already
returned under this paragraph (b), equals the total excess
Compensation Deferral Contributions that are required to be returned
to enable the Plan to satisfy the Actual Deferral Percentage test,
the lesser amount shall be returned. This process shall be repeated
until the Plan satisfies the Actual Deferral Percentage test.
19. Section 4.5 of the Plan is amended, effective January 1, 1997, by
deleting Paragraph (c) regarding family aggregation and redesignating
Paragraphs (d), (e), (f), (g), (h), and (i) as Paragraphs (c), (d), (e),
(f), (g), and (h), respectively.
20. Section 5.4(d) of the Plan is amended in its entirety, effective January
1, 1999, as follows:
(d) A Participant may elect at any time to transfer amounts
accrued in such Participant's Before Tax Deposits Account, After Tax
Deposits Account, or Rollover Account among any of the investment
funds currently offered by the Committee and currently available to
the Participant, provided, however, the total amount transferred
shall be in increments of 1% of the amount accrued in such accounts.
A Participant shall effect such transfer in the manner authorized by
the Committee.
21. Section 5.5 of the Plan is amended, effective January 1, 1997, by
deleting Paragraph (f) regarding the Stock Credit Account and
redesignating Paragraphs (g), (h), and (i) as Paragraphs (f), (g), and
(h), respectively.
22. Section 6.1 of the Plan is amended in its entirety, effective January 1,
1997, as follows:
6.1 Participants' Accounts. In order to account for the
allocated interest of each Participant in the Trust Fund, there shall
be established and maintained for each Participant (making such form
of contribution) a Before Tax Deposits Account, an After Tax Deposits
Account, a Company Contribution Account, and a Rollover Account.
23. Section 6.13(b)(i) of the Plan is amended in its entirety, effective
January 1, 1997, as follows:
(i) "Average Contribution Percentage" shall mean, with respect
to the group of Highly Compensated Participants and the group of all
other Participants for a Plan Year, the ratio, calculated separately
and to the nearest
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one-hundredth of one percent for each Participant in such group: The
"Contribution Percentage" for any Participant shall be determined as
follows:
(1) For a Highly Compensated Participant, the ratio of
such Participant's After Tax Deposits and Matching Contributions
for the current Plan Year to such Participant's Compensation for
the current Plan Year; provided, however, that the Contribution
Percentage of a Highly Compensated Participant with no After Tax
Deposits and Matching Contributions made on his or her behalf
shall be zero.
(2) For any other Participant, the ratio of such
Participant's After Tax Deposits and Matching Contributions for
the preceding Plan Year to such Participant's Compensation for
the preceding Plan Year; provided, however, that the Contribution
Percentage of a Participant with no After Tax Deposits and
Matching Contributions made on his or her behalf shall be zero.
The Contribution Percentage, in each case, however, shall not
include Matching Contributions that are forfeited either to correct
Excess Aggregate Contributions or because the contribution to which
they relate are excess Before Tax Deposits, excess After Tax
Deposits, or Excess Aggregate Contributions. To the extent determined
by the Committee and in accordance with regulations issued by the
Secretary of the Treasury under Code Section 401(m)(3), Before Tax
Deposits and any qualified nonelective contributions, within the
meaning of Code Section 401(m)(4)(C) on behalf of a Participant may
also be taken into account for purposes of calculating the
Contribution Percentage of a Participant. However, if any Before Tax
Deposits are taken into account for purposes of determining Actual
Deferral Percentages under Section 4.3 then such Before Tax Deposits
shall not be taken into account under this Section 6.13.
24. Section 6.13(b)(v) of the Plan is amended in its entirety, effective
January 1, 1998, as follows:
(v) "Compensation" shall mean compensation as described below:
(1) Compensation means compensation determined by the
Company in accordance with the requirements of Code Section
414(s) and the Regulations thereunder.
(2) For purposes of this Section 6.13, for Plan Years
beginning on or after January 1, 1998, Compensation may, at the
Company's election, exclude amounts which are excludable from a
Participant's gross income under Code Section 125 (pertaining to
cafeteria plans) and Code Section 402(e)(3) (pertaining to 401(k)
salary reductions). The Company
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<PAGE> 10
may change its election provided such change does not
discriminate in favor of Highly Compensated Employees.
(3) Compensation taken into account for any Plan Year
shall not exceed $150,000 as adjusted at the time and in such
manner as permitted under Code Section 401(a)(17)(B).
25. Section 6.13 of the Plan is amended, effective January 1, 1997, by
deleting Paragraph (e) regarding family aggregation and redesignating
Paragraphs (f), (g), and (h) as Paragraphs (e), (f), and (g),
respectively.
26. Section 6.14(b) of the Plan is amended in its entirety, effective
January 1, 1997, as follows:
(b) For purposes of satisfying the Average Contribution
Percentage test, the amount of any excess After Tax Deposits or
Matching Contributions by or on behalf of Highly Compensated
Participants for a Plan Year under Section 6.13 shall be determined
by application of a leveling method under which the After Tax
Deposits or Matching Contributions of the Highly Compensated
Participant who has the highest dollar amount of After Tax Deposits
or Matching Contributions for such Plan Year is reduced to the extent
required to cause such Highly Compensated Participant's After Tax
Deposits and Matching Contributions to equal the After Tax Deposits
and Matching Contributions of the Highly Compensated Participant with
the next highest After Tax Deposits and Matching Contributions;
provided, however, if a lesser amount, when added to the total dollar
amount already distributed under this paragraph (b), equals the total
excess After Tax Deposits and Matching Contributions that are
required to be distributed to enable the Plan to satisfy the Average
Contribution Percentage test, the lesser amount shall be distributed.
This process shall be repeated until the Plan satisfies the Average
Contribution Percentage test.
27. Section 6.14 of the Plan is amended, effective January 1, 1997, by
deleting Paragraph (c) regarding family aggregation and redesignating
Paragraphs (d), (e), (f), and (g) as Paragraphs (c), (d), (e), and (f),
respectively.
28. Section 7.3 of the Plan is amended in its entirety, effective January 1,
1997, as follows:
7.3 Vesting of Participant Deposits. A Participant shall be
fully vested at all times in the amounts allocated to his or her
Before Tax Deposits Account, After Tax Deposits Account, and Rollover
Account.
29. Section 8.1(a) of the Plan is amended in its entirety, effective January
1, 1997, as follows:
(a) A Participant may, for any reason, withdraw any portion of
the amount allocated to his After Tax Deposits Account (excluding any
After Tax
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Deposits recharacterized as such under Section 4.5 and any
earnings attributable to After Tax Deposits after December 31, 1988).
A Participant who makes a withdrawal of After Tax Deposits which are
also Sharing Deposits shall not receive an allocation of Company
Contributions pursuant to Section 6.4(a)(iii) with respect to any
Sharing Deposits made by such Participant during the 6 month period
beginning on the date of any such withdrawal.
30. Section 8.1(c) of the Plan is amended in its entirety, effective January
1, 1997, as follows:
(c) On or after the attainment of age 59-1/2, a Participant
may withdraw any portion of the amounts allocated to any of his or
her Accounts.
31. Section 8.2(a) of the Plan is amended in its entirety, effective January
1, 1999 as follows:
(a) Subject to the provisions of Section 8.5, if a Participant
incurs a Severance for any reason (including Disability) other than
death, all or a portion of such Participant's entire vested portion
of his or her Accounts under the Plan shall be (i) distributed
directly to such Participant or (ii) at the election of the
Participant, distributed as an Eligible Rollover Distribution and
paid directly by the Trustee to the trustee of an Eligible Retirement
Plan.
32. Section 8.2(b) of the Plan is amended in its entirety, effective January
1, 1999 as follows:
(b) Any distribution made pursuant to Paragraph (a) shall be
paid no more than once in any three (3) month period in amounts of at
least $500 (or the Participant's entire vested portion of his or her
Accounts under the Plan if lesser) and shall be made in cash except
to the extent any of the vested portion of such Participant's
Accounts is invested in the Company Stock Fund, then, to the extent
so invested, such distribution may be made in Company Stock at the
election of the Participant.
33. Section 13.1(a)(1) of the Plan is amended in its entirety, effective
January 1, 1995, as follows:
(1) Thirty Thousand Dollars ($30,000).
34. Section 13.4 of the Plan is amended, effective January 1, 1998, by
adding at the end thereto that "This Section shall not apply to Plan
Years beginning on or after January 1, 2000."
35. Section 13.5(a) of the Plan is amended, effective January 1, 1998, by
adding at the end thereto that "This subsection shall not apply to Plan
Years beginning on or after January 1, 2000."
36. Section 13.6 of the Plan is amended in its entirety, effective January
1, 1998, as follows:
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13.6 Compensation. For the purpose of this Article XIII,
Compensation shall mean a Participant's earned income, wages,
salaries, fees for professional services, and other amounts received
(without regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of employment with
the Company maintaining the Plan and shall be determined as described
below:
(a) Compensation shall include to the extent that the
amounts are includible in gross income (including, but not
limited to, commissions paid salespeople, compensation for
services on the basis of a percentage of profits, commissions on
insurance premiums, tips, bonuses, fringe benefits, and
reimbursements or other expense allowances under a nonaccountable
plan as described in Regulation 1.62-2(c)).
(b) Compensation shall include any elective deferral as
defined in Code Section 402(g)(3) and any amount which is
contributed or deferred by the Company at the election of the
Employee and which is not includible in the gross income of the
Employee by reason of Code Sections 125 or 457.
(c) Compensation shall not include (i) any employer
contributions to a plan of deferred compensation which are not
included in the Employee's gross income for the taxable year in
which contributed, (ii) any distributions from a plan of deferred
compensation, (iii) any amounts realized from the exercise of a
non-qualified stock option or when restricted stock or property
held by the Employee becomes either freely transferable or is no
longer subject to a substantial risk of forfeiture under Code
Section 83 if such option, stock, or property was granted to the
Employee by the Company, (iv) any amounts realized from the sale,
exchange, or other disposition of stock acquired under a
qualified stock option, (v) any contribution for medical benefits
(within the meaning of Code Section 419(f)(2) after termination
of employment which is otherwise treated as an Annual Addition,
and (vi) any amount otherwise treated as an Annual Addition under
Code Section 415(l)(1).
(d) Notwithstanding anything in the Plan to the contrary,
Compensation shall be determined in accordance with Code Section
415(c)(3) as in effect for Plan Years beginning prior to January
1, 1998 where required by applicable law.
37. The Plan is amended, effective January 1, 1999, by adding the attached
Appendix A which sets forth provisions applicable only to Puerto
Rico-based payroll Employees and Puerto Rico-based Participants.
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38. The effective date of this Third Amendment shall be January 1, 1997
except as otherwise provided.
IN WITNESS WHEREOF, Allergan, Inc. hereby executes this Amendment on the
9th day of December, 1998.
ALLERGAN, INC.
BY: /s/ Francis R. Tunney, Jr.
---------------------------------
Francis R. Tunney, Jr.
Corporate Vice President, General
Counsel and Secretary
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APPENDIX A
SPECIAL PROVISIONS FOR PUERTO RICO-BASED PAYROLL EMPLOYEES
PART I
INTRODUCTION
1.1 Effective Date. Subject to the approval of the United States and
Puerto Rico tax authorities, the Effective Date of this Appendix A is the later
of January 1, 1999 or, the date the merger of the Allergan, Inc. Puerto Rico
Savings and Investment Plan into the Plan is approved by the United States and
Puerto Rico tax authorities. Prior to the Effective Date of Appendix A, Puerto
Rico-based Employees were eligible to participate in the Allergan, Inc. Puerto
Rico Savings and Investment Plan. As of the Effective Date of Appendix A,
Eligible Puerto Rico-based Employees shall cease participating in the Allergan,
Inc. Puerto Rico Savings and Investment Plan and shall participate in the Plan.
1.2 Merger of Allergan, Inc. Puerto Rico Savings and Investment Plan.
Subject to the approval of the United States and Puerto Rico tax authorities,
the Allergan, Inc. Puerto Rico Savings and Investment Plan shall merge with and
into the Plan. The Plan shall be the plan surviving the merger. All account
balances shall be transferred to the Plan and all assets acquired under the Plan
as a result of the merger shall be administered, distributed, forfeited and
otherwise governed by the provisions of the Plan and this Appendix A.
1.3 Purpose of Appendix A. The provisions of the Plan shall apply to all
Puerto Rico-based payroll Employees, except as specifically provided in this
Appendix A.
PART II
DEFINITIONS
The Definitions of Article II of the Plan shall apply to all Puerto
Rico-based Employees and shall have the same meaning for the purpose of this
Appendix A except as set forth below:
2.1 Plan Section 2.20. "Compensation" shall have the same meaning as set
forth in Plan Section 2.20 except that in the case of a Puerto Rico-based
Employee, Compensation shall also include cost of living allowances earned
within Puerto Rico and amounts paid under the Christmas bonus program.
2.2 Plan Section 2.24. "Credited Service" shall have the same meaning as
set forth in Plan Section 2.24 except that in the case of a Puerto Rico-based
Employee who was employed by the Company at any time prior to the Effective
Date, for the period prior to January 1, 1989, Credited Service shall include
service, if any, credited to such Employee under the Savings and Investment Plan
for Employees of Subsidiaries of SmithKline Beckman Corporation Whose Principal
Office is Located in Puerto Rico.
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2.3 Plan Section 2.26. For the purpose of this Appendix A only, the
definition of "Eligible Employee" as defined in Plan Section 2.26 shall not
apply and "Eligible Employee" or "Eligible Puerto Rico-based Employee" shall
mean any Puerto Rico-based Employee but shall exclude any non-resident alien of
Puerto Rico and the United States, any Leased Employee, and , and any Employee
covered by a collective bargaining agreement.
2.4 Plan Section 2.29. For the purpose of this Appendix A only, the
definition of "Employee" as defined in Plan Section 2.29 shall not apply and
"Employee" or "Puerto Rico-based Employee" shall mean any person who is employed
in any capacity by the Sponsor or any Affiliated Company at its Puerto Rico
locations, any portion of whose income is subject to withholding or income tax
and/or for whom Social Security contribution are made by the Sponsor or any
Affiliated Company except that such term shall not include (i) any individual
who performs services for the Sponsor or any Affiliated 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 Sponsor or any
Affiliated Company and (ii) any individual who performs services for the Sponsor
or any Affiliated Company pursuant to an agreement between the Sponsor or any
Affiliated Company and any other person including a leasing organization except
to the extent such individual is a Leased Employee.
2.5 Plan Section 2.40. For the purpose of this Appendix A only,
"Participant" as defined in Plan Section 2.40 shall not apply and "Participant"
or "Puerto Rico-based Participant" shall mean a Puerto Rico-based Employee who
is eligible to participate in the Plan and elects to participate in the Plan in
accordance with Plan Section 3.1.
2.6 Plan Section 2.50. Notwithstanding the provisions of Plan Section
2.50, "Sharing Deposits" of a Puerto Rico-based Participant shall mean his
Deposits (whether Before Tax or After Tax) not in excess of six percent (6%) of
Compensation. Sharing Deposits shall participate in allocations of Company
Contributions and Forfeitures.
2.7 Additional Terms. Additional terms shall have the following meaning:
(a) "PR-Code" shall mean the Puerto Rico Internal Revenue Code of
1994, as amended. Where the context so requires a reference to a
particular PR-Code Section shall also refer to any successor provision
of the PR-Code to such PR-Code Section.
(b) "Top One-Third Highly Compensated Employee" shall mean any
Participant who has Compensation for a Plan Year that is greater than
the Compensation for such Plan Year of two-thirds (2/3) of all other
Participants of the same Company.
PART III
ELIGIBILITY AND PARTICIPATION
The provisions of Article III of the Plan shall apply to all Puerto
Rico-based Employees.
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PART IV
PARTICIPANT DEPOSITS
The provisions of Article IV of the Plan shall apply to all Puerto
Rico-based Employees except as set forth below:
4.1 Reserved for Future Modification.
4.2 Plan Section 4.2(a). Notwithstanding the provisions of Plan Section
4.2(a), a Puerto Rico-based Participant may elect to contribute a whole
percentage of his Compensation to the Plan as Before Tax Deposits not to exceed
ten percent (10%) and, when aggregated with the After Tax Deposits contributed
by such Participant pursuant to paragraph (b) below, not to exceed fifteen
percent (15%). Notwithstanding the foregoing, no Participant shall be permitted
to make Before Tax Deposits to the Plan during any calendar year in excess of
$8,000, or such larger amount as may be determined by the Puerto Rico Secretary
of the Treasury pursuant to the PR-Code, or which exceed the limitations set
forth in Section 4.3 of this Appendix. For purposes of the dollar limitation,
the Before Tax Deposits of a Participant for any taxable year is the sum of all
Before Tax Deposits under the Plan and all salary reduction amounts under any
other qualified cash or deferred arrangement (as defined in Code Section 401(k),
a simplified employee pension (as defined in Code Sections 408(k) and
402(h)(1)(B), a deferral compensation plan under Code Section 457, a trust
described in Code Section 501(c)(18) and any salary reduction amount used to
purchase an annuity contract under Section 403(b) whether or not sponsored by
the Company but shall not include any amounts properly distributed as excess
annual additions.
4.3 Additional Contribution Deferral Limitation. In addition to the
limitations on Compensation Deferral Contributions set forth in Plan Section
4.3, Compensation Deferral Contributions by a Puerto Rico-based Participant
shall not exceed the limitation on contributions by or on behalf of the Top
One-Third Highly Compensation Employees under PR-Code Section 1165(e), as
provided in this Section 4.3 with respect to each Plan Year. In the event that
Compensation Deferrals Contributions under the Plan by or on behalf of the Top
One-Third Highly Compensated Employees exceed the limitations of this section
for any reason, such excess contributions shall be recharacterized as After Tax
Deposits or such excess contributions, adjusted for any income or loss allocable
thereto, shall be returned to such Participant, as provided in Plan Section 4.5.
(a) The Compensation Deferral Contributions by Participants for a
Plan Year shall satisfy the Actual Deferral Percentage test under the
PR-Code as set forth in (i) below, or to the extent not precluded by
applicable regulations, the alternate Actual Deferral Percentage test as
set forth in (ii) below:
(i) The average "Actual Deferral Percentage" for the Top
One-Third Highly Compensated Employees shall not be more than the
average Actual Deferral Percentage of all non-Top One-Third
Highly Compensated Employees multiplied by 1.25, or
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(ii) The excess of the average Actual Deferral Percentage
for the Top One-Third Highly Compensated Employees over the
average Actual Deferral Percentage for all non-Top One-Third
Highly Compensated Employees shall not be more than two (2)
percentage points and the average Actual Deferral Percentage for
the Top One-Third Highly Compensated Employee shall not be more
than the average Actual Deferral Percentage of all non-Top
One-Third Highly Compensated Employees multiplied by 2.0.
(b) For the purpose of this Section 4.3 only, the following
definitions shall apply:
(i) "Actual Deferral Percentage" shall mean, with respect
to the group of all Top One-Third Highly Compensated Employees
and the group of all non-Top One-Third Highly Compensated
Employees for a Plan Year, the ratio, calculated separately for
each Participant in such group, of the amount of the
Participant's Compensation Deferral Contribution for such Plan
Year, to such Participant's Compensation for such Plan Year, in
accordance with regulations prescribed by the Puerto Rico
Secretary of the Treasury under PR-Code Section 1165(e). For
purposes of computing the Actual Deferral Percentage, an Eligible
Employee who would be a Participant but for the failure to make
Before Tax Deposits shall be treated as a Participant on whose
behalf no Before Tax Deposits are made.
(ii) "Participant" shall mean any Eligible Puerto
Rico-based Employee who satisfied the requirements under Plan
Section 3.1 during the Plan Year, whether or not such Eligible
Employee elected to contribute to the Plan for such Plan Year.
(iii) "Compensation Deferral Contributions" shall mean
amounts contributed to the Plan by a Participant as Before Tax
Deposits pursuant to Section 4.1 of this Appendix, including
excess Before Tax Deposits (as defined in Plan Section 4.4(a)) of
the Top One-Third Highly Compensated Employees but excluding (1)
excess Before Tax Deposits of all non-Top One-Third Highly
Compensated Employees that arise solely from Before Tax Deposits
made under the Plan or plans of the Company, (2) Before Tax
Deposits that are taken into account in the Average Contribution
Percentage test (as defined in Plan Section 6.11) provided that
the Actual Deferral Percentage test is satisfied both with and
without exclusions of these Before Tax Deposits, and (3) any
deferrals properly distributed as excess Annual Additions. To the
extent determined by the Committee and in accordance with
regulations issued by the Puerto Rico Secretary of the Treasury,
matching contributions and qualified nonelective contributions on
behalf of a Participant that satisfy the requirements of PR-Code
Section 1165(e)(3)(D)(ii) may also be taken into account for the
purpose of determining the Actual Deferral Percentage of such
Participant.
(iv) "Compensation" shall mean compensation as described
below:
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(1) Compensation means compensation determined by
the Company in accordance with the requirements of Code
Section 414(s) and the regulations thereunder.
(2) For the purpose of this Section 4.3,
Compensation may, at the Company's election, include
amounts which are excludable from a Participant's gross
income under Code Section 125 (pertaining to cafeteria
plans) and Code Section 402(e)(3) (pertaining to 401(k)
salary reductions). The Company may change its election
provided such change does not discriminate in favor of the
Top One-Third Highly Compensated Employees.
(3) Compensation taken into account for any Plan
Year shall not exceed $150,000 as adjusted at the time and
in such manner as permitted under Code Section
401(a)(17)(B).
(c) In the event that as of the first day of Plan Year, the Plan
satisfies the requirements of PR-Code Section 1165(a) only if aggregated
with one or more other plans which include arrangements under PR-Code
Section 1165(e), then this Section 4.3 shall be applied by determining
the Actual Deferral Percentages of Participants as if all such plans
were a single plan, in accordance with regulations prescribed by the
Secretary of the Treasury under PR-Code Section 1165(e). Plans may be
considered one plan for purposes of satisfying PR-Code Section 1165(e)
only if they have the same Plan Year.
(d) For the purpose of this Section 4.3, the "Actual Deferral
Percentage" for any Top One-Third Highly Compensated Employee who is a
Participant under two or more PR-Code Section 1165(e) arrangements of
the Company shall be determined by taking into account the Top One-Third
Highly Compensated Employee's Compensation under each such arrangement
and contributions under each such arrangement which qualify for
treatment under PR-Code Section 1165(e) in accordance with regulations
prescribed by the Puerto Rico Secretary of the Treasury under PR-Code
Section 1165(e). If the arrangements have different Plan Years, this
subsection shall be applied by treating all such arrangements ending
with or within the same calendar year as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated as
separate plans if mandatorily disaggregated pursuant to regulations
under Code Section 401(k).
(e) For purposes of the Actual Deferral Percentage test,
Compensation Deferral Contributions must be made before the last day of
the twelve-month period immediately following the Plan Year to which
such contributions relate.
(f) The determination and treatment of Compensation Deferral
Contributions and the Actual Deferral Percentage of any Participant
under this Section 4.3 shall satisfy such other requirements as may be
prescribed by the Puerto Rico Secretary of the Treasury.
(g) The Committee shall keep or cause to have kept such records
as are necessary to demonstrate that the Plan satisfies the requirements
of PR-Code Section
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1165(e) and the regulations thereunder, in accordance with
regulations prescribed by the Puerto Rico Secretary of the
Treasury.
4.4 Plan Section 4.4. The provisions of Plan Section 4.4 entitled
"Provisions for Return of Excess Before Tax Deposits over $7,000" shall be
applied by substituting the dollar limitation contained in Section 4.1 of this
Appendix for the "$7,000 limitation" in each place it appears.
4.5 Plan Section 4.5. The provisions of Plan Section 4.5 entitled
"Provision for Recharacterization or Return of Excess Deferrals by Highly
Compensated Participants" shall be applied as follows:
(a) "Highly Compensated Employee and Top One-Third Highly
Compensated Employee" shall be substituted for "Highly Compensated
Employee" in each place it appears.
(b) Any reference to Code Sections shall include reference to the
corresponding PR-Code Section unless the context clearly indicates
otherwise. For example, references to "Code Section 401(k)" and "Code
Section 404" shall include references to PR-Code Section 1165(e) and
PR-Code Section 1023(n), respectively.
4.6 Reserved for Future Modification.
4.7 Plan Section 4.7. In addition to the provisions of Plan Section 4.7
entitled "Character of Deposits," Before Tax Deposits shall be treated as
Company Contributions for purposes of PR-Code Section 1165(e).
4.8 Plan Section 4.8. The provisions of Plan Section 4.8 entitled
"Rollover Contributions" shall be applied by including a corresponding reference
to "PR-Code Section 1165(a)" in each place "Code Section 401(a)" and "Code
Section 501(a)" appears.
PART V
TRUST FUND AND COMPANY CONTRIBUTIONS
The provisions of Article V shall apply to all Puerto Rico-based
Employees except as set forth below:
5.1 Plan Section 5.2. Notwithstanding the provisions of Plan Section 5.2
entitled "Company Contributions" and subject to the limitations of Plan Article
XIII and to the extent that the Company has current or accumulated profits, in
the case of a Puerto Rico-based Participant the Company shall contribute monthly
out of current or accumulated profits and an amount which, when added to
available forfeitures provided under Plan Section 8.2 resulting from the
terminations during the month, is equal to 75% of each Participant's Sharing
Deposits for the previous month which are not in excess of two percent (2%) of
such Participant's Compensation.
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5.2 Plan Section 5.7. The provisions of Plan Section 5.7 entitled
"Irrevocability" shall be applied by including a corresponding reference to
"PR-Code Section 1165(a)" and "PR-Code Section 1023(n)" in each place "Code
Section 401(a)" and "Code Section 404" appears, respectively.
PART VI
ACCOUNTS AND ALLOCATIONS
The provisions of Article VI of the Plan shall apply to all Puerto
Rico-based Employees.
PART VII
VESTING IN PLAN ACCOUNTS
The provisions of Article VII of the Plan shall apply to all Puerto
Rico-based Employees.
PART VIII
PAYMENT OF PLAN BENEFITS
The provisions of Article VIII of the Plan shall apply to all Puerto
Rico-based Employees except as set forth below:
8.1 Plan Section 8.1. The provisions of Plan Section 8.1 entitled
"Withdrawals During Employment" shall be applied by including a corresponding
reference to "PR-Code Section 1165(e)(7)(A)" in each place "Code Section 402(g)"
appears.
8.2 Plan Section 8.4. In addition to the provisions of Plan Section 8.4
entitled "Designation of Beneficiary," the following rules shall apply to a
Participant, as defined in Section 2.4 of this Appendix:
(a) In the event a deceased Participant is not a resident of
Puerto Rico at the date of his death, the Plan Administrator, in its
discretion, may require the establishment of ancillary administration in
Puerto Rico.
(b) If the Committee cannot locate a qualified personal
representative of the deceased Participant, or if administration of the
deceased Participant's estate is not otherwise required, the Plan
Administrator, in its discretion, may pay the deceased Participant's
interest in the Trust Fund to his heirs at law (determined in accordance
with the laws of the Commonwealth of Puerto Rico) as they existed at the
date of the Participant's death.
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8.3 Plan Section 8.5(a). Notwithstanding the provisions of Plan Section
8.5(a) entitled "Distribution Rules," in the case of a Puerto Rico-based
Participant in no event shall any benefits under the Plan, including benefits
upon retirement, Severance, or Disability, be paid (or commence to be paid) to a
participant prior to the "Consent Date" (as defined herein) unless the
Participant consents in writing to the payment (or commencement of payment) of
such benefits prior to said Consent Date. As used herein, the term "Consent
Date" shall mean the later of (i) the Participant's 62nd birthday, or (ii) the
Participant's Normal Retirement Age. Notwithstanding the foregoing, the
provisions of this Paragraph shall not apply (i) following the Participant's
death, or (ii) with respect to a lump sum distribution of the vested portion of
a Participant's Account if the total amount of such vested portion does not
exceed or has never exceeded $3,500.
8.4 Plan Section 8.5(c). Notwithstanding the provisions of Plan Section
8.5(c) entitled "Distribution Rules," Section 8.3 of this Appendix or Plan
Section 8.5(b), in the case of a Puerto Rico-based Participant distributions of
the entire vested portion of a Participant's Accounts shall be made no later
than the Participant's Required Beginning Date, or, if such distribution is to
be made over the life of such Participant or over the lives of such Participant
and a Beneficiary (or over a period not extending beyond the life expectancy of
such participant and Beneficiary) then such distribution shall commence no later
than the Participant's Required Beginning Date. Required Beginning Date shall
mean:
(a) For the period prior to January 1, 1989, April 1 of the
calendar year following the later of the calendar year in which the
Participant (i) attains age 70-1/2, or (ii) retires; provided, however,
the foregoing clause (ii) shall not apply with respect to a Participant
who is a Five Percent Owner (as defined in Code Section 416(i)) at any
time during the five Plan Year period ending in the calendar year in
which the Participant attains age 70-1/2 . If the Participant becomes a
Five Percent Owner during any Plan Year subsequent to the five Plan Year
period referenced above, the Required Beginning Date under this
Paragraph (a) shall be April 1 of the calendar year following the
calendar year in which such subsequent Plan year ends.
(b) For the period after December 31, 1988, April 1 of the
calendar year following the calendar year in which the Participant
attains age 70-1/2; provided, however, if the Participant attains age
70-1/2 before January 1, 1988 and the Participant was not a Five Percent
Owner at any time during the Plan Year ending with or within the
calendar year in which such Participant attains age 66-1/2 or any
subsequent Plan Year, then this Paragraph (b) shall not apply and the
Required Beginning Date shall be determined under Paragraph (a) above.
8.5 Plan Section 8.10(c). The provisions of Plan Section 8.10(c)
entitled "Additional Documents" shall be applied by including reference to
"Puerto Rico" in each place "State or Federal" appears.
8.6 Plan Section 8.11. The provisions of Plan Section 8.11 entitled
"Trustee-Trustee Transfers" shall be applied by including a corresponding
reference to "PR-Code Section 1165" in each place "Section 401 of the Code"
appears.
21
<PAGE> 22
8.7 Plan Section 8.12. The provisions of Plan Section 8.10(c) entitled
"Additional Documents" shall be applied by including reference to the "P-R Code"
in each place "Code or ERISA" appears.
PART IX
PLAN ARTICLES IX THROUGH XV
The provisions of Articles IX through XV of the Plan shall apply to all
Puerto Rico-based Employees.
PART X
MISCELLANEOUS PROVISIONS
The provisions of Article XVI of the Plan shall apply to all Puerto
Rico-based Employees except as follows:
10.1 Plan Section 16.5. In addition to the provisions of Plan Section
16.5 entitled "Interpretation," the provisions of the Plan shall be interpreted
in a manner consistent with the Plan satisfying (i) the requirements of PR-Code
Section 1165(a) and related statutes for qualification as a defined contribution
plan and (ii) the requirements of PR-Code Section 1165(e) and related statutes
for qualification as a cash or deferred arrangement to the extent such
interpretation would not violate (i) the requirements of Code Section 401(a) and
related statutes for qualification as a defined contribution plan and (ii) the
requirements of Code Section 401(k) and related statutes for qualification as a
cash or deferred arrangement.
10.2 Plan Section 16.6. In addition to the provisions of Plan Section
16.6 entitled "Withholding for Taxes," any payments from the Trust Fund may be
subject to withholding for taxes as may be required by any applicable Puerto
Rico law.
10.3 Plan Section 16.7. In addition to the provisions of Plan Section
16.7 entitled "California Law Controlling," the Plan Administrator shall
determine whether all legal questions pertaining to the Plan which are not
controlled by ERISA shall be determined in accordance with the laws of the
Commonwealth of Puerto Rico or the laws of the State of California in the case
of a Puerto Rico-based Employee or Participant.
22
<PAGE> 1
EXHIBIT 10.22
1999 MANAGEMENT BONUS PLAN ALLERGAN, INC.
- -------------------------------------------------------------------------------
PURPOSE OF THE PLAN
The Allergan, Inc. 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, 1999 through December 31, 1999 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, 1998 to November 30, 1999.
- -------------------------------------------------------------------------------
ELIGIBILITY
All regular full-time and part-time employees 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. For the locations
where the Plan year is January 1, 1999 through December 31, 1999, the
participants must be employed on or before June 30, 1999; for the locations
where the Plan year is December 1, 1998 through November 30, 1999, the
participants must be employed on or before May 31, 1999. Participants must be
actively employed by Allergan 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
* EARNINGS PER SHARE--Corporate performance is measured in terms of Allergan,
Inc.'s Earnings Per Share (EPS) performance. EPS is defined as net earnings
divided by the weighted average number of common and common equivalent
shares.
* OPERATING INCOME--Operating Income compared to budget will be considered
for allocation of bonus pools by Business Unit/Function. Operating Income is
defined as Net Sales minus Cost of Goods minus Selling and General
Administrative expenses minus Research & Development.
- -------------------------------------------------------------------------------
January 1999 Page -1-
<PAGE> 2
1999 MANAGEMENT BONUS PLAN ALLERGAN, INC.
- -------------------------------------------------------------------------------
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 shareholder 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:
1. Earnings per share; and
2. 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.
*EARNINGS PER SHARE
1999 EPS RANGE BONUS % OF TARGET
- -------------- -----------------
-$0.25 40%
-$0.20 49%
-$0.15 58%
-$0.10 70%
-$0.05 83%
TARGET 100%
+$0.05 117%
+$0.10 130%
+$0.15 142%
+$0.20 151%
+$0.25 160%
If actual EPS results fall between the performance levels shown above, bonuses
will be prorated accordingly.
- -------------------------------------------------------------------------------
January 1999 Page -2-
<PAGE> 3
1999 MANAGEMENT BONUS PLAN ALLERGAN, INC.
- --------------------------------------------------------------------------------
BONUS POOL DIFFERENTIATION BY BUSINESS UNIT/FUNCTION
* 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 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:
* extraordinary, unusual or non-recurring items
* effects of accounting changes
* effects of financing activities
* expenses for restructuring or productivity initiatives
* other non-operating items
* spending for acquisitions
* effects of divestitures
- -------------------------------------------------------------------------------
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
addendum).
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 the
Allergan, Inc. 1989 Incentive Compensation Plan, as amended), bonuses will be
paid within 30 days of the effective date of the Change in Control.
- -------------------------------------------------------------------------------
January 1999 Page -3-
<PAGE> 4
1999 MANAGEMENT BONUS PLAN ALLERGAN, INC.
- -------------------------------------------------------------------------------
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:
* 100% of the EPS target or
* 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 Director, Compensation. This Management Bonus Plan
document supersedes any previous document you may have received.
- -------------------------------------------------------------------------------
January 1999 Page -4-
<PAGE> 5
ADDENDUM
[LOGO] ALLERGAN
1999 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 50%
- -------------------------------------------------------------------------------
*As a percentage of year-end annualized base salary.
<PAGE> 1
EXHIBIT 21
ENTITIES OF ALLERGAN, INC.
<TABLE>
<CAPTION>
PLACE OF INCORPORATION
NAME OF SUBSIDIARY OR ORGANIZATION
- ------------------ ---------------
<S> <C>
Allergan-Loa S.A. Argentina
Allergan S.A.I.C.yF. Argentina
Allergan Australia Pty Limited Australia
Allergan Holdings Pty Limited Australia
Amawind Pty Limited Australia
Pacific Eyecare Pty Limited Australia
Allergan N.V. Belgium
Allergan-Lok Produtos Farmaceuticos Ltda. Brazil
Allergan Inc. Canada
CrownPharma Canada Inc. Canada
Allergan Laboratorios Limitada Chile
Allergan (Hangzhou) Pharmaceutical Co., Ltd. China
Allergan de Colombia S.A. Colombia
Allergan A/S Denmark
Allergan France S.A. 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 S.p.A. Italy
Allergan K.K. Japan
Allergan Korea Ltd. Korea
Allergan Afrasia Limited Malta
Allergan, S.A. de C.V. Mexico
Pharmac, S.A.M. Monaco
Allergan B.V. Netherlands
Allergan New Zealand Limited New Zealand
Allergan AS Norway
Allergan Pakistan (Private) Limited Pakistan
Allergan Pharmaceuticals (Ireland) Ltd., Inc. Panama
Allergan Pte. Ltd. Singapore
Allergan Pharmaceuticals (Proprietary) Limited South Africa
Allergan, S.A. Spain
Allergan Norden AB Sweden
Allergan AG Switzerland
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C>
Allergan Optik Mamulleri Sanayi Ve Ticaret Limited Turkey
Allergan Farnborough Limited United Kingdom
Allergan Holdings Limited United Kingdom
Allergan Limited United Kingdom
Allergan Optical Irvine, Inc. United States/CA
Allergan Sales, Inc. (formerly Allergan Medical Optics) United States/CA
AMO Puerto Rico, Inc. (formerly Allergan America) United States/CA
Herbert Laboratories United States/CA
Allergan America, Inc. (formerly Allergan Caribe, Inc.) United States/DE
Allergan Holdings, Inc. United States/DE
Allergan Optical Inc. United States/DE
AMO Holdings, Inc. United States/DE
Optical Micro Systems, Inc. United States/DE
Pacific Pharma, Inc. (formerly Pacific I Limited, Inc.) United States/DE
Allergan de Venezuela, S.A. Venezuela
Allergan India Limited (Joint Venture) India
</TABLE>
<PAGE> 1
EXHIBIT 23
ACCOUNTANTS' CONSENT AND REPORT
ON CONSOLIDATED SCHEDULE
To the Board of Directors and Stockholders
Allergan, Inc.
Under date of January 27, 1999, we reported on the consolidated balance
sheets of Allergan, Inc. and subsidiaries as of December 31, 1998 and 1997, 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, 1998,
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 1998.
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 1998. The 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
27, 1999, 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,
333-64559 and 333-70407) and Registration Statements on Form S-3 (Nos. 33-55061
and 33-69746).
/s/ KPMG LLP
Costa Mesa, California
March 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS AND BALANCE SHEET OF ALLERGAN, INC. AND IS
QUALIFIED IN ITS ENTIRETY.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 181,600
<SECURITIES> 0
<RECEIVABLES> 232,800
<ALLOWANCES> 6,700
<INVENTORY> 123,300
<CURRENT-ASSETS> 661,200
<PP&E> 597,500
<DEPRECIATION> 272,600
<TOTAL-ASSETS> 1,334,400
<CURRENT-LIABILITIES> 368,500
<BONDS> 201,100
0
0
<COMMON> 700
<OTHER-SE> 695,300
<TOTAL-LIABILITY-AND-EQUITY> 1,334,400
<SALES> 1,261,700
<TOTAL-REVENUES> 1,296,100
<CGS> 407,000
<TOTAL-COSTS> 439,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,100
<INTEREST-EXPENSE> 16,400
<INCOME-PRETAX> (57,700)
<INCOME-TAX> 32,800
<INCOME-CONTINUING> (90,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (90,200)
<EPS-PRIMARY> (1.38)
<EPS-DILUTED> (1.38)
</TABLE>
