ALLERGAN INC (Form: 10-K, Received: 02/26/2013 16:08:40)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

(Mark One)



þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended December 31, 2012



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-10269

Allergan, Inc.

(Exact Name of Registrant as Specified in its Charter)



Delaware	95-1622442
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

2525 Dupont Drive Irvine, California	92612
(Address of Principal Executive Offices)	(Zip Code)

(714) 246-4500

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:



Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.01 Par Value	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer þ	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

As of June 29, 2012 , the aggregate market value of the registrant’s co mmon stock held by non-affiliates of the registrant was approximately $27,885 million based on the closing sale price as reported on the New York Stock Exchange.

Common stock outstanding as of February 21, 2013 — 307,549,810 shares (including 9,466,332 shares held in treasury).

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this report incorporates certain information by reference from the registrant’s proxy statement for the annual meeting of stockholders to be held on April 30, 2013, which proxy statement will be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2012.

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TABLE OF CONTENTS



		Page
PART I.		1
Item 1.	Business	1
Item 1A.	Risk Factors	23
Item 1B.	Unresolved Staff Comments	32
Item 2.	Properties	32
Item 3.	Legal Proceedings	32
Item 4.	Mine Safety Disclosures	32

PART II.		33
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	33
Item 6.	Selected Financial Data	34
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	62
Item 8.	Financial Statements and Supplementary Data	66
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	66
Item 9A.	Controls and Procedures	66
Item 9B.	Other Information	66

PART III.		67
Item 10.	Directors, Executive Officers and Corporate Governance	67
Item 11.	Executive Compensation	67
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	67
Item 13.	Certain Relationships and Related Transactions, and Director Independence	67
Item 14.	Principal Accounting Fees and Services	67

PART IV.		68
Item 15.	Exhibits and Financial Statement Schedules	68

SIGNATURES		75

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Statements made by us in this report and in other reports and statements released by us that are not historical facts constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21 of the Securities Exchange Act of 1934, as amended. These forward-looking statements are necessarily estimates reflecting the judgment of our management based on our current estimates, expectations, forecasts and projections and include comments that express our current opinions about trends and factors that may impact future operating results. Disclosures that use words such as we “believe,” “anticipate,” “estimate,” “intend,” “could,” “plan,” “expect,” “project” or the negative of these, as well as similar expressions, are intended to identify forward-looking statements. These statements are not guarantees of future performance and rely on a number of assumptions concerning future events, many of which are outside of our control, and involve known and unknown risks and uncertainties that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. We discuss such risks, uncertainties and other factors throughout this report and specifically under the caption “Risk Factors” in Item 1A of Part I of this report below. Any such forward-looking statements, whether made in this report or elsewhere, should be considered in the context of the various disclosures made by us about our businesses including, without limitation, the risk factors discussed below. Except as required under the federal securities laws and the rules and regulations of the U.S. Securities and Exchange Commission, we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

PART I

Item 1. Business

General Overview of our Business

We are a multi-specialty health care company focused on developing and commercializing innovative pharmaceuticals, biologics, medical devices and over-the-counter products that enable people to live life to its full potential - to see more clearly, move more freely and express themselves more fully. We discover, develop and commercialize a diverse range of products for the ophthalmic, neurological, medical aesthetics, medical dermatology, breast aesthetics, obesity intervention, urological and other specialty markets in more than 100 countries around the world.

We are also a pioneer in specialty pharmaceutical, biologic and medical device research and development. Our research and development efforts are focused on products and technologies related to the many specialty areas in which we currently operate as well as new specialty areas where unmet medical needs are significant. In 2012, our research and development expenditures were approximately 17.3% of our product net sales, or approximately $989.6 million. We supplement our own research and development activities with our commitment to identify and obtain new technologies through in-licensing, research collaborations, joint ventures and acquisitions.

Our diversified business model includes products for which patients may be eligible for reimbursement and cash pay products that consumers pay for directly out-of-pocket. Based on internal information and assumptions, we estimate that in fiscal year 2012, approximately 62% of our product net sales were derived from reimbursable products and 38% of our product net sales were derived from cash pay products.

In the fourth quarter of 2012, we acquired SkinMedica, Inc., or SkinMedica, a privately held aesthetics skin care business, which includes a variety of aesthetic skin care products, for total consideration of approximately $348.3 million. The acquisition did not include the SkinMedica Colorescience aesthetic make-up business.

We were founded in 1950 and incorporated in Delaware in 1977. Our principal executive offices are located at 2525 Dupont Drive, Irvine, California, 92612, and our telephone number at that location is (714) 246-4500. Our website address is www.allergan.com (the information available at our website address is not incorporated by reference into this report). We make our periodic and current reports available on our website, free of charge, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission, or SEC. The SEC maintains a website at www.sec.gov that contains the reports and other information that we file electronically with the SEC.

Operating Segments

We operate our business on the basis of two reportable segments — specialty pharmaceuticals and medical devices. The specialty pharmaceuticals segment produces a broad range of pharmaceutical products, including: ophthalmic products for dry eye, glaucoma, inflammation, infection, allergy and retinal disease; Botox ^® for certain therapeutic and aesthetic indications; skin care products for acne, psoriasis, eyelash growth and other prescription and over-the-counter skin care products; and urologics products. The medical devices segment produces a broad range of medical devices, including: breast implants for augmentation, revision and reconstructive surgery and tissue expanders; obesity intervention products; and facial aesthetics products.

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The following table sets forth, for the periods indicated, product net sales for each of our product lines within our specialty pharmaceuticals and medical devices segments, segment operating income for our specialty pharmaceuticals and medical devices segments, domestic and international sales as a percentage of total product net sales, and domestic and international long-lived assets:



	Year Ended December 31,
	2012			2011			2010
	(dollars in millions)
Specialty Pharmaceuticals Segment Product Net Sales by Product Line
Eye Care Pharmaceuticals	$	2,692.2		$	2,520.2		$	2,262.0
Botox ^® /Neuromodulators	1,766.3			1,594.9			1,419.4
Skin Care	298.4			260.1			229.5
Urologics	27.7			56.8			62.5
Total Specialty Pharmaceuticals Segment Product Net Sales	$	4,784.6		$	4,432.0		$	3,973.4

Medical Devices Segment Product Net Sales by Product Line
Breast Aesthetics	$	377.1		$	349.3		$	319.1
Obesity Intervention	159.5			203.1			243.3
Facial Aesthetics	387.6			362.7			283.8
Total Medical Devices Segment Product Net Sales	$	924.2		$	915.1		$	846.2

Specialty Pharmaceuticals Segment Operating Income (1)	$	1,997.7		$	1,763.3		$	1,501.9
Medical Devices Segment Operating Income (1)	278.8			286.0			284.7

Consolidated Product Net Sales
Domestic	60.9		%	60.2		%	62.6		%
International	39.1		%	39.8		%	37.4		%

Consolidated Long-Lived Assets
Domestic	$	3,718.6		$	3,500.9		$	3,222.4
International	650.2			617.5			688.1

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(1)

Management evaluates business segment performance on an operating income basis exclusive of general and administrative expenses and other indirect costs, legal settlement expenses, impairment of intangible assets and related costs, restructuring charges, amortization of certain identifiable intangible assets related to business combinations and asset acquisitions and related capitalized licensing costs and certain other adjustments, which are not allocated to our business segments for performance assessment by our chief operating decision maker. Other adjustments excluded from our business segments for purposes of performance assessment represent income or expenses that do not reflect, according to established company-defined criteria, operating income or expenses associated with our core business activities.

We do not discretely allocate assets to our operating segments, nor does our chief operating decision maker evaluate operating segments using discrete asset information.

See Note 15, “Business Segment Information,” in the notes to the consolidated financial statements listed under Item 15 of Part IV of this report, “Exhibits and Financial Statement Schedules,” for further information concerning our foreign and domestic operations.

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Specialty Pharmaceuticals Segment

Eye Care Pharmaceuticals

We develop, manufacture and market a broad range of prescription and non-prescription products designed to treat diseases and disorders of the eye, including dry eye, glaucoma, inflammation, infection, allergy and retinal disease.

Dry Eye

Restasis ^® (cyclosporine ophthalmic emulsion) 0.05%, our best selling eye care product, is the largest prescription ophthalmic pharmaceutical by sales value in the United States and is the first, and currently the only, prescription eye drop to help increase tear production in cases where tear production may be reduced by inflammation due to chronic dry eye. Chronic dry eye is a painful and irritating condition involving abnormalities and deficiencies in the tear film initiated by a variety of causes. The incidence of chronic dry eye increases markedly with age, after menopause in women and in people with systemic diseases. We launched Restasis ^® in the United States in 2003 and Restasis ^® is currently sold in approximately 40 countries.

Our artificial tears products, including Refresh ^® and Optive ^™ lubricant eye drops, treat dry eye symptoms including irritation and dryness due to pollution, computer use, aging and other causes. We launched Refresh ^® over 25 years ago and today our artificial tears product line includes a wide range of preserved and non-preserved drops as well as ointments to treat dry eye symptoms. In early 2012, we launched Refresh Optive ^™ Advanced lubricant eye drops in the United States and as Optive Plus ^® in some countries in Europe.

Glaucoma

Our Lumigan ^® (bimatoprost ophthalmic solution) product line is our second best selling eye care product line. Lumigan ^® 0.01% is a topical treatment indicated for the reduction of elevated intraocular pressure in patients with glaucoma or ocular hypertension. Lumigan ^® 0.01% was approved in 2009 by Health Canada and in 2010 by the U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA. We currently sell Lumigan ^® 0.01% in the United States and it is approved in approximately 48 countries worldwide. The original formulation of Lumigan ^® , Lumigan ^® 0.03%, was approved by FDA in 2001 and EMA in 2002. We announced the discontinuation of this product in Canada in 2010 and ceased manufacturing Lumigan ^® 0.03% for the U.S. market in the fourth quarter of 2012. Senju Pharmaceutical Co., Ltd., or Senju, is responsible for the development and commercialization of Lumigan ^® in Japan pursuant to an exclusive licensing agreement.

Ganfort ^™ (bimatoprost/timolol maleate ophthalmic solution) is a bimatoprost and timolol maleate combination designed to treat glaucoma and ocular hypertension in patients who are not responsive to treatment with only one medication. We received a license from the EMA to market Ganfort ^™ in the European Union in 2006 and Ganfort ^™ is currently approved in approximately 67 countries.

Our Alphagan ^® (brimonidine tartrate ophthalmic solution) products are our third best selling eye care product line. Alphagan ^® P 0.1%, Alphagan ^® P 0.15% and Alphagan ^® P 0.2% are ophthalmic solutions that lower intraocular pressure by reducing aqueous humor production and increasing uveoscleral outflow. Alphagan ^® P 0.1% was approved by the FDA in 2005 and is a reformulation of Alphagan ^® P 0.15% and Alphagan ^® 0.2%. Alphagan ^® P 0.1% is currently approved in approximately 10 countries, Alphagan ^® P 0.15% is currently approved in approximately 50 countries and Alphagan ^® 0.2% is approved in approximately 70 countries. Alphagan ^® P 0.15% and Alphagan ^® 0.2% face generic competition in the United States and other parts of the world. Senju is responsible for the development and commercialization of our Alphagan ^® products in Japan pursuant to an exclusive licensing agreement between us and Kyorin Pharmaceuticals Co., Ltd., or Kyorin, that Kyorin subsequently sublicensed to Senju. In 2012, Senju received approval from the Japanese Ministry of Health, Labor and Welfare for Aiphagan ^® ophthalmic solution 0.1%, or Aiphagan ^® , for the reduction of intraocular pressure in patients with ocular hypertension or glaucoma.

Combigan ^® (brimonidine tartrate/timolol maleate ophthalmic solution) 0.2%/0.5% is a brimonidine and timolol combination designed to treat ocular hypertension in glaucoma patients who are not responsive to treatment with only one medication or need additional therapy. Combigan ^® was first approved in the European Union in 2005, approved by the FDA in 2007 and is currently approved in approximately 72 countries.

Inflammation

Acuvail ^® (ketorolac tromethamine ophthalmic solution) 0.45% is a nonsteroidal, anti-inflammatory indicated for the treatment of ocular pain and inflammation following cataract surgery that was approved by the FDA in 2009. Acular LS ^® (ketorolac ophthalmic solution) 0.4% is a nonsteroidal anti-inflammatory indicated to reduce ocular pain, burning and stinging following corneal refractive surgery. Acular LS ^® , approved by the FDA in 2003, is a reformulated version of Acular ^® . Acular ^® and Acular LS ^® face generic competition in the United States. Pred Forte ^® (prednisolone acetate ophthalmic suspension, USP) 1% is a topical steroid that was approved by the FDA over 35 years ago and faces generic competition in the United States.

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Infection

Zymaxid ^® (gatifloxacin ophthalmic solution) 0.5%, approved by the FDA in 2010, is our next-generation anti-infective product indicated for the treatment of bacterial conjunctivitis.

Allergy

Lastacaft ^® (alcaftadine ophthalmic solution) 0.25%, approved by the FDA in 2010, is a topical allergy medication for the prevention and treatment of itching associated with allergic conjunctivitis. Lastacaft ^® 0.25% was first approved outside the United States by Brazil in 2011. We acquired the global license to manufacture and commercialize Lastacaft ^® in 2010 from Vistakon Pharmaceuticals, LLC, Janssen Pharmaceutica N.V. and Johnson & Johnson Vision Care Inc., or, collectively, Vistakon, and launched Lastacaft ^® in 2011.

Elestat ^® (epinastine HCL ophthalmic solution) 0.05% is used for the prevention of itching associated with allergic conjunctivitis. We license Elestat ^® from Boehringer Ingelheim AG, and hold worldwide ophthalmic commercial rights excluding Japan. Elestat ^® , together with sales under its brand names Relestat ^® and Purivist ^® , is currently approved in approximately 50 countries. Elestat ^® currently faces generic competition in the United States.

Retinal Disease

Ozurdex ^® (dexamethasone intravitreal implant) 0.7 mg is a novel bioerodable formulation of dexamethasone in our proprietary Novadur ^® sustained-release drug delivery system that can be used to locally and directly administer medications to the retina. The FDA approved Ozurdex ^® in 2009 as the first drug therapy indicated for the treatment of macular edema associated with retinal vein occlusion, or RVO, and, in 2010, the EMA granted marketing authorization for Ozurdex ^® for RVO. Ozurdex ^® is currently approved for RVO in approximately 53 countries including Argentina, Brazil, Canada, India, Korea and Mexico. In 2010, the FDA approved Ozurdex ^® for the treatment of non-infectious uveitis affecting the posterior segment of the eye and, in 2011, the EMA granted marketing authorization for Ozurdex ^® for this additional indication. Ozurdex ^® is currently approved for uveitis in approximately 44 countries.

Neuromodulators

Botox ^®

Botox ^® (onabotulinumtoxinA) was first approved by the FDA in 1989 for the treatment of strabismus and blepharospasm, two eye muscle disorders, making it the first botulinum toxin type A product approved in the world. Since its first approval, Botox ^® has been approved by regulatory authorities worldwide as a treatment for approximately 26 unique indications in approximately 88 countries. Botox ^® Cosmetic was first approved for certain aesthetic uses in 2002. In addition to over 22 years of clinical experience, the safety and efficacy of Botox ^® have been well-established in approximately 65 randomized, placebo-controlled clinical trials and in approximately 15,000 patients treated with Botox ^® and Botox ^® Cosmetic in Allergan's clinical trials. Worldwide, approximately 35 million vials of Botox ^® and Botox ^® Cosmetic have been distributed and approximately 29 million treatment sessions have been performed in a span of 21 years (1989-2010). There have been approximately 2,300 articles on Botox ^® or Botox ^® Cosmetic in scientific and medical journals.

For the year ended December 31, 2012, therapeutic uses accounted for approximately 52% of Botox ^® total sales and aesthetic uses accounted for approximately 48% of Botox ^® total sales. Sales of Botox ^® represented approximately 31%, 30%, and 29% of our total consolidated product net sales in 2012, 2011 and 2010, respectively. In the fourth quarter of 2012, Botox ^® received a positive opinion from the Irish Medicines Board for the treatment of idiopathic overactive bladder with symptoms of urinary incontinence, urgency and frequency in adult patients who have an inadequate response to, or are intolerant of, anticholinergic medications. In the first quarter of 2013, the FDA approved Botox ^® for overactive bladder for patients who have an inadequate response to or are intolerant of anticholinergics.

Botox ^® is used therapeutically for the treatment of certain neuromuscular disorders which are characterized by involuntary muscle contractions or spasms, as well for axillary hyperhydrosis and the prophylactic treatment of headaches in adults with chronic migraine. The currently-approved therapeutic indications for Botox ^® in the United States are as follows:


•	the prophylactic treatment of headaches in adult patients with chronic migraine (characterized by 15 or more days per month with a headache lasting four or more hours per day);


•	treatment of idiopathic overactive bladder in adults who have an inadequate response to or are intolerant of an anticholinergic medication;


•	treatment of urinary incontinence due to detrusor overactivity associated with a neurologic condition in adults who have an inadequate response to or are intolerant of an anticholinergic medication;

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•	treatment of upper limb spasticity in adult patients;


•	treatment of cervical dystonia, or sustained contractions or spasms of muscles in the shoulders or neck, in adults, and associated neck pain;


•	treatment of severe axillary hyperhidrosis, or underarm sweating, in adults that is inadequately managed by topical agents;


•	treatment of blepharospasm , or the uncontrollable contraction of the eyelid muscles, associated with dystonia in people 12 years of age or older; and


•	treatment of strabismus, or misalignment of the eyes, in people 12 years of age and over.

Botox ^® is also available outside the United States for various indications. Botox ^® is now approved for the prophylactic treatment of adult chronic migraine in approximately 56 countries, including almost all countries in the European Union as well as Australia, Brazil, Canada, India, Korea and Russia. In 2012, the National Institute for Health and Clinical Excellence, or NICE, issued its Final Guidance authorizing Botox ^® to be used on the United Kingdom's National Health Service, or NHS, as prophylaxis against headache in adults with chronic migraine, specifically in patients who have not responded to at least three prior preventative treatments and whose condition is appropriately managed for medication overuse. Botox ^® has also been approved for the treatment of urinary incontinence due to detrusor overactivity associated with a neurologic condition in approximately 58 countries, including Argentina, Brazil, Canada, France, Germany, Russia, Spain and the United Kingdom. Botox ^® is also approved in many countries outside of the United States for treating hemifacial spasm, cervical dystonia, adult spasticity and spasticity associated with pediatric cerebral palsy.

We have licensed to GlaxoSmithKline, or GSK, our rights to develop and sell Botox ^® in Japan and China for all current and future therapeutic indications. Botox ^® was approved in Japan for equinus foot due to lower limb spasticity in juvenile cerebral palsy patients in 2009 and for the treatment of upper and lower limb spasticity in 2010. In 2012, Botox ^® was approved in Japan for the treatment of primary severe axillary hyperhidrosis.

Botox ^® Cosmetic

The FDA approved Botox ^® Cosmetic in 2002 for the temporary improvement in the appearance of moderate to severe glabellar lines in adult men and women age 65 or younger. Depending on the country of approval, this product is referred to as Botox ^® , Botox ^® Cosmetic, Vistabel ^® , Vistabex ^® or Botox Vista ^® , and is administered in small injections to temporarily reduce the muscle activity that causes the formation of glabellar lines between the eyebrows that often develop during the aging process. Currently, over 75 countries have approved facial aesthetic indications for Botox ^® , Botox ^® Cosmetic, Vistabel ^® , Vistabex ^® or Botox Vista ^® . Botox ^® is approved for upper facial lines in Australia, Canada, New Zealand, and certain countries in East Asia and Latin America. Botox ^® is approved for “crow's feet” facial lines in over 13 countries, including Australia, Canada, New Zealand and Singapore.

Skin Care

Our skin care products focus on the acne, psoriasis, physician-dispensed skin care and eyelash growth markets, particularly in the United States and Canada.

Aczone ^® (dapsone) gel 5% is approved for sale in both the United States and Canada and is indicated for the treatment of acne vulgaris in patients age 12 and older. We launched Aczone ^® in the United States in 2008, and in 2012 Aczone ^® became the most prescribed, branded topical acne treatment by dermatologists that is not a retinoid in the United States. In 2011, we outlicensed our Canadian rights to Aczone ^® to Biovail Laboratories International SRL, a subsidiary of Valeant Pharmaceuticals, Inc.

Tazorac ^® (tazarotene) gel is approved for sale in the United States for the treatment of mild to moderate acne and stable plaque psoriasis, a chronic skin disease characterized by dry red patches. We also market a cream formulation of Tazorac ^® in the United States for the topical treatment of acne and for the treatment of plaque psoriasis. In 2007, we entered into a strategic collaboration agreement with Stiefel Laboratories, Inc., which was acquired by GSK in 2009, to develop and market foam based products involving tazarotene for dermatological use worldwide. Since the Tazorac ^® patent expired in mid-2011, no generics have been launched in the United States and we believe that it is unlikely that Tazorac ^® will face generic competition for several years. This is due to FDA guidance regarding requirements for clinical bioequivalence for generic bioequivalence, separately both for psoriasis and acne.

Vivité ^® is an advanced anti-aging skin care line that uses proprietary GLX Technology ^™ , creating a highly specialized blend of glycolic acid and natural antioxidants. We launched Vivité ^® in 2007 and market our Vivité ^® line of skin care products to physicians in the United States.

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Latisse ^® (bimatoprost ophthalmic solution) 0.03%, is the first, and currently the only, FDA-approved prescription treatment for insufficient or inadequate eyelashes. The FDA approved Latisse ^® in 2008 and we launched Latisse ^® in the United States in 2009. Latisse ^® is also approved for sale in Canada, Russia and certain markets in Latin America, Asia Pacific and the Middle East.

The SkinMedica ^® family of products includes a variety of physician-dispensed, non-prescription aesthetic skin care products, including Lytera ^™ , TNS (Tissue Nutrient Solution) and Vaniqa ^® . Lytera ^™ is a non-prescription, non-hydroquinone skin brightening product that minimizes the appearance of skin discoloration and dark spots. The TNS anti-aging non-prescription product line contains NouriCel ^® , a patented biotechnology derived enriched nutrient solution, and includes cleansing, toning, moisturizing, sun protection, acne, visible redness, lightening products and peels. Vaniqa ^® (eflornithine HCl) is a topical prescription cream used to reduce the growth of facial hair in women, which was approved by the FDA in 2000.

Urologics

Sanctura XR ^® is our once-daily anticholinergic for the treatment of overactive bladder, or OAB. Sanctura XR ^® was approved by the FDA in 2007 and Health Canada in 2010. In October 2012, a competitive generic version of Sanctura XR ^® was launched in the United States.

Medical Devices Segment

Breast Aesthetics

Our silicone gel and saline breast implants, consisting of a variety of shapes, sizes and textures, have been available to women for more than 30 years and are currently sold in approximately 75 countries for breast augmentation, revision and reconstructive surgery. Our breast implants consist of a silicone elastomer shell filled with either a saline solution or silicone gel with varying degrees of cohesivity. This shell can consist of either a smooth or textured surface. We market our breast implants and tissue expanders under the trade names Natrelle ^® , Inspira ^® , BRST ^™ and CUI ^™ and the trademarks BioCell ^® , MicroCell ^™ and BioDimensional ^® . We currently market over 1,000 breast implant product variations worldwide to meet our patients' preferences and needs. The Natrelle ^® 410 shaped silicone breast implants, which are designed to mimic the slope of the breast to deliver a subtle, non-augmented look, were approved by the FDA in the first quarter of 2013 and are also approved in Korea. Our Natrelle ^® line of round responsive implants were approved by the Japanese regulatory agency in 2012. We also sell a line of tissue expanders primarily for breast reconstruction and also as an aid to skin grafting to cover burn scars and correct birth defects.

Obesity Intervention

Lap-Band ^®

The Lap-Band ^® System is designed to provide minimally invasive long-term treatment of severe obesity and is used as an alternative to more invasive procedures such as gastric bypass or sleeve gastrectomy. The Lap-Band ^® System is an adjustable silicone band that is laparoscopically placed around the upper part of the stomach through a small incision, creating a small pouch at the top of the stomach, which slows the passage of food and creates a sensation of fullness. The FDA approved the Lap-Band ^® System in 2001 to treat severe obesity in adults who have failed more conservative weight reduction alternatives. In 2007, we launched the Lap-Band AP ^® System, a next-generation of the Lap-Band ^® System. The Lap-Band AP ^® System has proprietary 360-degree Omniform ^® technology, which is designed to evenly distribute pressure throughout the band's adjustment range. In 2011, the FDA approved the expanded use of the Lap-Band ^® System for weight reduction in obese adults who have failed more conservative weight reduction alternatives and have a minimum Body Mass Index, or BMI, of 30 and at least one comorbid condition, such as type-2 diabetes or hypertension. The Lap-Band ^® System was previously only approved for adults with a BMI of at least 35 and at least one comorbid condition as well as adults with a BMI of at least 40.

Orbera ^®

The Orbera ^® Intragastric Balloon System is a non-surgical alternative for the treatment of overweight and obese adults that is approved for sale outside the United States in over 60 countries. The Orbera ^® System includes a silicone elastomer balloon that is filled with saline after transoral insertion into the patient's stomach to reduce stomach capacity and create an earlier sensation of fullness. The Orbera ^® System is removed endoscopically within six months after placement.

In the first quarter of 2013, we announced the completion of our previously disclosed review of strategic options for maximizing the value of our obesity intervention business, and have formally committed to pursue a sale of that business unit. We currently expect to execute a signed agreement to sell the obesity intervention business in the first half of 2013; however, we cannot assure any outcome or the timing of any outcome related to this process.

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Facial Aesthetics

Our Juvéderm ^® dermal filler family of products are designed to improve facial appearance by smoothing wrinkles and folds using our proprietary Hylacross ^™ and Vycross ^™ technology. This technology enables the delivery of a homogeneous gel-based hyaluronic acid. The FDA approved Juvéderm ^® Ultra and Ultra Plus in 2006 for the correction of moderate to severe wrinkles and folds. In 2010, the FDA approved Juvéderm ^® Ultra XC and Ultra Plus XC, each formulated with lidocaine, an anesthetic that alleviates pain during injections.

Outside the United States, we market various formulations of Juvéderm ^® , including Juvéderm Voluma ^™ for wrinkle and fold augmentation as well as volume deficits. In 2011, we launched Juvéderm Voluma ^™ with lidocaine in Europe and Canada. In October of 2011, Juvéderm Volift ^™ and Juvéderm Volbella ^™ were granted a CE mark in Europe. The Juvéderm ^® dermal filler family of products are currently approved or registered in approximately 89 countries, including all major world markets with the exception of Japan and China where we are pursuing approvals.

International Operations

Our international sales represented 39.1%, 39.8% and 37.4% of our total consolidated product net sales for the years ended December 31, 2012, 2011 and 2010, respectively. Our products are sold in over 100 countries. Marketing activities are coordinated on a worldwide basis, and resident management teams provide leadership and infrastructure for customer-focused, rapid introduction of new products in the local markets.

Sales and Marketing

We sell our products directly through our own sales subsidiaries in approximately 38 countries and, supplemented by independent distributors, in over 100 countries worldwide. We maintain a global strategic marketing team, as well as regional sales and marketing organizations, to support the promotion and sale of our products. We also engage contract sales organizations to promote certain products. Our sales efforts and promotional activities are primarily aimed at eye care professionals, neurologists, physiatrists, dermatologists, plastic and reconstructive surgeons, aesthetic specialty physicians, bariatric surgeons, urologists and general practitioners who use, prescribe and recommend our products.

We advertise in professional journals, participate in medical meetings and utilize direct mail and internet programs to provide descriptive product literature and scientific information to specialists in the ophthalmic, dermatological, medical aesthetics, bariatric, neurology, movement disorder and urology fields. We have developed training modules and seminars to update physicians regarding evolving technology in our products. We also have utilized direct-to-consumer advertising for Botox ^® for chronic migraine, Botox ^® Cosmetic, Juvéderm ^® , the Lap-Band ^® System, Latisse ^® , Natrelle ^® and Restasis ^® . We supplement our marketing efforts with exhibits at medical conventions, advertisements in trade journals, sales brochures and national media. In addition, we sponsor symposia and educational programs to familiarize physicians and surgeons with the leading techniques and methods for using our products.

Our products are sold to drug wholesalers, independent and chain drug stores, pharmacies, commercial optical chains, opticians, mass merchandisers, food stores, hospitals, group purchasing organizations, integrated direct hospital networks, ambulatory surgery centers, government purchasing agencies and medical practitioners. We also utilize distributors for our products in smaller international markets. We transferred back sales and marketing rights for our products from our distributors and established direct operations in Poland, Turkey and the Philippines in 2010, South Africa in 2011 and Russia in 2012.

As of December 31, 2012, we employed approximately 3,600 sales representatives throughout the world. U.S. sales, including manufacturing operations, represented 60.9%, 60.2% and 62.6% of our total consolidated product net sales in 2012, 2011 and 2010, respectively. Sales to Cardinal Health, Inc. for the years ended December 31, 2012, 2011 and 2010 were 14.3%, 14.1% and 13.1%, respectively, of our total consolidated product net sales. Sales to McKesson Drug Company for the years ended December 31, 2012, 2011 and 2010 were 14.2%, 12.6% and 12.1%, respectively, of our total consolidated product net sales. No other country, or single customer, generated over 10% of our total consolidated product net sales.

Research and Development

Our global research and development efforts currently focus on eye care, neurology, urology, skin care, and medical aesthetics. Our strategy includes developing innovative products to address unmet medical needs and conditions associated with aging, as well as chronic and debilitating diseases and conditions, and otherwise assisting patients in reaching life's potential. Our top priorities include furthering our leadership in ophthalmology, medical aesthetics and neuromodulators, identifying new potential compounds for sight-threatening diseases such as glaucoma, age-related macular degeneration and other retinal disorders and developing novel therapies for chronic dry eye, pain and genitourinary diseases as well as next-generation breast implants and dermal fillers.

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We have a fully integrated research and development organization with in-house discovery programs, including medicinal chemistry, high-throughput screening and biological sciences. We supplement our own research and development activities with our commitment to identify and obtain new technologies through in-licensing, research collaborations, joint ventures and acquisitions. As of December 31, 2012, we had approximately 2,000 employees involved in our research and development efforts. Our research and development expenditures for 2012, 2011 and 2010 were approximately $989.6 million, $902.8 million and $804.6 million, respectively.

Some of our research and development highlights are described below, including acquisitions of compounds and products in development and progress under collaborations with third parties.

Ophthalmology . Our research and development efforts for the ophthalmic pharmaceuticals business continue to focus on new therapeutic products for retinal disease, glaucoma and chronic dry eye. In 2012, we significantly expanded our existing relationship with Molecular Partners AG by entering into two separate agreements to discover, develop, and commercialize proprietary therapeutic DARPin ^® products for the treatment of serious ophthalmic diseases. The first agreement is an exclusive license agreement for the design, development and commercialization of MP0260, a potent dual anti-VEGF-A/PDGF-B DARPin ^® , and its corresponding backups for the treatment of exudative age-related macular degeneration and related conditions. The second agreement is an exclusive discovery alliance agreement under which we will collaborate to design and develop DARPin ^® products against selected targets that are implicated in causing serious diseases of the eye. These agreements are in addition to the license agreement we entered into with Molecular Partners AG in 2011, pursuant to which we obtained exclusive global rights in the field of ophthalmology for MP0112, a Phase II proprietary therapeutic DARPin ^® protein targeting vascular endothelial growth factor receptors under investigation for the treatment of retinal diseases.

Neurology . We continue to invest heavily in the research and development of neuromodulators, including Botox ^® and Botox ^® Cosmetic. We are focused on expanding the number of country licenses for the approved indications for Botox ^® , including idiopathic overactive bladder, chronic migraine, adult movement disorders and juvenile cerebral palsy, while also pursuing next-generation neuromodulator-based therapeutics, including a targeted neuromodulator for use in post-herpetic neuralgia. In addition, we are further enhancing biologic process development and manufacturing. In 2011, the FDA and Health Canada approved our fully in vitro, cell-based assay for use in the stability and potency testing of Botox ^® and Botox ^® Cosmetic. In 2012, Allergan received positive opinions for this assay in Europe for Vistabel ^® , Vistabex ^® and Botox ^® .

In January 2013, we entered into a definitive merger agreement with MAP Pharmaceuticals, Inc., or MAP, whereby MAP will become our wholly owned subsidiary. While the acquisition of MAP is pending, we continue to collaborate with MAP pursuant to the collaboration agreement entered into in 2011, for the exclusive development and commercialization by us and MAP of Levadex ^® within the United States to neurologists for the acute treatment of migraine in adults, migraine in adolescents 12 to 18 years of age and other indications that may be approved. Levadex ^® is a self-administered, orally inhaled therapy consisting of a proprietary formulation of dihydroergotamine using MAP's proprietary Tempo ^® delivery system, which has completed Phase III clinical development for the treatment of acute migraine in adults and was accepted for filing by the FDA in November 2012.

Urology . We continue to collaborate with Serenity Pharmaceuticals, LLC, or Serenity, on the development and commercialization of Ser-120, an investigational drug in clinical development for the treatment of nocturia, a urological disorder in adults characterized by frequent urination at night time. Given positive Phase III data, we are currently funding a confirmatory Phase III trial. In 2012, we discontinued our studies related to the use of Botox ^® to treat benign prostatic hyperplasia. In the first quarter of 2013, we restructured our collaboration agreement related to apaziquone with Spectrum Pharmaceuticals, Inc., or Spectrum, pursuant to which Spectrum reacquired all rights from us under the collaboration agreement in exchange for agreeing to pay us a royalty on future net sales of specified products. Going forward, we will have no further obligations under the agreement to share development costs or perform any development, regulatory or other activities.

Dermatology . We continue to develop a novel compound to treat erythema associated with rosacea that we acquired in connection with our 2011 acquisition of Vicept Therapeutics, Inc.

Medical Devices . We continue to invest in the development of biodegradable silk-based scaffolds for use in soft tissue support and repair, including breast augmentation, revision and reconstruction, abdominal and general surgical applications. We invest in research and development around our Natrelle ^® and Inspira ^® line of products for breast augmentation and reconstruction, and our Juvéderm ^® family of dermal filler products. Juvéderm Voluma ^™ with lidocaine is currently under FDA review for correcting age-related mid-face volume deficit.

The continuing introduction of new products supplied by our research and development efforts, including our clinical development projects and in-licensing opportunities are critical to our success. There are intrinsic uncertainties associated with research and development efforts and the regulatory process. We cannot assure you that any of the research projects, clinical development projects, collaborations or pending drug marketing approval applications will result in new products that we can

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commercialize. Delays or failures in one or more significant research or clinical development projects and pending drug marketing approval applications could have a material adverse effect on our future operations. For a more complete discussion of the risks relating to research and development, see Item 1A of Part I of this report, including “Risk Factors - Our development efforts may not result in products or indications approved for commercial sale.”

Patents, Trademarks and Licenses

We own, or have licenses under, numerous U.S. and foreign patents relating to our products, product uses and manufacturing processes. Our success depends on our ability to obtain patents or rights to patents, protect trade secrets and other proprietary technologies and processes, operate without infringing upon the proprietary rights of others, and prevent others from infringing on our patents, trademarks, service marks and other intellectual property rights. Upon the expiration or loss of patent protection for a product, we can lose a significant portion of sales of that product in a very short period of time as other companies manufacture and sell generic forms of our previously protected product without having to incur significant development or marketing costs.

Patents. With the exception of the U.S. and European patents relating to Lumigan ^® 0.01%, Alphagan ^® P 0.15%, Alphagan ^® P 0.1% , Combigan ^® , Ganfort ^™ , Ozurdex ^® and the U.S. patents relating to Restasis ^® , Lastacaft ^® , Latisse ^® and Azcone ^® no one patent or license is materially important to our specialty pharmaceuticals segment. The U.S. marketing exclusivity for Lumigan ^® 0.01% expires in August 2013. The U.S. patents covering Lumigan ^® 0.01% expire in 2014 and 2027 and the European patents expire in 2013, 2017 and 2026. The U.S. patents covering the commercial formulations of Alphagan ^® P 0.15%, and Alphagan ^® P 0.1% expire in 2022. The U.S. patents covering Combigan ^® expire in 2022 and 2023. The European patents covering Ganfort ^™ expire in 2013 and 2022. The U.S. patents covering Ozurdex ^® expire between 2020 and 2024 and the European patent expires in 2021. The U.S. patent covering Restasis ^® expires in 2014. The U.S. patent covering Lastacaft ^® expires in 2013 and a patent term extension is pending. The marketing exclusivity for Lastacaft ^® in the United States expires in July 2015. The U.S. patents covering Latisse ^® expire in 2022, 2023 and 2024 and the European patents covering Latisse ^® expire in 2013 and 2021. The U.S. patent covering Azcone ^® expires in 2016. Furthermore, we acquired certain patents material to the SkinMedica ^® business, including U.S. patents that cover the TNS product line, which expire in 2019, and the U.S. patent that covers the Lytera ™ Skin Brightening Complex, which expires in 2032.

We own, and have rights in, well over 100 issued U.S. and European use and process patents covering various Botox ^® indications, including the treatment of chronic migraine, overactive bladder and hyperhydrosis, as well as our next-generation neuromodulator-based therapeutics currently in development.

With the exception of certain U.S. and European patents relating to the Lap-Band AP ^® System and our Inspira ^® and Natrelle ^® breast implants products, no one patent or license is materially important to our specialty medical device segment. The patents covering our Lap-Band AP ^® System expire in 2024 in the United States and in 2023 in Europe. The patents covering our Inspira ^® and Natrelle ^® breast implant products expire in 2018 in the United States and 2017 in Europe. We have additional patents pending relating to our breast implant products and tissue expanders in development. We also have patents covering our Juvéderm Voluma ^™ dermal filler product in late-stage development that expire in 2021 and 2026 in the United States and in 2021 in Europe.

We also own or have rights to patents covering potential products in late-stage development pursuant to certain agreements with third parties described further below under “ Licenses, ” including, the U.S. patents covering Levadex ^® that expire in 2028 and Ser-120 that expire in 2024. We have exclusive rights in the ophthalmology field to exploit AGN 150998 and other DARPin ^® technology under issued patents in the United States, Canada, and Europe, and a patent application pending in Japan, which expire in 2021, with the exception of one of the U.S. patents, which expires in 2023. Molecular Partners AG also owns patent applications in several countries covering AGN 150998 (MP0112) and other DARPin ^® technology and has granted us an exclusive license to exploit that technology in the ophthalmology field. The patents resulting from those applications, if issued, would expire from 2029 to 2033. For a discussion of the risks relating to late-stage development, please see Item 1A of Part I of this report, including “Risk Factors-Our development efforts may not result in products or indications approved for commercial sale.”

The issuance of a patent is not conclusive as to its validity or as to the enforceable scope of the claims of the patent. It is impossible to anticipate the breadth or degree of protection that any such patents will afford. Third parties may challenge, invalidate or circumvent our patents and patent applications relating to our products, product candidates and technologies, which could result in significant harm to our business.

The individual patents associated with and expected to be associated with our products and late-stage development projects extend for varying periods of time depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries in which they are obtained. The actual protection afforded by a patent varies on a product-by-product basis and country-to-country basis and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patents.

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Trademarks. We market our products under various trademarks, for which we have both registered and unregistered trademark protection in the United States and certain countries outside the United States. We consider these trademarks to be valuable because of their contribution to the market identification of our products and we regularly prosecute third party infringers of our trademarks in an attempt to limit confusion in the marketplace. Any failure to adequately protect our rights in our various trademarks and service marks from infringement could result in a loss of their value to us. If the marks we use are found to infringe upon the trademark or service mark of another company, we could be forced to stop using those marks and, as a result, we could lose the value of those marks and could be liable for damages caused by infringing those marks. In addition to intellectual property protections afforded to trademarks, service marks and proprietary know-how by the various countries in which our proprietary products are sold, we seek to protect our trademarks, service marks and proprietary know-how through confidentiality agreements with third parties, including our partners, customers, employees and consultants. These agreements may be breached or become unenforceable, and we may not have adequate remedies for any such breach. It is also possible that our trade secrets will become known or independently developed by our competitors, resulting in increased competition for our products.

Licenses. We license certain intellectual property from third parties and are involved in various collaborative ventures to develop and commercialize products. Certain of these arrangements include, but are not limited to, the following:


•	a license agreement with Molecular Partners AG pursuant to which we obtained exclusive global rights in the field of ophthalmology for MP0112, a Phase II proprietary therapeutic DARPin ^® protein targeting vascular endothelial growth factor receptors under investigation for the treatment of retinal diseases;


•	an exclusive license agreement with Molecular Partners AG to design, develop and commercialize a potent dual anti-VEGF-A/PDGF-B DARPin ^® (MP0260) and its corresponding backups for the treatment of exudative age-related macular degeneration, or AMD, and related conditions;


•	an exclusive discovery alliance agreement with Molecular Partners AG to design and develop DARPin ^® products against selected targets that are implicated in causing serious diseases of the eye;


•	an exclusive license agreement with Serenity to develop and commercialize Ser-120, a nasally administered low dosage formulation of desmopressin currently in Phase III clinical trials for the treatment of nocturia; and


•	a license from Merck & Co., formerly Inspire Pharmaceuticals, Inc., pursuant to which we pay royalties based on our net sales of Restasis ^® and any other human ophthalmic formulations of cyclosporine owned or controlled by us.

We also license certain of our intellectual property rights to third parties. Certain of these arrangements include but are not limited to the following:


•	a royalty-bearing license to GSK for clinical development and commercial rights to Botox ^® for therapeutic indications in Japan and China;


•	an exclusive licensing agreement with Senju pursuant to which Senju is responsible for the development and commercialization of Lumigan ^® in Japan;


•	an exclusive licensing agreement with Kyorin, which Kyorin subsequently sublicensed to Senju, pursuant to which Senju is responsible for the development and commercialization of our Alphagan ^® P products, including Aiphagan ^® , in Japan;


•	a royalty-bearing license to Merz Pharmaceuticals, or Merz, pursuant to which Merz pays royalties with regard to Xeomin ^® in many countries where we have issued or pending patents;


•	a royalty-bearing license to Alcon for brimonidine 0.15% in the United States; and


•	a royalty-bearing license to US WorldMeds with regard to MyoBloc ^® / Neurobloc ^® .

From time to time, we may need to obtain licenses to patents and other proprietary rights held by third parties to develop, manufacture and market our products. If we are unable to timely obtain these licenses on commercially reasonable terms, our ability to commercially exploit such products may be inhibited or prevented. In addition to the information provided above, please see Item 3 of Part I of this report, “Legal Proceedings,” for information concerning current litigation regarding our products and intellectual property.

Manufacturing

We manufacture the majority of our commercialized products in our own plants located at the following locations: Westport, Ireland; Waco, Texas; San José, Costa Rica; Pringy, France; and Guarulhos, Brazil. We also produce clinical and commercial supplies of biodegradable silk-based scaffolds at a leased facility in Massachusetts and human fibroblast material in an owned

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facility in Houston, Texas. We maintain sufficient manufacturing capacity at these facilities to support forecasted demand as well as a modest safety margin of additional capacity to meet peaks of demand and sales growth in excess of expectations. We increase our capacity as required in anticipation of future sales increases. In the event of a very large or very rapid unforeseen increase in market demand for a specific product or technology, supply of that product or technology could be negatively impacted until additional capacity is brought on line. Third parties manufacture a small number of commercialized products for us.

We are a vertically integrated producer of plastic parts and produce our own bottles, tips and caps for use in the manufacture of our ophthalmic solutions. Additionally, we ferment, purify and characterize the botulinum toxin used in our product Botox ^® and produce human fibroblast raw material for products associated with the 2012 acquisition of SkinMedica. We purchase all other active pharmaceutical ingredients, or API, from third parties as well as other significant raw materials and parts for medical devices from qualified domestic and international sources. Where practical, we maintain more than one supplier for each API and other materials, and we have an ongoing alternate program that identifies additional sources of key raw materials. However, in some cases, we are a niche purchaser and may only have a single source of supply. These sources are identified in filings with regulatory agencies, including the FDA, and cannot be changed without prior regulatory approval. In these cases, we maintain inventories of the raw material itself to mitigate the risk of interrupted supply. A lengthy interruption of the supply of one of these materials and parts for medical devices could adversely affect our ability to manufacture and supply commercial products. In addition, a small number of the raw materials required to manufacture certain of our products are derived from biological sources which could be subject to contamination and recall by their suppliers. We use multiple lots of these raw materials at any one time in order to mitigate such risks. However, a shortage, contamination or recall of these products could disrupt our ability to maintain an uninterrupted commercial supply of our finished goods.

Manufacturing facilities producing pharmaceutical and medical device products intended for distribution in the United States and internationally are subject to regulation and periodic review by the FDA, international regulatory authorities and European notified bodies for certain of our medical devices. All of our facilities are currently approved by the FDA, the relevant notified bodies or other foreign regulatory authorities to manufacture pharmaceuticals and medical devices for distribution in the United States and international markets. For a discussion of the risks relating to manufacturing and the use of third party manufacturers, see Item 1A of Part I of this report, including “Risk Factors - Disruptions in our supply chain or failure to adequately forecast product demand could result in significant delays or lost sales.”

Competition

The pharmaceutical and medical device industries are highly competitive and require an ongoing, extensive search for technological innovation. They also require, among other things, the ability to effectively discover, develop, test and obtain regulatory approvals for products, as well as the ability to effectively commercialize, market and promote approved products, including communicating the effectiveness, safety and value of products to actual and prospective customers and medical professionals. Numerous companies are engaged in the development, manufacture and marketing of health care products competitive with those that we develop, manufacture and market. Many of our competitors have greater resources than we have. This enables them, among other things, to make greater research and development investments and spread their research and development costs, as well as their marketing and promotion costs, over a broader revenue base. Our competitors may also have more experience and expertise in obtaining marketing approvals from the FDA and other regulatory authorities. In addition to product development, testing, approval and promotion, other competitive factors in the pharmaceutical and medical device industries include industry consolidation, product quality and price, product technology, reputation, customer service and access to technical information. We believe that our products principally compete on the basis of quality, clinical data, product design, an experienced sales force, physicians' and surgeons' familiarity with our products and brand names, effective marketing campaigns, including direct-to-consumer advertising, customer relationship marketing databases, regional warranty programs and our ability to identify and develop or license patented products embodying new technologies.

Specialty Pharmaceuticals Segment

Eye Care Products

Our eye care pharmaceutical products face extensive competition from Alcon Laboratories, Inc./Novartis AG, Abbott Laboratories, Bausch & Lomb, Inc., Genentech/Hoffman La Roche AG, Merck & Co., Pfizer Inc., Regeneron Pharmaceuticals, Inc. and Santen Seiyaku. For our eye care products to be successful, we must be able to manufacture and effectively detail them to a sufficient number of eye care professionals such that they use or continue to use our current products and the new products we may introduce. Glaucoma must be treated over an extended period and doctors may be reluctant to switch a patient to a new treatment if the patient's current treatment for glaucoma is effective and well tolerated.

We also face intense competition from generic drug manufacturers in the United States and internationally. The first generic of Alphagan ^® was approved by the FDA in 2003 and Alphagan ^® P 0.15% also faces generic competition in the United States. A

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generic form of Elestat ^® was first approved by the FDA in 2011 and Elestat ^® now faces generic competition in the United States. A generic form of Zymar ^® produced by Apotex Inc. was approved by the FDA in 2011, but a generic product has not been launched in the United States. Acular LS ^® and Acular ^® also face generic competition in the United States. In some cases, we also compete with generic versions of our competitors' products. For instance, Lumigan ^® now competes indirectly with generic versions of Pfizer's Xalatan ^® ophthalmic solution.

In recent years we have received paragraph 4 Hatch-Waxman Act certifications from various generic drug manufacturers, including but not limited to Excela PharmaSci, Inc., Apotex Inc., Barr Laboratories, Inc., Sandoz, Inc., Alcon Research, Ltd., Watson Laboratories, Inc., Lupin Limited and High-Tech Pharmacal Co., Inc., seeking FDA approval of generic forms of certain of our eye care products, including Alphagan ^® P 0.15%, Alphagan ^® P 0.1%, Combigan ^® , Lumigan ^® 0.1%, Zymar ^® and Zymaxid ^® . We expect to continue to receive paragraph 4 Hatch-Waxman Act certifications from these and other companies challenging the validity of our patents.

Neuromodulators

Botox ^® was the only neuromodulator approved by the FDA until 2000, when the FDA approved Myobloc ^® (rimabotulinumtoxinB), a neuromodulator currently marketed by US WorldMeds. In 2009, the FDA approved Dysport ^® (abobotulinumtoxinA) for the treatment of cervical dystonia and glabellar lines, which is marketed by Ipsen Ltd., or Ipsen, and Valeant Pharmaceuticals International, Inc., or Valeant, which acquired Medicis Pharmaceutical Corporation in 2012. Since the approval of Dysport ^® , the FDA has required that all botulinum toxins marketed in the United States include a boxed warning regarding the symptoms associated with the spread of botulinum toxin beyond the injection site along with a medication guide which addresses the lack of interchangeability of botulinum toxin products. In 2006, Ipsen received marketing authorization for a cosmetic indication for Dysport ^® in Germany. In 2007, Ipsen granted Galderma, a joint venture between Nestle and L'Oréal Group, an exclusive development and marketing license for Dysport ^® for cosmetic indications in the European Union, Russia, Eastern Europe and the Middle East, and first rights of negotiation for other countries around the world, except the United States, Canada and Japan. In 2009, the health authorities of 15 European Union countries approved Dysport ^® for glabellar lines under the trade name Azzalure ^® . Health Canada approved Dysport for glabellar lines in 2012, but the product has not yet been launched. In 2011, Ipsen and Syntaxin engaged in a research collaboration agreement to develop native and engineered formats of botulinum neurotoxin. In 2012, Ipsen and Galderma broadened its existing relationship with Galderma related to Dysport ^® by renewing the sole distribution partnership in Brazil and Argentina, forming a new partnership in Australia and entering into a co-promotion agreement in South Korea.

In addition, Merz's botulinum toxin product Xeomin ^® is currently approved for therapeutic indications in most countries in the European Union as well as Canada and certain countries in Latin America and Asia. Xeomin ^® was approved by the FDA in 2010 for cervical dystonia and blepharospasm in adults previously treated with Botox ^® . In 2009, Merz received approval of Bocouture ^® (rebranded from Xeomin ^® ) for glabellar lines in Germany. In 2010, Bocouture ^® was approved in significant markets within the European Union. Xeomin ^® is also approved for glabellar lines in Argentina and Mexico. In 2011, Xeomin ^® was approved for glabellar lines in the United States and Korea. In 2012, the U.S. District Court, after conducting a full trial, ruled that Merz Pharmaceuticals and Merz Aesthetics violated California's Uniform Trade Secrets Act and issued a permanent injunction against them for misappropriating our trade secrets. The injunction prohibited Merz from, among other things, selling or soliciting purchases of Xeomin ^® in the facial aesthetics market until January 9, 2013. The injunction, as subsequently amended, also prohibited Merz from selling or soliciting purchases, to certain customers, of its dermal fillers or Xeomin ^® in the therapeutic market until November 1, 2012. In 2012, Merz announced a partnership with Pierre Fabre related to the marketing of Glytone ^® whereby Merz acquired certain hyaluronic acid injectables used to reduce wrinkles.

Mentor Worldwide LLC, a division of Johnson & Johnson, or Mentor, is conducting clinical trials for a competing neuromodulator for glabellar lines in the United States and Johnson & Johnson has communicated that Mentor will file its Biologics License Application, or BLA, with the FDA in the fourth quarter of 2013 or later. In addition, Revance Therapeutics, Inc. is developing a topically applied botulinum toxin type A (BoNTA) for cosmetic and therapeutic indications, including lateral canthal lines and hyperhidrosis.

In addition, we are aware of competing neuromodulators currently being developed and commercialized in Asia, South America and other markets. A Korean botulinum toxin, Meditoxin ^® , was approved for sale in Korea in 2006. The company, Medy-Tox Inc., received exportation approval from Korean authorities in early 2005 to ship their product under the trade name Neuronox ^® . Neuronox ^® is marketed in Hong Kong, India , Thailand and other Asian markets. Meditoxin ^® is approved in several South American and African countries under various trade names. A Chinese entity, Lanzhou Biological Institute, received approval to market a botulinum toxin in China in 1997 under the trade name HengLi, and has launched its botulinum toxin product in other lightly regulated markets in Asia, South America and Central America under several trade names. Another Korean company, Hugel Inc. markets Botulax for aesthetic use in Korea. These lightly regulated markets may not require adherence to the FDA's current Good Manufacturing Practice regulations, or cGMPs, or the regulatory requirements of the European Medicines Agency or other

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regulatory agencies in countries that are members of the Organization for Economic Cooperation and Development. While these products are unlikely to meet stringent U.S. regulatory standards, the companies operating in these markets may be able to produce products at a lower cost than we can.

Skin Care Products

Our skin care products, including Aczone ^® , Tazorac ^® , Vivité ^® , Latisse ^® and the family of SkinMedica ^™ products, focus on the acne, psoriasis, physician-dispensed skin care and eyelash growth markets, particularly in the United States and Canada, and compete with many other skin care products from companies, including Galderma, Stiefel Laboratories, Inc., a division of GSK, Novartis AG, Obagi Medical Products, Inc., L'Oréal Group and Valeant Pharmaceuticals International, many of which have greater resources than us. We also compete with mass retail products that are designed to treat skin care issues similar to those for which our products are indicated. For example, Aczone ^® faces competition from several generic and over-the-counter products, which provide lower-priced options for the treatment of acne.

Urology

Our products for the treatment of OAB, Sanctura ^® and Sanctura XR ^® , compete with several other OAB treatment products, many of which have been on the market for a longer period of time, including Pfizer Inc.'s Detrol ^® , Detrol ^® LA and Toviaz ^™ , Actavis Inc.'s Oxytrol ^® and Gelnique ^™ , Warner Chilcott PLC's Enablex ^® and Astellas Pharma US, Inc.'s Vesicare ^® and Myrbetriq ^™ products and certain generic OAB products. We also face competition from generic urologic drug manufacturers in the United States and internationally. Sanctura ^® and Sanctura XR ^® face generic competition in the United States.

Medical Devices Segment

Breast Aesthetics

We compete in the U.S. breast implant market with Mentor and Sientra, Inc., or Sientra, a partner of Silimed. The conditions under which Mentor and Sientra are allowed to market silicone breast implants and tissue expanders in the United States are similar to ours, including indications for use and the requirement to conduct post-marketing studies. If patients or physicians prefer Mentor's or Sientra's breast products to ours or perceive that Mentor's or Sientra's breast products are safer than ours, our sales of breast products could materially suffer. Internationally, we compete with several manufacturers, including Mentor, Silimed, Eurosilicone, Nagor, Polytech and several Chinese implant manufacturers.

Obesity Intervention

Ethicon Endo-Surgery, Inc., a subsidiary of Johnson & Johnson, received FDA approval in 2007 to market its gastric band product, the Realize ^® Personalized Banding Solution, in the United States. The Realize ^® band competes with our Lap-Band ^® System. Outside the United States, the Lap-Band ^® System competes primarily with the Realize ^® band, Heliogast ^® by Helioscopie SA, Midband ^™ by Medical Innovation Development SAS, Soft Gastric Band by Agency for Medical Innovation, Bioring ^® by Cousin Biotech, MiniMizer Extra by Bariatric Solns and Adj Gastric Band by Silimed. No intragastric balloons for the treatment of obesity are commercially available in the United States. Outside the United States, our Orbera ^® products compete with other intragastric balloons made by Helioscopie, Silimed, Spatz FGIA and Endalis, in certain countries in the European Union, Latin America and/or Asia Pacific. In 2011, we discontinued our EasyBand ^™ Remote Adjustable Gastric Band System, which we had acquired in connection with our 2007 acquisition of EndoArt SA. In addition to competition within the gastric band industry, we also face competition from other bariatric procedures, including gastric bypass and sleeve gastrectomy.

Facial Aesthetics

Our facial products compete in the dermatology and plastic surgery markets with other hyaluronic acid fillers, as well as polymer/bioceramic-based injectables. Our fillers compete indirectly with substantially different procedures, such as laser treatments, face lifts, chemical peels, fat injections and botulinum toxin-based products. In addition, several companies are engaged in research and development activities examining the use of collagen, hyaluronic acids and other biomaterials for the correction of soft tissue defects. In the United States, our dermal filler products, including Juvéderm ^® Ultra and Ultra Plus, compete with Valeant's products Restylane ^® and Perlane ^™ , which were approved by the FDA in 2004 and in 2007, respectively. In 2010, the FDA approved our Juvéderm ^® Ultra XC and Ultra Plus XC products containing lidocaine as well as new formulations of Restylane ^® and Perlane ^™ also containing lidocaine and Restylane ^® without lidocaine for lips.

Additional competitors in the filler category include Radiesse ^® , a calcium hydroxylapatite from Bioform, which received FDA approval in 2006 and was acquired by Merz in 2010, Sculptra ^® from Valeant Pharmaceuticals, Inc., and Belotero Balance ^® from Merz, which received FDA approval in 2011. Internationally, we compete with Q-Med's range of Restylane ^® and Perlane ^™

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products, as well as products from Anteis, Filoraga, Teoxane, Valeant Pharmaceuticals, Inc. and a large number of other hyaluronic acid, bioceramic, protein and other polymer-based dermal fillers.

Government Regulation

Specialty Pharmaceuticals Segment

Drugs and biologics are subject to regulation by the FDA, state agencies and foreign health agencies. Pharmaceutical products and biologics are subject to extensive pre- and post-market regulation by the FDA, including regulations that govern the testing, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising and promotion of the products under the Federal Food, Drug, and Cosmetic Act, or FFDCA, and its implementing regulations with respect to drugs and the Public Health Services Act and its implementing regulations with respect to biologics, and by comparable agencies in foreign countries. Failure to comply with applicable FDA or other requirements may result in civil or criminal penalties, recall or seizure of products, partial or total suspension of production or withdrawal of a product from the market.

The process required by the FDA before a new drug or biologic may be marketed in the United States is long, expensive and inherently uncertain. We must complete preclinical laboratory and animal testing, submit an Investigational New Drug Application, which must become effective before United States clinical trials may begin, and perform adequate and well controlled human clinical trials to establish the safety and efficacy of the proposed drug or biologic for its intended use. Clinical trials are typically conducted in three sequential phases, which may overlap, and must satisfy extensive Good Clinical Practice regulations and informed consent regulations. Further, an independent institutional review board, or IRB, for each medical center or medical practice proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center or practice and must monitor the study until completed. The FDA, the IRB or the study sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. In addition, the Food and Drug Administration Amendments Act of 2007, or FDAAA, imposes certain clinical trial registry obligations on study sponsors, including the posting of detailed trial design and trial results in the FDA public databases.

We must submit a New Drug Application, or NDA, for a new drug and a Biologics License Application, or BLA, for a biologic to the FDA, and the NDA or BLA must be reviewed and approved by the FDA before the drug or biologic may be legally marketed in the United States. To satisfy the criteria for approval, a NDA or BLA must demonstrate the safety and efficacy of the product based on results of preclinical studies and the three phases of clinical trials. Both NDAs and BLAs must also contain extensive manufacturing information, and the applicant must pass an FDA pre-approval inspection of the manufacturing facilities at which the drug or biologic is produced to assess compliance with the FDA's cGMPs prior to commercialization. Satisfaction of FDA pre-market approval requirements typically takes several years and the actual time required may vary substantially based on the type, complexity and novelty of the product, and we cannot be certain that any approvals for our products will be granted on a timely basis, or at all.

Once approved, the FDA may require post-marketing clinical studies, known as Phase IV studies, and surveillance programs to monitor the effect of approved products. The FDA may limit further marketing of the product based on the results of these post-market studies and programs. Further, any modifications to the drug or biologic, including changes in indications, labeling or manufacturing processes or facilities, may require the submission and approval of a new or supplemental NDA or BLA before the modification is implemented, which may require that we develop additional data or conduct additional preclinical studies and clinical trials.

The manufacture and distribution of drugs and biologics are subject to continuing regulation by the FDA, including recordkeeping requirements, reporting of adverse experiences associated with the drug, and cGMPs, which regulate all aspects of the manufacturing process and impose certain procedural and documentation requirements. Drug and biologic manufacturers and their subcontractors are required to register their establishments, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with regulatory requirements. Further, the FDAAA, which went into law in 2007, provided the FDA with additional authority over post-marketing safety. The FDAAA permits the FDA to require sponsors to conduct post-approval clinical studies, to mandate labeling changes based on new safety information and to require sponsors to implement a Risk Evaluation and Mitigation Strategies, or REMS, program to carry out specified post-market safety measures. The FDA may require a sponsor to submit a REMS program before a product is approved, or after approval based on new safety information. A REMS program may include a medication guide, a patient package insert, a plan for communicating risks to health care providers or other elements that the FDA deems necessary to assure the safe use of the drug. If the manufacturer or distributor fails to comply with the statutory and regulatory requirements, or if safety concerns arise, the FDA may take legal or regulatory action, including civil or criminal penalties, suspension, withdrawal or delay in the issuance of approvals, or seizure or recall of products, any one or more of which could have a material adverse effect upon us.

The FDA imposes a number of complex regulatory requirements on entities that advertise and promote pharmaceuticals and biologics, including, but not limited to, standards and regulations for direct-to-consumer advertising, off-label promotion,

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industry-sponsored scientific and educational activities, and promotional activities including internet marketing. The Food and Drug Administration Safety and Innovation Act of 2012, or FDASIA, requires the FDA to issue new guidance on permissible forms of internet and social medial promotion of regulated medical products, and the FDA may soon specify new restrictions on this type of promotion. Drugs and biologics can only be marketed for approved indications and in accordance with the labeling approved by the FDA. Failure to comply with these regulations can result in penalties, including the issuance of warning letters directing a company to correct deviations from FDA standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA, and federal and state civil and criminal investigations and prosecutions. The FDA does not, however, regulate the behavior of physicians in their practice of medicine and choice of treatment. Physicians may prescribe (although manufacturers are not permitted to promote) legally available drugs and biologics for uses that are not described in the product's labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties.

We are also subject to various laws and regulations regarding laboratory practices, the housing, care and experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances in connection with our research. In each of these areas, as above, the FDA and the U.S. Department of Justice have broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay our operations and issue approvals, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect upon us.

Internationally, the regulation of drugs is also complex. In Europe, our 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 the European Medicines Agency and national Ministries of Health. Particular emphasis is also being placed on more sophisticated and faster procedures for reporting adverse events to the competent authorities. The European Union procedures for the authorization of medicinal products are intended to improve the efficiency of operation of both the mutual recognition and centralized procedures to license medicines. Similar rules and regulations exist in all countries around the world. Additionally, new rules have been introduced or are under discussion in several areas, including the harmonization of clinical research laws and the laws relating to orphan drugs and orphan indications. For example, in 2012, the European Commission adopted a proposal intended to replace the current European Union Clinical Trials Directive which includes reforms for streamlining clinical trial oversight among the European Member States. Outside the United States, reimbursement pricing is typically regulated by government agencies.

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. Legislation passed in recent years has imposed certain changes to the way in which pharmaceuticals, including our products, are covered and reimbursed in the United States. For instance, federal legislation and regulations have created a voluntary prescription drug benefit, Medicare Part D, and have imposed significant revisions to the Medicaid Drug Rebate Program. The recently enacted Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, collectively, the PPACA, imposes additional changes to these programs. The estimated pre-tax equivalent cost of rebates and excise taxes to us under PPACA was approximately $114 million in 2012. There also is political pressure to allow the importation of pharmaceutical and medical device products from outside the United States. Reimbursement restrictions or other price reductions or controls or imports of pharmaceutical or medical device products from outside of the United States could materially and adversely affect our revenues and financial condition. Additionally, price reductions and rebates have recently been mandated in several European countries, principally Germany, Italy, Spain, the United Kingdom, Turkey and Greece as well as in Korea and cost Allergan an estimated $36 million in 2012. Certain products are also no longer eligible for reimbursement in France, Italy and Germany. Reference pricing is used in several markets around the world to reduce prices. Furthermore, parallel trade within the European Union, whereby products flow from relatively low-priced to high-priced markets, has been increasing. Spain removed government reimbursement for artificial tears products in September 2012.

We cannot predict the likelihood or pace of any significant future regulatory or legislative action in the specialty pharmaceuticals segment, nor can we predict whether or in what form health care legislation being formulated by various governments in this area will be passed. Initiatives could subject coverage and reimbursement rates to change at any time. We cannot predict with precision what effect such governmental measures would have if they were ultimately enacted into law. However, in general, we believe that such legislative activity will likely continue.

Medical Devices Segment

Medical devices are subject to regulation by the FDA, state agencies and foreign government health agencies. FDA regulations, as well as various U.S. federal and state laws, govern the development, clinical testing, manufacturing, labeling, record keeping and marketing of medical device products. Our medical device product candidates, including our breast implants, must undergo rigorous clinical testing and an extensive government regulatory clearance or approval process prior to sale in the United States and other countries. The lengthy process of clinical development and submissions for approvals, and the continuing need for compliance with applicable laws and regulations, require the expenditure of substantial resources. Regulatory clearance or

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approval, when and if obtained, may be limited in scope, and may significantly limit the indicated uses for which a product may be marketed. Approved products and their manufacturers are subject to ongoing review, and discovery of previously unknown problems with products may result in restrictions on their manufacture, sale, use or their withdrawal from the market.

Our medical device products are subject to extensive regulation by the FDA in the United States. Unless an exemption applies, each medical device we market in the United States must have a 510(k) clearance or a Premarket Approval Application, or PMA, in accordance with the Federal Food, Drug, and Cosmetic Act, or FFDCA, and its implementing regulations. The FDA classifies medical devices into one of three classes, depending on the degree of risk associated with each medical device and the extent of controls that are needed to ensure safety and effectiveness. Devices deemed to pose a lower risk are placed in either Class I or Class II, which may require the manufacturer to submit to the FDA a premarket notification under Section 510(k) of the FFDCA requesting permission for commercial distribution. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or a device deemed to be not substantially equivalent to a previously cleared 510(k) device, are placed in Class III. In general, a Class III device cannot be marketed in the United States unless the FDA approves the device after submission of a PMA application, and any changes to the device must be reviewed and approved by the FDA. The majority of our medical device products, including our breast implants, are regulated as Class III medical devices. Under new changes instituted by FDASIA, the FDA may now change the classification of a medical device by administrative order instead of by regulation. Although the revised process is simpler, the FDA must still publish a proposed order in the Federal Register, hold a device classification panel meeting, and consider comments from affected stakeholders before issuing the reclassification order.

When we are required to obtain a 510(k) clearance for a device we wish to market, we must submit a premarket notification to the FDA demonstrating that the device is “substantially equivalent” to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA had not yet called for the submission of PMA applications. By regulation, the FDA is required to respond to a 510(k) premarket notification within 90 days after submission of the notification, although clearance can take significantly longer. If a device receives 510(k) clearance, any modification that could significantly affect its safety or efficacy, or that would constitute a major change in its intended use, design or manufacture requires a new 510(k) clearance or PMA approval. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer's determination. If the FDA disagrees with a manufacturer's determination that a new clearance or approval is not required for a particular modification, the FDA can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or premarket approval is obtained.

In response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA initiated an evaluation of the program, and in January 2011, announced several proposed actions intended to reform the review process governing the clearance of medical devices. These actions include new guidance to industry on when clinical data should be included in a premarket submission, pre-submission interactions with the FDA, the process for appeals of device approval decisions, and the “de novo” classification process for novel low-risk devices. The FDA intends these reform actions to improve the efficiency and transparency of the clearance process, as well as bolster patient safety. In addition, as part of FDASIA, Congress reauthorized the Medical Device User Fee Amendments with various FDA performance goal commitments and enacted several “Medical Device Regulatory Improvements” and miscellaneous reforms which are further intended to clarify and improve medical device regulation both pre- and post-approval. We cannot predict the impact that these regulatory actions and the FDA's forthcoming guidance will have on the clearance of any new or modified medical device products that are currently pending FDA review or that we may develop in the future.

A PMA application must be submitted if the device is not exempt or cannot be cleared through the 510(k) process. The PMA process is much more demanding than the 510(k) clearance process. A PMA application must be supported by extensive information, including data from preclinical and clinical trials, sufficient to demonstrate to the FDA's satisfaction that the device is safe and effective for its intended use. The FDA, by statute and regulation, has 180 days to review and accept a PMA application, although the review generally occurs over a significantly longer period of time, and can take up to several years. The FDA may also convene an advisory panel of experts outside the FDA to review and evaluate the PMA application and provide recommendations to the FDA as to the approvability of the device. New PMA applications or supplemental PMA applications are required for significant modifications to the manufacturing process, labeling and design of a medical device that is approved through the PMA process. PMA supplements require information to support the changes and may include clinical data.

A clinical trial is almost always required to support a PMA application and is sometimes required for a 510(k) premarket notification. Clinical trials generally require submission of an application for an investigational device exemption, which must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound, as well as approval by the FDA and the IRB overseeing the trial. In addition, the FDAAA imposes certain clinical trial registry obligations on study sponsors. We, the FDA or the IRB at each site at which a clinical trial is being performed may suspend a clinical trial at any time for various reasons, including a belief that the study subjects are being exposed to an unacceptable health risk. The results of clinical testing may not be sufficient to obtain approval of the product.

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Once a device is approved, the manufacture and distribution of the device remains subject to continuing regulation by the FDA, including Quality System Regulation requirements, which involve design, testing, control, documentation and other quality assurance procedures during the manufacturing process. Medical device manufacturers and their subcontractors are required to register their establishments and list their manufactured devices with the FDA, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with regulatory requirements. Manufacturers must also report to the FDA if their devices may have caused or contributed to a death or serious injury or malfunctioned in a way that could likely cause or contribute to a death or serious injury, or if the manufacturer conducts a field correction or product recall or removal to reduce a risk to health posed by a device or to remedy a violation of the FFDCA that may present a health risk. Further, the FDA continues to regulate device labeling, and prohibits the promotion of products for unapproved or “off-label” uses along with other labeling restrictions. If a manufacturer or distributor fails to comply with any of these regulatory requirements, or if safety concerns with a device arise, the FDA may take legal or regulatory action, including civil or criminal penalties, suspension, withdrawal or delay in the issuance of approvals, or seizure or recall of products, any one or more of which could have a material adverse effect upon us.

The FDA imposes a number of complex regulatory requirements on entities that advertise and promote medical devices, including, but not limited to, standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities, and promotional activities including internet marketing. Medical devices can only be marketed for indications approved or cleared by the FDA. Failure to comply with these regulations can result in penalties, the issuance of warning letters directing a company to correct deviations from FDA standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA, and federal and state civil and criminal investigations and prosecutions. The FDA does not, however, regulate physicians in their practice of medicine and choice of treatment. Physicians may prescribe (although manufacturers are not permitted to promote) legally available devices for uses that are not described in the product's labeling and that differ from those tested by us and approved or cleared by the FDA. Such off-label uses are common across medical specialties.

A Class III device may have significant additional obligations imposed in its conditions of approval. Compliance with regulatory requirements is assured through periodic, unannounced facility inspections by the FDA and other regulatory authorities, and these inspections may include the manufacturing facilities of our subcontractors or other third party manufacturers. Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions: warning letters or untitled letters; fines, injunctions and civil penalties; recall or seizure of our products; operating restrictions, partial suspension or total shutdown of production; refusing our request for 510(k) clearance or PMA approval of new products; withdrawing 510(k) clearance or PMAs that are already granted; and criminal prosecution.

Products that are marketed in the European Union must comply with the requirements of the Medical Device Directive, or MDD, as implemented in the national legislation of the European Union member states. The MDD, as implemented, provides for a regulatory regime with respect to the design, manufacture, clinical trials, labeling and adverse event reporting for medical devices to ensure that medical devices marketed in the European Union are safe and effective for their intended uses. Medical devices that comply with the MDD, as implemented, are entitled to bear a CE marking and may be marketed in the European Union. Following a highly publicized incident surrounding a French breast implant company that was discovered in late 2011 to be using unapproved industrial grade silicone in its implants, the European Union is considering more onerous device registration and surveillance regulations. Medical device laws and regulations similar to those described above are also in effect in many of the other countries to which we export our products. These range from comprehensive device approval requirements for some or all of our medical device products to requests for product data or certifications. Failure to comply with these domestic and international regulatory requirements could affect our ability to market and sell our products in these countries.

Medical devices are also 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. Governments may delay reimbursement decisions after a device has been approved by the appropriate regulatory agency, impose rebate obligations or restrict patient access. PPACA also imposes significant new taxes on medical device makers in the form of a 2.3% excise tax on all U.S. medical device sales beginning in January 2013. Under the legislation, the total cost to the medical device industry is expected to be approximately $20 billion over ten years. This significant increase in the tax burden on the medical device industry could have an adverse impact on our results of operations and our cash flows. Although efforts are currently underway to repeal the tax, we cannot predict whether these efforts will be successful. We expect that current health care reform measures such as PPACA and those that may be adopted in the future, could have a material adverse effect on our industry generally and our ability to successfully commercialize our products or could limit or eliminate our spending on certain development projects.

Other Regulations

We are subject to federal, state, local and foreign environmental laws and regulations, including the U.S. Occupational Safety and Health Act, the U.S. Toxic Substances Control Act, the U.S. Resource Conservation and Recovery Act, Superfund Amendments and Reauthorization Act, Comprehensive Environmental Response, Compensation and Liability Act and other current

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and potential future federal, state or local regulations. Our manufacturing and research and development activities involve the controlled use of hazardous materials, chemicals and biological materials, which require compliance with various laws and regulations regarding the use, storage and disposal of such materials. We cannot assure you, however, that environmental problems relating to properties owned or operated by us will not develop in the future, and we cannot predict whether any such problems, if they were to develop, could require significant expenditures on our part. In addition, we are unable to predict what legislation or regulations may be adopted or enacted in the future with respect to environmental protection and waste disposal.

Additionally, we are subject to domestic and international laws and regulations pertaining to the privacy and security of personal health information, including but not limited to the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, collectively, HIPAA. In addition, many states have enacted comparable laws addressing the privacy and security of health information, some of which are more stringent than HIPAA.

We are also subject to various federal and state laws pertaining to health care “fraud and abuse” and gifts to health care practitioners, including the federal Anti-Kickback Statute. The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Furthermore, the federal False Claims Act prohibits anyone from, among other things, knowingly and willingly presenting, or causing to be presented for payment to third party payors (including Medicare and Medicaid), claims for reimbursed products or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. HIPAA prohibits executing a scheme to defraud any health care benefit program or making false statements relating to health care matters. In addition, many states have adopted laws similar to the federal fraud and abuse laws discussed above, which, in some cases, apply to all payors whether governmental or private. Our activities, particularly those relating to the sale and marketing of our products, may be subject to scrutiny under these and other laws.

The Physician Payment Sunshine Act also imposes new reporting and disclosure requirements on device and drug manufacturers for any “transfer of value” made or distributed to prescribers and other healthcare providers. In addition, device and drug manufacturers will also be required to report and disclose any investment interests held by physicians and their immediate family members during the preceding calendar year. Failure to submit required information may result in significant civil monetary penalties. Manufacturers will be required to begin data collection on August 1, 2013 and report such data to CMS by March 31, 2014.

Some states, such as California, Massachusetts and Vermont, mandate implementation of compliance programs to ensure compliance with these health care fraud and abuse laws. Under California law, pharmaceutical companies must adopt a comprehensive compliance program that is in accordance with both the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers, or OIG Guidance, and the Pharmaceutical Research and Manufacturers of America Code on Interactions with Healthcare Professionals, or the PhRMA Code. The PhRMA Code seeks to promote transparency in relationships between health care professionals and the pharmaceutical industry and to ensure that pharmaceutical marketing activities comport with the highest ethical standards. The PhRMA Code contains strict limitations on certain interactions between health care professionals and the pharmaceutical industry relating to gifts, meals, entertainment and speaker programs, among others. Similarly, the Advanced Medical Technology Association's Revised Code of Ethics, or the AdvaMed Code, also seeks to ensure that medical device companies and health care professionals have collaborative relationships that meet high ethical standards, that medical decisions are based on the best interests of patients, and that medical device companies and health care professionals comply with applicable laws, regulations and government guidance. To that end, the AdvaMed Code provides guidance regarding how medical device companies may comply with certain aspects of the anti-kickback laws and OIG Guidance by outlining ethical standards for interactions with health care professionals. In addition, certain states, such as Massachusetts and Minnesota, have also imposed restrictions on the types of interactions that pharmaceutical and medical device companies or their agents (e.g., sales representatives) may have with health care professionals, including bans or strict limitations on the provision of meals, entertainment, hospitality, travel and lodging expenses, and other financial support, including funding for continuing medical education activities.

In 2010, we reached a settlement with the U.S. Attorney, U.S. Department of Justice for the Northern District of Georgia, or DOJ, and other federal agencies regarding our alleged sales and marketing practices in connection with certain therapeutic uses of Botox ^® . In connection with this settlement, we agreed to (i) plead guilty to a single misdemeanor “misbranding” charge covering the period from 2000 through 2005; (ii) pay the government $375 million, which includes a $350 million criminal fine and $25 million in forfeited assets; (iii) pay $225 million to resolve civil claims asserted by the DOJ under the civil False Claims Act; and (iv) enter into a five-year Corporate Integrity Agreement, or CIA, with the Office of Inspector General of the Department of Health and Human Services. Failure to comply with the terms of the CIA could result in substantial civil or criminal penalties and being excluded from government health care programs. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from federal health care programs (including Medicare and Medicaid).

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Our global activities are subject to the U.S. Foreign Corrupt Practices Act, the FCPA, the United Kingdom's Bribery Act of 2010, the UK Bribery Act, and other countries' anti-bribery laws that have been enacted in support of the Organization for Economic Cooperation and Development's Anti-Bribery Convention. These laws generally prohibit companies and their intermediaries from offering, promising, authorizing or providing payments or anything of value to any foreign government official, government staff member, political party or political candidate for the purpose of obtaining or retaining business or securing any other improper advantage. The UK Bribery Act also prohibits commercial bribery and makes it a crime for companies to fail to prevent bribery. Companies have the burden of proving that they have adequate procedures in place to prevent bribery. The enforcement of such laws in the U.S. and elsewhere has increased dramatically in the past few years, and authorities have indicated that the pharmaceutical and medical device industry will be a significant focus for enforcement efforts. Although we have policies and procedures in place to ensure that we, our employees and our agents comply with the FCPA, the UK Bribery Act and related laws, there is no assurance that such policies or procedures will protect us against liability under the FCPA, the UK Bribery Act or related laws for actions taken by our agents, employees and intermediaries with respect to our business. For a discussion of the risks relating to the failure to comply with the FCPA, the UK Bribery Act or related laws, see Item 1A of Part I of this report, including “Risk Factors — We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and other worldwide anti-bribery laws.”

Third Party Coverage and Reimbursement

Health care providers generally rely on third-party payors, including governmental payors such as Medicare and Medicaid, and private insurance carriers, to adequately cover and reimburse the cost of pharmaceuticals and medical devices. Such third-party payors are increasingly challenging the price of medical products and services and instituting cost containment measures to control, restrict access or significantly influence the purchase of medical products and services. The market for some of our products therefore is influenced by third-party payors' policies. This includes the placement of our pharmaceutical products on drug formularies or lists of medications.

Purchases of aesthetic products and procedures using those products generally are not covered by third-party payors, and consequently patients incur out-of-pocket costs for such products and associated procedures. This includes breast aesthetics products for augmentation and facial aesthetics products. Since 1998, however, U.S. federal law has mandated that group health plans, insurance companies and health maintenance organizations offering mastectomy coverage must also provide coverage for reconstructive surgery following a mastectomy, which includes coverage for breast implants. Outside the United States, reimbursement for breast implants used in reconstructive surgery following a mastectomy may be available, but the programs vary on a country by country basis.

Furthermore, treatments for obesity may not be covered by third-party payors unless the individual meets certain criteria. For example, in 2006, Medicare began covering certain designated bariatric surgical services, including gastric bypass surgery and procedures using the Lap-Band ^® System, for Medicare patients who have previously been unsuccessfully treated for obesity and who have a BMI equal to or greater than 40 or a BMI of 35 when at least one co-morbidity is present. Without changing coverage criteria for morbidly obese individuals, effective February 12, 2009, the Centers for Medicare & Medicaid Services, or CMS, the agency responsible for implementing the Medicare program, determined that Type 2 diabetes mellitus is a co-morbid condition related to obesity under the existing policies. Medicare policies are sometimes adopted by other third-party payors, but governmental and private insurance coverage for obesity treatment varies by carrier and geographic location, and we actively work with governmental agencies, insurance carriers and employers to obtain reimbursement coverage for procedures using our Lap-Band ^® System product. Notably, the Technology Evaluation Center of the Blue Cross/Blue Shield National Association provided a positive assessment of the Lap-Band ^® System, an important step in providing private payor reimbursement for the procedure.

Outside the United States, reimbursement programs vary on a country by country basis. In some countries, both the procedure and product are fully reimbursed by the government health care systems for all citizens who need it, and there is no limit on the number of procedures that can be performed. In other countries, there is complete reimbursement but the number of procedures that can be performed at each hospital is limited either by the hospital's overall budget or by the national budget for the type of product.

In the United States, there have been and continue to be a number of legislative initiatives to contain health care coverage and reimbursement by governmental and other payors. For example, in March 2010, the PPACA was passed, which substantially changes the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical and medical device industries. The PPACA, among other things, subjects biologic products to potential competition by lower-cost biosimilars, increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, establishes annual fees and taxes on manufacturers of certain branded prescription drugs and medical devices, requires manufacturers to participate in a discount program for certain outpatient drugs under Medicare Part D, and promotes programs that increase the federal government's comparative effectiveness research.

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In addition, other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. On August 2, 2011, the Budget Control Act of 2011 among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers up to 2% per fiscal year, starting in 2013. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which, among other things, delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget Control Act of 2011. The ATRA also reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other health care funding, which could have a material adverse effect on our customers and accordingly, our financial operations.

Further, President Obama's proposed budget for 2013 and certain proposed legislation would require drug manufacturers to pay to the Medicare program new rebates for certain outpatient drugs covered under Medicare Part D. These proposals would allow the Medicare program to benefit from the same, relatively higher, rebates that Medicaid receives for brand name and generic drugs provided to beneficiaries who receive the low-income subsidies under the Medicare Part D program and “dual eligible” beneficiaries (i.e., those who are eligible for both the Medicare and Medicaid programs). At this time, the extent to which these proposals will affect our business remains unclear, but we expect that health care reform measures that may be adopted in the future, could have a material adverse effect on our industry generally and our ability to successfully commercialize our products or could limit or eliminate our spending on certain development projects.

Environmental Matters

We are subject to federal, state, local and foreign environmental laws and regulations. We believe that our operations comply in all material respects with applicable environmental laws and regulations in each country where we have a business presence. We also pride ourselves on our comprehensive and successful environmental, health and safety programs and performance against internal objectives. We have been recognized many times for superior environmental health and safety performance.

Although we continue to make capital expenditures for environmental protection, we do not anticipate any expenditures in order to comply with such laws and regulations that would have a material impact on our earnings or competitive position. We are 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 effect on our financial position. We cannot assure you, however, that environmental problems relating to properties owned or operated by us will not develop in the future, and we cannot predict whether any such problems, if they were to develop, could require significant expenditures on our part. In addition, we are unable to predict what legislation or regulations may be adopted or enacted in the future with respect to environmental protection and waste disposal.

Seasonality

Our business, both taken as a whole and by our business segments, is not materially affected by seasonal factors, although we have noticed a historical trend with respect to sales of our aesthetics products, including our breast aesthetics and Botox ^® Cosmetic. Sales of our aesthetics products have tended to be marginally higher during the second and fourth quarters, presumably in advance of the summer vacation and holiday seasons. Fluctuations of our sales are also impacted by the effect of promotions, which cause non-seasonal variability in sales trends.

Employee Relations

At December 31, 2012, we employed approximately 10,800 persons throughout the world, including approximately 5,100 in the United States. None of our U.S.-based employees are represented by unions. We believe that our relations with our employees are generally good.

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Executive Officers

Our executive officers and their ages as of February 26, 2013 are as follows:



Name	Age	Principal Positions with Allergan
David E.I. Pyott	59	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)
James F. Barlow	54	Senior Vice President, Corporate Controller (Principal Accounting Officer)
Raymond H. Diradoorian	55	Executive Vice President, Global Technical Operations
Jeffrey L. Edwards	52	Executive Vice President, Finance and Business Development, Chief Financial Officer (Principal Financial Officer)
David J. Endicott	48	Corporate Vice President, and President Allergan Medical, Asia Pacific and Latin America
Julian S. Gangolli	55	Corporate Vice President and President, North America
Douglas S. Ingram	50	Executive Vice President and President, Europe, Africa and Middle East
Arnold A. Pinkston	54	Executive Vice President, General Counsel and Assistant Secretary
Scott D. Sherman	47	Executive Vice President, Human Resources
Scott M. Whitcup, M.D.	53	Executive Vice President, Research & Development, Chief Scientific Officer

Officers are appointed by and hold office at the pleasure of the board of directors.

Mr. Pyott has been Allergan's Chief Executive Officer since January 1998 and in 2001 became the Chairman of the Board. Mr. Pyott also served as Allergan's President from January 1998 until February 2006, and again beginning March 2011. Previously, he was head of the Nutrition Division and a member of the executive committee of Novartis AG, a publicly-traded company focused on the research and development of products to protect and improve health and well-being, from 1995 until December 1997. From 1992 to 1995, Mr. Pyott was President and Chief Executive Officer of Sandoz Nutrition Corp., Minneapolis, Minnesota, a predecessor to Novartis, and General Manager of Sandoz Nutrition, Barcelona, Spain, from 1990 to 1992. Prior to that, Mr. Pyott held various positions within the Sandoz Nutrition group from 1980. Mr. Pyott is also a member of the board of directors of Avery Dennison Corporation, a publicly-traded company focused on pressure-sensitive technology and self-adhesive solutions, where he serves as the lead independent director, and Edwards Lifesciences Corporation, a publicly-traded company focused on products and technologies to treat advanced cardiovascular diseases. Mr. Pyott is a member of the Directors' Board of The Paul Merage School of Business at the University of California, Irvine (UCI). Mr. Pyott serves on the board and Executive Committee of the Biotechnology Industry Organization and is Chairman of the board of the California Healthcare Institute. Mr. Pyott also serves as a member of the board of the Pan-American Ophthalmological Foundation, the International Council of Ophthalmology Foundation and as a member of the Advisory Board for the Foundation of The American Academy of Ophthalmology. Mr. Pyott also serves as a Vice Chairman of the Board of Trustees of Chapman University.

Mr. Barlow has been Senior Vice President, Corporate Controller since February 2005. Mr. Barlow joined Allergan in January 2002 as Vice President, Corporate Controller. Prior to joining Allergan, Mr. Barlow served as Chief Financial Officer of Wynn Oil Company, a division of Parker Hannifin Corporation. Prior to Wynn Oil Company, Mr. Barlow was Treasurer and Controller at Wynn's International, Inc., a supplier of automotive and industrial components and specialty chemicals, from July 1990 to September 2000. Before working for Wynn's International, Inc., Mr. Barlow was Vice President, Controller from 1986 to 1990 for Ford Equipment Leasing Company. From 1983 to 1985 Mr. Barlow worked for the accounting firm Deloitte Haskins and Sells.

Mr. Diradoorian has served as Allergan's Executive Vice President, Global Technical Operations since February 2006. From April 2005 to February 2006, Mr. Diradoorian served as Senior Vice President, Global Technical Operations. From February 2001 to April 2005, Mr. Diradoorian served as Vice President, Global Engineering and Technology. Mr. Diradoorian joined Allergan in July 1981. Prior to joining Allergan, Mr. Diradoorian held positions at American Hospital Supply and with the Los Angeles Dodgers baseball team.

Mr. Edwards has been Executive Vice President, Finance and Business Development, Chief Financial Officer since September 2005. Prior to that, Mr. Edwards was Corporate Vice President, Corporate Development since March 2003 and previously served as Senior Vice President, Treasury, Tax, and Investor Relations. He joined Allergan in 1993. Prior to joining Allergan, Mr. Edwards was with Banque Paribas and Security Pacific National Bank, where he held various senior level positions in the credit and business development functions.

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Mr. Endicott has been Corporate Vice President and President, Allergan Medical, Asia Pacific and Latin America since April 2011 and served as Corporate Vice President and President, Allergan Medical since August 2010. Prior to that, he served as Corporate Vice President and President, Europe, Africa and Middle East from October 2004 to August 2010 and managed the expansion of Allergan's business internationally, including our entry into new markets such as Turkey and Poland. Mr. Endicott served as Senior Vice President, U.S. Specialty Pharmaceuticals from January 2004 to October 2004, Vice President and General Manager of Canada from February 2000 to December 2003 and Vice President of U.S. Managed Markets since 1998. Prior to that, Mr. Endicott served various roles at Allergan since joining us in 1986. Mr. Endicott holds an undergraduate degree in Chemistry from Whitman College, an MBA from the University of Southern California and is a graduate of the Advanced Management Program at the Harvard Business School. Mr. Endicott serves on the board of directors of Orexigen Therapeutics, Inc., a publicly-traded company.

Mr. Gangolli has been Corporate Vice President and President, North America since January 2004. Mr. Gangolli served as Senior Vice President, U.S. Eye Care from July 1998 to January 2004. Prior to joining Allergan, Mr. Gangolli served as Vice President, Sales and Marketing of VIVUS, Inc., a publicly-traded biopharmaceutical company, from 1994 to 1998, where he was responsible for facilitating the successful transition of the company from a research and development start-up into a niche pharmaceutical company. Prior to that, Mr. Gangolli served in a number of increasingly senior marketing roles in the UK, Global Strategic Marketing and in the US for Syntex Pharmaceuticals, Inc., a multinational pharmaceutical company. Mr. Gangolli began his career in pharmaceutical sales and marketing with Ortho-Cilag Pharmaceuticals, Ltd. a UK subsidiary of Johnson & Johnson. Mr. Gangolli received a BSc (Honors) in Applied Chemistry and Business Studies from Kingston Polytechnic in England.

Mr. Ingram has been Executive Vice President and President, Europe, Africa and Middle East since August 2010. Prior to that, he served as Executive Vice President, Chief Administrative Officer, and Secretary from October 2006 to July 2010 and led Allergan's Global Legal Affairs, Compliance, Internal Audit and Internal Controls, Human Resources, Regulatory Affairs and Safety, and Global Corporate Affairs and Public Relations departments. Mr. Ingram also served as General Counsel from January 2001 to June 2009 and as Secretary and Chief Ethics Officer from July 2001 to July 2010. During that time, he served as Executive Vice President from October 2003 to October 2006, as Corporate Vice President from July 2001 to October 2003 and as Senior Vice President from January 2001 to July 2001. Prior to that, Mr. Ingram was Associate General Counsel and Assistant Secretary from 1998 and joined Allergan in 1996 as Senior Attorney and Chief Litigation Counsel. Prior to joining Allergan, Mr. Ingram was an attorney at Gibson, Dunn & Crutcher LLP from 1988 to 1996. Mr. Ingram received his Juris Doctorate from the University of Arizona in 1988, graduating summa cum laude and Order of the Coif.

Mr. Pinkston joined Allergan as Executive Vice President, General Counsel and Assistant Secretary in October 2011 with over 25 years of experience managing legal affairs. Prior to joining Allergan, Mr. Pinkston served as the Senior Vice President, General Counsel and Secretary of Beckman Coulter, Inc. from 2005 through the company's sale to Danaher Corporation in June 2011. While at Beckman Coulter, Mr. Pinkston was responsible for all aspects of the company's global legal affairs as well as the company's compliance program, corporate social responsibility program, internal audit department and knowledge resources. Prior to joining Beckman Coulter, Mr. Pinkston held various positions at Eli Lilly and Company from 1999 through 2005, including serving as deputy general counsel responsible for the legal affairs of Lilly USA. Mr. Pinkston served as general counsel of PCS Health Systems from 1994 to 1999 after working for McKesson Corporation and beginning his legal career as an attorney with Orrick, Herrington & Sutcliffe. Mr. Pinkston received a Bachelor's Degree in Geophysics from Yale College and a Juris Doctor degree from Yale Law School.

Mr. Sherman joined Allergan as Executive Vice President, Human Resources in September 2010 with more than fifteen years of human resources leadership experience. Prior to joining Allergan, Mr. Sherman worked at Medtronic, Inc., a global medical device company, from August 1995 to September 2010 in roles of increasing complexity and responsibility. From April 2009 until September 2010, Mr. Sherman served as Medtronic's Vice President, Global Total Rewards and Human Resources Operations, where he was responsible for global compensation and benefits programs, and served as Secretary to the Compensation Committee of Medtronic's Board of Directors. Mr. Sherman lived in Europe from August 2005 until April 2009 and served as Vice-President, International Human Resources (May 2008 - April 2009) and Vice-President, Human Resources-Europe, Emerging Markets and Canada (August 2005 - May 2008). Prior to these assignments, Mr. Sherman held a series of other positions at Medtronic including Vice President, Human Resources-Diabetes (January 2002 - July 2005). Prior to joining Medtronic, Mr. Sherman held various positions in the Human Resources and Sales organizations at Exxon Corporation from 1990 to 1995.

Dr. Whitcup has been Executive Vice President, Research and Development, and Chief Scientific Officer since April 2009. Prior to that, Dr. Whitcup was Executive Vice President, Research and Development since July 2004. Dr. Whitcup joined Allergan in January 2000 as Vice President, Development, Ophthalmology. In January 2004, Dr. Whitcup became Allergan's Senior Vice President, Development, Ophthalmology. From 1993 until 2000, Dr. Whitcup served as the Clinical Director of the National Eye Institute at the National Institutes of Health. As Clinical Director, Dr. Whitcup's leadership was vital in building the clinical research program and promoting new ophthalmic therapeutic discoveries. Dr. Whitcup is a faculty member at the Jules Stein Eye Institute/David Geffen School of Medicine at the University of California, Los Angeles. Dr. Whitcup serves on the board of directors of

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Avanir Pharmaceuticals, Inc., a publicly-traded pharmaceutical company, and Questcor Pharmaceuticals, Inc., a publicly-traded biopharmaceutical company.

Item 1A. Risk Factors

Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below in addition to the other cautionary statements and risks described elsewhere and the other information contained in this report and in our other filings with the SEC, including subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. We operate in a rapidly changing environment that involves a number of risks. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. These known and unknown risks could materially and adversely affect our business, financial condition, operating results or liquidity, which could cause the trading price of our common stock to decline.

We operate in a highly competitive business.

The pharmaceutical and medical device industries are highly competitive. To be successful in these industries, we must be able to, among other things, effectively discover, develop, test and obtain regulatory approvals for products and effectively commercialize, market and promote approved products, including by communicating the effectiveness, safety and value of products to actual and prospective customers and medical professionals. Many of our competitors have greater resources than we have. This enables them to make greater research and development investments, including the acquisitions of technologies, products and businesses, and spread their research and development costs, as well as their marketing and promotion costs, over a broader revenue base.

Our future growth depends, in part, on our ability to develop and introduce products which are more effective than those developed by our competitors. Developments by our competitors, the entry of new competitors into the markets in which we compete, and the rapid pace of scientific advancement in the pharmaceutical and medical device industries could make our products or technologies less competitive or obsolete. For example, sales of our existing products may decline rapidly if a new product is introduced that represents a substantial improvement over our existing products or that is sold at a lower price. Additionally, if we lose patent coverage for a product, our products may compete against generic products that are as safe and effective as our products, but sold at considerably lower prices. The introduction of generic products could significantly reduce demand for our products within a short period of time. Certain of our pharmaceutical products also compete with over-the-counter products and other products not regulated by the FDA which may be priced and regulated differently than our products.

We also expect to face increasing competition from biosimilar products. Recent U.S. healthcare reform legislation included an abbreviated regulatory pathway for the approval of biosimilars. As a result, we anticipate increasing competition from biosimilars in the future. Title VII of the PPACA and the Biologics Price Competition and Innovation Act of 2009, or BPCIA, create a new licensure framework for biosimilar products, and the FDA issued draft guidance in early 2012, which could ultimately subject our biologic products, including Botox ^® , to competition. Previously, there had been no licensure pathway for such a follow-on product. Further, Congress recently authorized user fee programs for both generic drugs and biosimilars in the FDASIA. The availability of industry user fees obtained through these new programs may facilitate biosimilar product development and faster approvals of both generic drugs and biosimilars. While we do not anticipate that the FDA will license a biosimilar of Botox ^® for several years, we cannot guarantee that our biologic products such as Botox ^® will not eventually become subject to direct competition by a licensed biosimilar.

We may be unable to obtain and maintain adequate protection for our intellectual property rights.

Our success depends in part on our ability to obtain and defend patent rights and other intellectual property rights that are important to the commercialization of our products and product candidates. We cannot assure you that we will successfully obtain or preserve patent protection for the technologies incorporated into our products, or that the protection obtained will be of sufficient breadth and degree to protect our commercial interests in all countries where we conduct business. In addition, third parties, including generic drug manufacturers, may challenge, invalidate or circumvent our patents and patent applications relating to our products, product candidates and technologies. Upon the expiration or loss of necessary intellectual property protection for a product, we may rapidly lose a significant portion of our sales of that product.

Furthermore, we cannot assure you that our products will not infringe patents or other intellectual property rights held by third parties. If we infringe the intellectual property rights of others, we could lose our right to develop, manufacture or sell products or could be required to pay monetary damages or royalties to license proprietary rights from third parties. An adverse determination in a judicial or administrative proceeding or a failure to obtain necessary licenses could prevent us from manufacturing or selling our products. See Item 3 of Part I of this report, “Legal Proceedings,” for information concerning our current intellectual property litigation.

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Our development efforts may not result in products or indications approved for commercial sale.

We must continue to develop, test and manufacture new products or achieve new indications or label extensions for the use of our existing products. Prior to marketing, these new products and product indications must satisfy stringent regulatory standards and receive requisite approvals or clearances from regulatory authorities in the United States and abroad. It typically takes many years to satisfy the regulatory requirements to obtain approval or clearance to market products such as ours and approval timing varies substantially based upon the type, complexity and novelty of the product. We may be required to conduct costly and time-intensive clinical trials in order to obtain clearance or approval. The development, regulatory review and approval, and commercialization processes are very expensive and time consuming, costly and subject to numerous factors that may delay or prevent the development, approval or clearance, and commercialization of new products.

In addition, any of our product candidates or indications may receive necessary regulatory approvals or clearances only after delays or unanticipated costs. For example, prior to the FDA approval of Botox ^® for the prophylactic treatment of headaches in adults with chronic migraine in 2010, we were required to adopt a REMS program addressing the risks related to botulinum toxin spread beyond the injection site and the non-interchangeability of botulinum toxins. Even if we receive regulatory approvals for a new product or indication, the product may later exhibit adverse effects that limit or prevent its widespread use or that force us to withdraw the product from the market or to revise our labeling to limit the indications for which the product may be prescribed.

Further, clinical trial results are frequently susceptible to varying interpretations by scientists, medical personnel, regulatory personnel, statisticians and others, which differences may delay, limit or prevent further clinical development or regulatory approvals of a product candidate. Also, the length of time that it takes for us to complete clinical trials and obtain regulatory approval for product marketing is unpredictable and varies by product and by the intended use of a product. Of course, there may be other factors that prevent us from marketing a product.

From time to time, legislative or regulatory proposals are introduced that could alter the review and approval process relating to our products. For example, in response to industry and healthcare provider concerns regarding the predictability, consistency and rigor of the 510(k) regulatory pathway, the FDA initiated an evaluation of the program and, in the first quarter of 2011, announced numerous actions that are intended to reform the review process governing the clearance of medical devices. In addition, as part of FDASIA, Congress enacted several reforms entitled the Medical Device Regulatory Improvements and additional miscellaneous provisions which will further affect medical device regulation both pre- and post-approval. It is possible that the FDA or other governmental authorities will issue additional regulations further restricting the sale of our present or proposed products. Any change in legislation or regulations that govern the review and approval process relating to our current and future products could make it more difficult and costly to obtain approval for new products, or to produce, market and distribute existing products.

Moreover, any of our product candidates or indications may fail at any stage, potentially after substantial financial and other resources have been invested in their development. Successful product development in the pharmaceutical and medical device industry is highly uncertain, and very few research and development projects produce a commercial product. Product candidates that appear promising in the early phases of development, such as in early human clinical trials, may fail to reach the market for a number of reasons. For instance, a product candidate may not be effective in treating a specified condition or illness, a product candidate may have harmful side effects in humans or animals, the necessary regulatory bodies, such as the FDA, may not approve the product candidate for an intended use, a product candidate may not be economical for us to manufacture and commercialize, or certain of our licensors or partners may fail to effectively conduct clinical development or clinical manufacturing activities.

Our business and products are subject to extensive government regulation.

We are subject to extensive, complex, costly and evolving regulation by federal and state governmental authorities in the United States, principally by the FDA and the U.S. Drug Enforcement Administration, or DEA, and foreign regulatory authorities. Failure to comply with all applicable regulatory requirements, including those promulgated under the FFDCA and Controlled Substances Act, may subject us to operating restrictions and criminal prosecution, monetary penalties and other disciplinary actions, including, sanctions, warning letters, product seizures, recalls, fines, injunctions, suspension, revocation of approvals, or exclusion from future participation in the Medicare and Medicaid programs.

After our products receive regulatory approval or clearance, we, and our direct and indirect suppliers, remain subject to the periodic inspection of our plants and facilities, review of production processes, and testing of our products to confirm that we are in compliance with all applicable regulations. For example, the FDA conducts ongoing inspections to determine whether our record keeping, production processes and controls, personnel and quality control are in compliance with the cGMPs, the Quality System Regulation, or QSR, and other FDA regulations. Adverse findings during regulatory inspections may result in the implementation of REMS programs, completion of government mandated post-marketing clinical studies, and government enforcement action relating to labeling, advertising, marketing and promotion, as well as regulations governing manufacturing controls noted above.

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The FDA has increased its enforcement activities related to the advertising and promotion of pharmaceutical, biological and medical device products. In particular, the FDA has increased its scrutiny of our compliance with the agency's regulations and guidance governing direct-to-consumer advertising. The FDA may limit or, with respect to certain products, terminate our dissemination of direct-to-consumer advertisements in the future, which could cause sales of those products to decline. In addition, our communications to physicians regarding the prescription of our pharmaceutical and biologic products, and the utilization of our medical device products that are not described in the product's labeling or differ from those tested by us and approved or cleared by the FDA, are restricted by federal statutes, FDA regulations and other governmental communications. If our promotional activities fail to comply with applicable laws, regulations, guidelines or interpretations, we may be subject to enforcement actions by the FDA or other governmental enforcement authorities.

Disruptions in our supply chain or failure to adequately forecast product demand could result in significant delays or lost sales.

The interruption of our manufacturing processes could adversely affect our ability to manufacture or sell many of our products. We manufacture certain products, including Botox ^® , Restasis ^® , breast aesthetics and our Juvéderm ^® dermal filler family of products, at a single facility or a single site. Therefore, a significant disruptive event, including a fire or natural disaster, at certain manufacturing facilities or sites could materially and adversely affect our business and results of operations. In the event of a disruption, we may need to build or locate replacement facilities as well as seek and obtain the necessary regulatory approvals for these facilities. Accordingly, we may experience substantial production delays, and, if our finished goods inventories are insufficient to meet demand, we may be unable to satisfy customer orders on a timely basis, if at all.

The loss of a material supplier could also significantly disrupt our business. In some cases, we obtain components or chemicals used in certain of our products from single sources. If we experience difficulties acquiring sufficient quantities of required materials or products from our existing suppliers, or if our suppliers are found to be non-compliant with the FDA's QSR, cGMPs or other applicable laws, obtaining the required regulatory approvals to use alternative suppliers may be a lengthy and uncertain process during which we could lose sales.

Any failure by us to forecast demand for, or to maintain an adequate supply of, the raw material and finished product could result in an interruption in the supply of certain products and a decline in sales of that product. For example, the manufacturing process to create the raw material necessary to produce Botox ^® and other products is technically complex and requires significant lead-time. In addition, if our suppliers are unable to meet our manufacturing requirements, we may not be able to produce a sufficient amount of materials or products in a timely manner, which could cause a decline in our sales.

Increased concerns over the safety of our products may result in negative publicity or increased regulatory controls on our products.

The Company's reputation is the foundation of our relationships with physicians, patients and other customers. If we are unable to effectively manage real or perceived issues, which could negatively impact sentiments toward the Company, our business could suffer. Pharmaceuticals and medical devices are perceived to be dangerous products and our customers may have a number of concerns about the safety of our products whether or not such concerns have a basis in generally accepted science or peer-reviewed scientific research. These concerns may be increased by negative publicity, even if the publicity is inaccurate. For example, consumer groups and certain plaintiffs have alleged that certain uses of Botox ^® , including off-label uses, have caused patient injuries and death and have further alleged that we failed to adequately warn patients of the risks relating to Botox ^® use. From time to time reports related to the quality and safety of breast implant devices are published, including reports that have suggested a possible association between anaplastic large cell lymphoma and breast implants, as well as negative reports from regulatory authorities in Europe related to a breast implant manufacturer that is not affiliated with the Company. In addition, government investigations related to the use of our products, but not the efficacy of the products themselves, may cause reputational harm to the Company. Negative publicity-whether accurate or inaccurate-about the efficacy, safety or side effects of our products or product categories, whether involving us or a competitor, could materially reduce market acceptance of our products, cause consumers to seek alternatives to our products, result in product withdrawals and cause our stock price to decline. Negative publicity could also result in an increased number of product liability claims, whether or not these claims have a basis in scientific fact.

We are also subject to adverse event reporting regulations that require us to report to the FDA or similar bodies in other countries if our products are associated with a death or serious injury, even if there is no available evidence of a causal relationship between the adverse event and the product. Such reports may be publicly released by the FDA and other authorities. For instance, the FDA maintains a public database, known as the Manufacturer and User Facility Device Experience, or MAUDE, that posts reports of adverse events involving medical devices. The submission of an adverse event report for a pharmaceutical or medical device product to the FDA and its public release on MAUDE, or other public database, does not, by regulation, reflect a conclusion by us or the FDA that the product caused or contributed to the adverse event. However, as part of our post-marketing pharmacovigilance program, we routinely monitor the adverse event reports we receive to identify potential safety issues, known as signals, that may require us to take action with respect to the product, such as a recall or other market action, or to amend our

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labeling to add the adverse reaction or a new warning or contraindication. The FDA and other regulatory authorities also monitor adverse event reports to identify safety signals, and may take action in connection with that monitoring, including the imposition on us of additional regulatory controls, such as REMS programs and the performance of costly post-approval clinical studies or revisions to our approved labeling, which requirements could limit the indications or patient population for our products or could even lead to the withdrawal of a product from the market. We cannot assure you that the FDA will agree with our assessments of whether a safety signal exists for one of our products. Furthermore, any adverse publicity associated with adverse events for our products, and related post-marketing actions, could cause consumers to seek alternatives to our products, and thereby cause our sales to decline, even if our products are ultimately determined not to have been the primary cause of the adverse event.

We are subject to complex government healthcare legislation and reimbursement programs, as well as other cost-containment pressures.

Many of our products are purchased or reimbursed by federal and state government authorities, private health insurers and other organizations, including heath maintenance and managed care organizations. These third-party payors increasingly challenge pharmaceutical and medical device product pricing, which could result in lower reimbursement rates and a reduction in demand for our products.

In addition, legislative and regulatory proposals and enactments to reform healthcare insurance programs could significantly influence the manner in which pharmaceutical products, biologic products and medical devices are prescribed and purchased. For example, in March 2010, the President of the United States signed the PPACA, which substantially changes the way healthcare is financed by both governmental and private insurers and significantly impacts the U.S. pharmaceutical and medical device industries. The PPACA, among other things, subjects biologic products to potential competition by lower-cost biosimilars, increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, establishes annual fees and taxes on manufacturers of certain branded prescription drugs and medical devices, requires manufacturers to participate in a discount program for certain outpatient drugs under Medicare Part D, and promotes programs that increase the federal government's comparative effectiveness research.

Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. On August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers up to 2% per fiscal year, starting in 2013. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget Control Act of 2011. The ATRA, among other things, also reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. We expect that additional federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, and in turn could significantly reduce the projected value of certain development projects and reduce our profitability.

Individual states have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and to encourage importation from other countries and bulk purchasing. Furthermore, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical and medical device products and which suppliers will be included in their prescription drug and other healthcare programs. Any legally mandated price controls or utilization of bidding procedures could negatively and materially impact our revenues, results of operations and financial condition.

Our ability to sell our products to hospitals in the United States also depends in part on our relationships with wholesalers and group purchasing organizations, or GPOs. We sell our pharmaceutical products primarily through wholesalers. These wholesale customers comprise a significant part of the distribution network for pharmaceutical products in the United States. This distribution network is continuing to undergo significant consolidation. We expect that consolidation of drug wholesalers will increase competitive and pricing pressures on pharmaceutical manufacturers, including us. In addition, wholesalers may apply pricing pressure through fee-for-service arrangements, and their purchases may exceed customer demand, resulting in reduced wholesaler purchases in later quarters. We cannot assure you that we can manage these pressures or that wholesaler purchases will not decrease as a result of this potential excess buying.

Many existing and potential customers for our products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes on an exclusive basis, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO's affiliated hospitals and other members. If we are not one of the providers selected by a GPO, affiliated

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hospitals and other members may be less likely to purchase our products, and if the GPO has negotiated a strict sole source, market share compliance or bundling contract for another manufacturer's products, we may be precluded from making sales to members of the GPO for the duration of the contractual arrangement. Our failure to renew contracts with GPOs may cause us to lose market share and could have a material adverse impact on our sales, financial condition and results of operations. We cannot assure you that we will be able to renew these contracts at the current or substantially similar terms. If we are unable to keep our relationships and develop new relationships with GPOs, our competitive position would likely suffer.

We also encounter similar legislative, regulatory and pricing issues in most countries outside the United States. International operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries has and will continue to put pressure on the price and usage of our pharmaceutical and medical device products. Although we cannot predict the extent to which our business may be affected by future cost-containment measures or other potential legislative or regulatory developments, additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our current and future products, which could adversely affect our revenue and results of operations.

Compliance with domestic and international laws and regulations pertaining to the privacy and security of health information may be time consuming, difficult and costly.

Failure to comply with domestic and international privacy and security laws can result in the imposition of significant civil and criminal penalties. The costs of compliance with these laws, including protecting electronically stored information from cyber attacks, and potential liability associated with failure to do so could adversely affect our business, financial condition and results of operations.

We are subject to various domestic and international privacy and security regulations, including but not limited to HIPAA. HIPAA mandates, among other things, the adoption of uniform standards for the electronic exchange of information in common healthcare transactions, as well as standards relating to the privacy and security of individually identifiable health information, which require the adoption of administrative, physical and technical safeguards to protect such information. In addition, many states have enacted comparable laws addressing the privacy and security of health information, some of which are more stringent than HIPAA.

While we currently expend significant resources to protect against cyber attacks and security breaches, we may need to expend additional significant resources in the future to continue to protect against potential security breaches or to address problems caused by such attacks or any breach of our safeguards. A party that is able to circumvent our security safeguards could, among other things, misappropriate or misuse sensitive or confidential information, user information or other proprietary information, cause significant interruptions in our operations and cause all or portions of our website to be unavailable. Further, any reductions in the availability of our website could impair our ability to conduct our business, comply with regulations, and adversely impact our customers during the occurrence of any such incident.

If we market products in a manner that violates healthcare fraud and abuse laws, we may be subject to civil or criminal penalties.

We are subject to various federal and state laws pertaining to healthcare fraud and abuse. The federal healthcare program Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical or medical device manufacturers, on the one hand, and prescribers, purchasers, formulary managers and other health care related professions, on the other hand. Due to recent legislative changes, a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the false claims statutes. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration could be subject to scrutiny if they do not qualify for an exemption or safe harbor.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a claim

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paid. Pharmaceutical companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, including reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates and engaging in off-label promotion that caused claims to be submitted to Medicaid for non-covered off-label uses.

HIPAA created two new federal crimes: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

The majority of states also have statutes or regulations similar to these federal laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. In addition, some states, including California, have laws and regulations that require pharmaceutical companies to adopt comprehensive compliance programs. We have adopted and implemented a compliance program which we believe satisfies the requirements of these laws, regulations and industry codes.

Sanctions under these federal and state laws may include civil monetary penalties, mandatory compliance programs, exclusion of a manufacturer's products from reimbursement under government programs, criminal fines and imprisonment. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If our past or present operations are found to be in violation of any of the laws described above or other similar governmental regulations to which we are subject, we may be subject to the applicable penalty associated with the violation which could adversely affect our ability to operate our business and our financial results.

We remain subject to government investigations and related subpoenas. Such investigations and subpoenas are often associated with previously filed qui tam actions, or lawsuits filed under seal under the False Claims Act, or FCA, 31 U.S.C. § 3729 et seq. Qui tam actions are brought by private plaintiffs suing on behalf of the federal government for alleged FCA violations. We may currently be subject to investigation for alleged FCA violations pursuant to qui tam actions, which may be under full or partial seal. The time and expense associated with responding to such subpoenas, and any related qui tam or other actions, may be extensive, and we cannot predict the results of our review of the responsive documents and underlying facts or the results of such actions. The costs of responding to government investigations, defending any claims raised, and any resulting fines, restitution, damages and penalties (including under the FCA), settlement payments or administrative actions, as well as any related actions brought by stockholders or other third parties, could have a material impact on our reputation, business and financial condition and divert the attention of our management from operating our business. For example, in September 2010, we announced that we reached a settlement with the Department of Justice regarding our alleged sales and marketing practices in connection with certain therapeutic uses of Botox ^® . As part of the settlement, we entered into a five-year Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services. Failure to comply with the terms of the Corporate Integrity Agreement could result in substantial civil or criminal penalties and being excluded from government health care programs, which could materially reduce our sales and adversely affect our financial condition and results of operations.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and other worldwide anti-bribery laws.

We are subject to the FCPA which generally prohibits companies and their intermediaries from making payments to non-U.S. government officials for the purpose of obtaining or retaining business or securing any other improper advantage. We are also subject to similar anti-bribery laws in the jurisdictions in which we operate, including the UK Bribery Act, which went into effect in the third quarter of 2011, which also prohibits commercial bribery and makes it a crime for companies to fail to prevent bribery. Although we have policies and procedures designed to ensure that we, our employees and our agents comply with the FCPA and related laws, there is no assurance that such policies or procedures will protect us against liability under the FCPA or related laws for actions taken by our agents, employees and intermediaries with respect to our business. Failure to comply with the FCPA or related laws governing the conduct of business with foreign government entities could disrupt our business and lead to severe criminal and civil penalties, including criminal and civil fines, loss of our export licenses, suspension of our ability to do business with the federal government, denial of government reimbursement for our products and exclusion from participation in government healthcare programs. Other remedial measures could include further changes or enhancements to our procedures, policies, and controls and potential personnel changes and/or disciplinary actions, any of which could have a material adverse impact on our business, financial condition, results of operations and liquidity. We could also be adversely affected by any allegation that we violated such laws.

Illegal imports and counterfeit products may reduce demand for our products.

The illegal importation of counterfeit products and pharmaceutical and medical device products from countries where government price controls or other market dynamics result in lower prices may adversely affect our sales and profitability in the

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United States and other countries in which we operate. Foreign imports are illegal under current U.S. law, with the sole exception of limited quantities of prescription drugs imported for personal use. However, the volume of illegal imports continues to rise as the ability of patients and other customers to obtain these lower priced imports has grown significantly. In addition, U.S. policy makers may expand consumers' ability to import lower priced versions of our products and competing products from Canada, where there are government price controls. Any future legislation or regulations that increase consumer access to lower priced medicines from outside the United States may lower the prices we receive for our products, which could adversely impact our revenues.

Litigation may harm our business or otherwise distract our management.

Substantial, complex or extended litigation could cause us to incur large expenditures, affect our ability to market and distribute our products and distract our management. For example, lawsuits by employees, stockholders, customers or competitors could be very costly and substantially disrupt our business. Disputes from time to time with such companies or individuals are not uncommon, and we cannot assure you that we will always be able to resolve such disputes out of court or on terms favorable to us. See Item 3 of Part I of this report, “Legal Proceedings,” for information concerning our current litigation.

We may experience losses due to product liability claims, product recalls or corrections.

The design, development, manufacture and sale of our products involve an inherent risk of product liability or other claims by consumers and other third parties. We have been in the past, and continue to be, subject to various product liability lawsuits, product recalls and requirements to issue field corrections related to our products due to manufacturing deficiencies, labeling errors or other safety or regulatory reasons.

Our pharmaceutical and medical device products may cause, or may appear to cause, serious adverse side effects or potentially dangerous drug interactions if misused, improperly prescribed, improperly implanted or subject to faulty surgical technique. For example, the manufacture and sale of breast implant products has been and continues to be the subject of a significant number of product liability claims due to allegations that the medical devices cause disease or result in complications, rare lymphomas and other health conditions due to rupture, deflation or other product failure. In addition to product liability claims, in the event of a breast implant rupture or deflation that requires surgical intervention with respect to our breast implant products sold and implanted, our warranty programs may require us to replace the product. Furthermore, we face a substantial risk of product liability claims from our eye care, neuromodulator, urology, skin care, obesity intervention and facial aesthetics products.

We are largely self-insured for future product liability losses related to all of our products. We have historically been and continue to be self-insured for any product liability losses related to our breast implant products. Our self-insurance program is based on historical loss trends, and we can provide no assurance that our self-insurance program accruals will be adequate to cover future losses, and our third-party insurance coverage may be inadequate to satisfy any other covered liabilities we might incur.

If third parties with whom we collaborate do not perform, we may not be able to develop and market products as anticipated.

We have entered into collaborative arrangements with third parties to develop and market certain products. We cannot assure you that these collaborations will be successful, lead to additional sales of our products or lead to the creation of additional products. Our dependence on collaborative arrangements with third parties subjects us to a number of risks, including:


•	our inability to fully control the amount and timing of resources our collaborative partners may devote to products based on the collaboration, and our partners may choose to pursue alternative products to the detriment of our collaboration;


•	counterparties may not perform their obligations as expected;


•	we could become involved in disputes with counterparties, which could lead to delays or termination of the collaborations and time-consuming and expensive litigation or arbitration; and


•	counterparties can terminate the collaboration agreement under certain circumstances.

Acquisitions of technologies, products, and businesses or the sale of our assets could disrupt our business, involve increased expenses and present risks not contemplated at the time of the transactions.

We regularly consider and, as appropriate, make acquisitions of technologies, products and businesses that we believe are complementary to our business. Acquisitions typically entail many risks and could result in difficulties in integrating the operations, personnel, technologies and products acquired, some of which may result in significant charges to earnings. Issues that must be addressed in acquiring and integrating the acquired technologies, products and businesses into our own include:

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•	conforming standards, controls, procedures and policies, operating divisions, business cultures and compensation structures;


•	retaining key employees;


•	retaining existing customers and attracting new customers;


•	consolidating operational infrastructure, including information technology, accounting systems and administration;


•	mitigating the risk of unknown liabilities; and


•	managing tax costs or inefficiencies associated with integrating operations.

If we are unable to successfully integrate our acquisitions with our existing business, we may not obtain the advantages that the acquisitions were intended to create, which may materially adversely affect our business, and our ability to develop and introduce new products. Actual costs and sales synergies, if achieved at all, may be lower than we expect and may take longer to achieve than we anticipate. Furthermore, the products of companies we acquire may overlap with our products or those of our customers, creating conflicts with existing relationships or with other commitments that are detrimental to the integrated businesses.

We may not complete acquisitions in a timely manner, on a cost-effective basis, or at all, which could cause the market value of our common stock to decline. The failure to consummate an acquisition may be caused by, among other reasons, occurrence of a material adverse change of the company we propose to acquire or an order to restrain, enjoin or prohibit the transaction is made by a court or other governmental entity.

As part of our business strategy, we may also sell some of our assets. There can be no assurance that any such sale will be completed in a timely manner, on a cost-effective basis, on terms favorable to us, or at all. The sale of assets typically entails numerous potential risks, including:


•	diversion of resources and management's attention from the operation of the business;


•	loss of key employees following such a transaction;


•	insufficient proceeds to offset transaction related expenses;


•	negative effects on our reported results of operations from disposition-related charges, amortization of expenses related to intangibles and charges for impairment of long-term assets; and


•	damage to our existing customer and supplier relationships.

Adverse U.S. or international economic conditions may negatively affect our business.

Adverse U.S. or international economic conditions or a decline of global or country-specific financial markets may reduce consumer demand for our products. Many of our products have limited reimbursement or are not reimbursable by governmental or other healthcare plans. Instead, these products are partially or wholly paid for directly by the consumer. Adverse economic and market conditions could also have a negative impact on our business by negatively affecting the parties with whom we do business, including among others, our customers, suppliers, wholesale distributors, creditors, collaboration partners and other third parties with whom we do business.

We also collect and pay a substantial portion of our sales and expenditures in currencies other than the U.S. dollar. Therefore, fluctuations in foreign currency exchange rates affect our operating results. We cannot assure you that future exchange rate movements, inflation or other related factors will not have a material adverse impact on our business.

In addition, our business is subject to certain risks inherent in international business, many of which are beyond our control. These risks include, among other things:


•	reductions in the reimbursement amounts we receive for our products from foreign governments and foreign insurance providers;


•	unexpected changes in foreign regulatory requirements, including quality standards and other certification requirements;


•	adverse changes in trade protection measures, including tariffs and export license requirements; and


•	difficulties in coordinating and managing foreign operations, including ensuring that foreign operations comply with foreign laws as well as U.S. laws applicable to U.S. companies with foreign operations, such as export laws and the FCPA.

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Unanticipated changes in our tax rates or exposure to additional income tax liabilities could affect our profitability.

We are subject to income taxes in both the United States and numerous foreign jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings in countries with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and regulations, changes in our interpretations of tax laws, including pending tax law changes, changes in our manufacturing activities and changes in our future levels of research and development spending. In that regard, there have been a number of recent proposals, including by Congress and the Treasury as well as various government appointed and outside commissions, that could substantially impact the U.S. taxation of U.S. based multinational corporations such as Allergan. In addition, certain U.S. federal income tax provisions, including a research and development tax credit that provides a tax benefit on certain research and development expenditures, are currently scheduled to expire at the end of 2013, and it is unclear whether Congress will extend the applicability of such provisions into future years. The permanent loss of the research and development tax credit would adversely affect our effective tax rate and our profitability.

We generally do not collect or pay state sales or other tax on sales of certain products, including Botox ^® , Botox ^® Cosmetic, our dermal fillers and breast implants. Changes in applicable tax laws that require us to collect and pay state sales or other taxes, and penalties, associated with prior, current or future years on sales of these products could adversely affect our sales and profitability due to the increased cost associated with those products.

In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service and other local, state and foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our estimated income tax liabilities. There can be no assurance that the outcomes from these continuous examinations will not have an adverse effect on our provision for income taxes and estimated income tax liabilities.

The terms of our debt agreements impose restrictions on our business.

Our indebtedness may limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate and, consequently, place us at a competitive disadvantage to our competitors. The operating and financial restrictions and covenants in our debt agreements may adversely affect our ability to finance future operations or capital needs or to engage in new business activities. For example, our debt agreements restrict our ability to, among other things, incur liens or engage in sale lease-back transactions and engage in consolidations, mergers and asset sales.

In addition, our debt agreements include financial covenants that we maintain certain financial ratios. As a result of these covenants and ratios, we have certain limitations on the manner in which we can conduct our business, and we may be restricted from engaging in favorable business activities or financing future operations or capital needs. Accordingly, these restrictions may limit our ability to successfully operate our business. Failure to comply with the financial covenants or to maintain the financial ratios contained in our debt agreements could result in an event of default that could trigger acceleration of our indebtedness. We cannot assure you that our future operating results will be sufficient to ensure compliance with the covenants in our debt agreements or to remedy any such default. In addition, in the event of any default and related acceleration of obligations, we may not have or be able to obtain sufficient funds to make any accelerated payments.

Failure to retain, motivate and recruit executives and other key employees may negatively affect our business.

We must continue to retain, motivate and recruit executives and other key employees. A failure by us to retain and motivate executives and other key employees could have a material adverse impact on our business, financial condition and results of operations and could cause the market value of our common stock to decline.

We are exposed to the risk of environmental liabilities.

Our product development programs and manufacturing processes involve the controlled use of hazardous materials, chemicals and toxic compounds. These programs and processes expose us to risks that an accidental contamination could lead to noncompliance with environmental laws, regulatory enforcement actions and claims for personal injury and property damage. In addition, we may be subject to clean-up obligations, damages and fines related to the discharge of hazardous materials, chemicals and toxic compounds on our properties whether or not we knew of, or were responsible for, the contamination. For example, in connection with the acquisition and ownership of our properties, we may be potentially liable for environmental clean-up costs.

Environmental laws also may impose restrictions on the manner in which our properties may be used or our business may be operated. Environmental laws provide for sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Any costs or expenses relating to environmental matters may not be covered by insurance and, accordingly, may have a material and adverse impact on our business.

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Natural disasters and geo-political events could adversely affect our business.

We are a global company with sales and marketing subsidiaries in approximately 38 countries and are present in over 100 countries, as supplemented by distributors. The occurrence of one or more natural disasters, such as earthquakes, tsunamis, hurricanes, floods and tornados, or severe changes in geo-political events, such as wars, civil unrest or terrorist attacks in a country in which we operate or in which our suppliers or distributors are located, could adversely affect our business and financial performance. Such events could result in physical damage to, or the complete loss of, properties or assets that are important to us or to our suppliers or distributors, changes in consumers' income or purchasing patterns, temporary or long-term disruption in the supply of products to us, or disruption in the distribution of our products. Any such events and their consequences are unpredictable and could disrupt our operations or the operations of our suppliers or distributors and could have a significant and adverse effect on our business and results of operations.

Our publicly filed SEC reports may be reviewed by the SEC.

The reports of publicly traded companies are subject to review by the SEC from time to time for the purpose of assisting companies in complying with applicable disclosure requirements and to enhance the overall effectiveness of companies' public filings, and comprehensive reviews of such reports are now required at least every three years under the Sarbanes-Oxley Act of 2002. The SEC reviews may be initiated at any time. While we believe that our previously filed SEC reports comply, and we intend that all future reports will comply in all material respects with the published rules and regulations of the SEC, we could be required to modify or reformulate information contained in prior filings as a result of an SEC review. Any modification or reformulation of information contained in such reports could be significant and could result in material liability to us and have a material adverse impact on the trading price of our common stock.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our operations are conducted in owned and leased facilities located throughout the world. We believe our present facilities are adequate for our current needs. Our headquarters and primary administrative and research facilities, which we own, are located in Irvine, California. We own and lease additional facilities in California to provide administrative, research and raw material support, manufacturing, warehousing and distribution. We own two facilities in Texas for manufacturing and warehousing. We produce clinical and commercial supplies of biodegradable silk-based scaffolds at a leased facility in Massachusetts. In 2012, we opened a new leased research and development facility in Bridgewater, New Jersey and a leased commercial administrative center in Austin, Texas.

Outside of the United States, we own, lease and operate various facilities for manufacturing and warehousing. Those facilities are located in Brazil, Costa Rica, France and Ireland. Other material facilities include leased facilities for administration in Australia, Brazil, Canada, France, Germany, Hong Kong, Ireland, Italy, Japan, Korea, Singapore, Spain and the United Kingdom.

Item 3. Legal Proceedings

Certain of the legal proceedings in which we are involved are discussed in Note 12, "Commitments and Contingencies," to our Consolidated Financial Statements in this Annual Report on Form 10-K, and are hereby incorporated by reference.

Item 4. Mine Safety Disclosures

Not Applicable.

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PART II


Item 5.	Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The following table shows the quarterly price range of our common stock and the cash dividends declared per share of common stock during the periods listed.



	2012						2011
Calendar Quarter	Low		High		Div.		Low		High		Div.
First	$	84.30	$	96.39	$	0.05	$	68.03	$	76.00	$	0.05
Second	87.69		97.09		0.05		71.75		85.74		0.05
Third	81.28		95.75		0.05		69.40		85.92		0.05
Fourth	86.51		95.44		0.05		77.71		89.25		0.05

Our common stock is listed on the New York Stock Exchange and is traded under the symbol “AGN.”

The approximate number of stockholders of record of our common stock w as 4,786 as of February 15, 2013 .

On February 1, 2013, our Board of Directors declared a cash dividend of $0.05 per share, payable March 21, 2013 to stockholders of record on February 28, 2013.

Securities Authorized for Issuance Under Equity Compensation Plans

The information included under Item 12 of Part III of this report, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” is hereby incorporated by reference into this Item 5 of Part II of this report.

Issuer Purchases of Equity Securities

The following table discloses the purchases of our equity securities during the fourth fiscal quarter of 2012.



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs (2)
October 1, 2012 to October 31, 2012	648,207	$	92.25	628,800	11,366,036
November 1, 2012 to November 30, 2012	607,906	90.52		607,700	11,458,504
December 1, 2012 to December 31, 2012	763,853	92.33		763,500	11,186,243
Total	2,019,966	$	91.76	2,000,000	N/A

——————————

(1)

We maintain an evergreen stock repurchase program, which we first announced on September 28, 1993. Under the stock repurchase program, we may maintain up to 18.4 million repurchased shares in our treasury account at any one time. At December 31, 2012, we held approximately 7.2 million treasury shares under this program. Effective January 1, 2013, our current Rule 10b5-1 plan authorizes our broker to purchase our common stock traded in the open market pursuant to our evergreen stock repurchase program. The terms of the plan set forth a maximum limit of 6.0 million shares to be repurchased through March 31, 2013, and the plan is cancellable at any time in our sole discretion and in accordance with applicable insider trading laws. The difference between total number of shares purchased and total number of shares purchased as part of publicly announced plans or programs is due to shares of common stock withheld by us to satisfy tax withholding obligations related to vested employee restricted stock awards.


(2)	The share numbers reflect the maximum number of shares that may be purchased under our stock repurchase program and are as of the end of each of the respective periods.

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Item 6.	Selected Financial Data

SELECTED CONSOLIDATED FINANCIAL DATA



	Year Ended December 31,
	2012			2011			2010			2009			2008
	(in millions, except per share data)
Summary of Operations
Product net sales	$	5,708.8		$	5,347.1		$	4,819.6		$	4,447.6		$	4,339.7
Other revenues	97.3			72.0			99.8			56.0			63.7
Total revenues	5,806.1			5,419.1			4,919.4			4,503.6			4,403.4
Operating costs and expenses:
Cost of sales (excludes amortization of intangible assets)	775.5			748.7			722.0			750.9			761.2
Selling, general and administrative	2,268.4			2,246.6			2,017.6			1,921.5			1,856.1
Research and development	989.6			902.8			804.6			706.0			797.9
Amortization of intangible assets	131.3			127.6			138.0			146.3			150.9
Legal settlement	—			—			609.2			—			—
Impairment of intangible assets and related costs	22.3			23.7			369.1			—			—
Restructuring charges	5.7			4.6			0.3			50.9			41.3
Operating income	1,613.3			1,365.1			258.6			928.0			796.0
Non-operating expense	(80.0		)	(65.4		)	(87.8		)	(79.5		)	(33.8		)
Earnings before income taxes	1,533.3			1,299.7			170.8			848.5			762.2
Net earnings	1,102.5			938.1			4.9			623.8			564.7
Net earnings attributable to noncontrolling interest	3.7			3.6			4.3			2.5			1.6
Net earnings attributable to Allergan, Inc.	$	1,098.8		$	934.5		$	0.6		$	621.3		$	563.1

Earnings per share attributable to Allergan, Inc. stockholders:
Basic	$	3.64		$	3.07		$	0.00		$	2.05		$	1.85
Diluted	$	3.58		$	3.01		$	0.00		$	2.03		$	1.84

Cash dividends per share	$	0.20		$	0.20		$	0.20		$	0.20		$	0.20

Financial Position
Current assets	$	4,458.8		$	4,048.3		$	3,993.7		$	3,106.3		$	2,270.6
Working capital	3,363.6			3,093.3			2,465.3			2,294.7			1,573.6
Total assets	9,179.3			8,508.6			8,308.1			7,536.6			6,791.8
Long-term debt, excluding current portion	1,512.4			1,515.4			1,534.2			1,491.3			1,570.5
Total stockholders’ equity	5,837.1			5,309.6			4,757.7			4,822.8			4,050.7

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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

This financial review presents our operating results for each of the three years in the period ended December 31, 2012, and our financial condition at December 31, 2012. Except for the historical information contained herein, the following discussion contains forward-looking statements which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We discuss such risks, uncertainties and other factors throughout this report and specifically under Item 1A of Part I of this report, “Risk Factors.” In addition, the following review should be read in connection with the information presented in our consolidated financial statements and the related notes to our consolidated financial statements.

Critical Accounting Policies, Estimates and Assumptions

The preparation and presentation of financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires us to establish policies and to make estimates and assumptions that affect the amounts reported in our consolidated financial statements. In our judgment, the accounting policies, estimates and assumptions described below have the greatest potential impact on our consolidated financial statements. Accounting assumptions and estimates are inherently uncertain and actual results may differ materially from our estimates.

Revenue Recognition

We recognize revenue from product sales when goods are shipped and title and risk of loss transfer to our customers. A substantial portion of our revenue is generated by the sale of specialty pharmaceutical products (primarily eye care pharmaceuticals, skin care and urologics products) to wholesalers within the United States, and we have a policy to attempt to maintain average U.S. wholesaler inventory levels at an amount less than eight weeks of our net sales. A portion of our revenue is generated from consigned inventory of breast implants maintained at physician, hospital and clinic locations. These customers are contractually obligated to maintain a specific level of inventory and to notify us upon the use of consigned inventory. Revenue for consigned inventory is recognized at the time we are notified by the customer that the product has been used. Notification is usually through the replenishing of the inventory, and we periodically review consignment inventories to confirm the accuracy of customer reporting.

We generally offer cash discounts to customers for the early payment of receivables. Those discounts are recorded as a reduction of revenue and accounts receivable in the same period that the related sale is recorded. The amounts reserved for cash discounts were $4.4 million and $4.5 million at December 31, 2012 and 2011, respectively. Provisions for cash discounts deducted from consolidated sales in 2012, 2011 and 2010 were $69.2 million, $62.5 million and $55.2 million, respectively.

We permit returns of product from most product lines by any class of customer if such product is returned in a timely manner, in good condition and from normal distribution channels. Return policies in certain international markets and for certain medical device products, primarily breast implants, provide for more stringent guidelines in accordance with the terms of contractual agreements with customers. Our estimates for sales returns are based upon the historical patterns of product returns matched against sales, and management’s evaluation of specific factors that may increase the risk of product returns. The amount of allowances for sales returns recognized in our consolidated balance sheets at December 31, 2012 and 2011 were $78.9 million and $68.5 million, respectively, and are recorded in “Other accrued expenses” and “Trade receivables, net” in our consolidated balance sheets. See Note 4, “Composition of Certain Financial Statement Captions” in the notes to our consolidated financial statements listed under Item 15 of Part IV of this report, “Exhibits and Financial Statement Schedules.” Provisions for sales returns deducted from consolidated sales were $412.6 million, $407.4 million and $389.3 million in 2012, 2011 and 2010, respectively. The increases in the amount of allowances for sales returns at December 31, 2012 compared to December 31, 2011 and the provisions for sales returns in 2012 compared to 2011 are primarily due to increased overall product sales volume and an increase in allowances for sales returns related to our urologics products due to the launch of a competitive generic version of Sanctura XR ^® in the United States in the fourth quarter of 2012, partially offset by a decrease in estimated product sales return rates for our skin care products and breast aesthetics products. The increase in the provisions for sales returns in 2011 compared to 2010 is primarily due to increased sales returns related to breast implant products, principally due to increased product sales volume, and an increase in estimated product sales return rates for our skin care products. Actual historical allowances for cash discounts and product returns have been consistent with the amounts reserved or accrued.

We participate in various managed care sales rebate and other incentive programs, the largest of which relates to Medicaid, Medicare and the U.S. Department of Veterans Affairs. Sales rebate and other incentive programs also include contractual volume rebate programs and chargebacks, which are contractual discounts given primarily to federal government agencies, health maintenance organizations, pharmacy benefits managers and group purchasing organizations. We also offer rebate and other incentive programs for our aesthetic products and certain therapeutic products, including Botox ^® Cosmetic, Juvéderm ^® , Latisse ^® , Acuvail ^® , Aczone ^® , Sanctura XR ^® and Restasis ^® , and for certain other skin care products. Sales rebates and incentive accruals

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reduce revenue in the same period that the related sale is recorded and are included in “Other accrued expenses” in our consolidated balance sheets. The amounts accrued for sales rebates and other incentive programs were $270.6 million and $249.1 million at December 31, 2012 and 2011, respectively. Provisions for sales rebates and other incentive programs deducted from consolidated sales were $935.3 million, $760.0 million and $565.3 million in 2012, 2011 and 2010, respectively. The increases in the amounts accrued at December 31, 2012 compared to December 31, 2011 and the provisions for sales rebates and other incentive programs in 2012 compared to 2011 are primarily due to an increase in activity under previously established rebate and incentive programs, principally related to our eye care pharmaceuticals, Botox ^® Cosmetic, urology, skin care and facial aesthetics products, an increase in the number of incentive programs offered and increased overall product sales volume. The increase in the provisions for sales rebates and other incentive programs in 2011 compared to 2010 are primarily due to an increase in activity under previously established rebate and incentive programs, principally related to our eye care pharmaceuticals, Botox ^® Cosmetic, urology, skin care and facial aesthetics products, an increase in the number of incentive programs offered, additional contractual discounts to federal government agencies related to the recently enacted health care reform legislation and increased overall product sales volume. In addition, an increase in our published list prices in the United States for pharmaceutical products, which occurred for several of our products in each of 2012 and 2011, generally results in higher provisions for sales rebates and other incentive programs deducted from consolidated sales.

Our procedures for estimating amounts accrued for sales rebates and other incentive programs at the end of any period are based on available quantitative data and are supplemented by management’s judgment with respect to many factors, including but not limited to, current market dynamics, changes in contract terms, changes in sales trends, an evaluation of current laws and regulations and product pricing. Quantitatively, we use historical sales, product utilization and rebate data and apply forecasting techniques in order to estimate our liability amounts. Qualitatively, management’s judgment is applied to these items to modify, if appropriate, the estimated liability amounts. There are inherent risks in this process. For example, customers may not achieve assumed utilization levels; customers may misreport their utilization to us; actual utilization and reimbursement rates under government rebate programs may differ from those estimated; and actual movements of the U.S. Consumer Price Index for All Urban Consumers, or CPI-U, which affect our rebate programs with U.S. federal and state government agencies, may differ from those estimated. On a quarterly basis, adjustments to our estimated liabilities for sales rebates and other incentive programs related to sales made in prior periods have not been material and have generally been less than 0.5% of consolidated product net sales. An adjustment to our estimated liabilities of 0.5% of consolidated product net sales on a quarterly basis would result in an increase or decrease to net sales and earnings before income taxes of approximately $7.0 million to $8.0 million. The sensitivity of our estimates can vary by program and type of customer. Additionally, there is a significant time lag between the date we determine the estimated liability and when we actually pay the liability. Due to this time lag, we record adjustments to our estimated liabilities over several periods, which can result in a net increase to earnings or a net decrease to earnings in those periods. Material differences may result in the amount of revenue we recognize from product sales if the actual amount of rebates and incentives differ materially from the amounts estimated by management.

We recognize license fees, royalties and reimbursement income for services provided as other revenues based on the facts and circumstances of each contractual agreement. In general, we recognize income upon the signing of a contractual agreement that grants rights to products or technology to a third party if we have no further obligation to provide products or services to the third party after entering into the contract. We recognize contingent consideration earned from the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. We defer income under contractual agreements when we have further obligations that indicate that a separate earnings process has not been completed.

Contingent Consideration

Contingent consideration liabilities represent future amounts we may be required to pay in conjunction with various business combinations. The ultimate amount of future payments is based on specified future criteria, such as sales performance and the achievement of certain future development, regulatory and sales milestones and other contractual performance conditions. We estimate the fair value of the contingent consideration liabilities related to sales performance using the income approach, which involves forecasting estimated future net cash flows and discounting the net cash flows to their present value using a risk-adjusted rate of return. We estimate the fair value of the contingent consideration liabilities related to the achievement of future development and regulatory milestones by assigning an achievement probability to each potential milestone and discounting the associated cash payment to its present value using a risk-adjusted rate of return. We estimate the fair value of the contingent consideration liabilities associated with sales milestones by employing Monte Carlo simulations to estimate the volatility and systematic relative risk of revenues subject to sales milestone payments and discounting the associated cash payment amounts to their present values using a credit-risk-adjusted interest rate. The fair value of other contractual performance conditions is measured by assigning an achievement probability to each payment and discounting the payment to its present value using our estimated cost of borrowing. We evaluate our estimates of the fair value of contingent consideration liabilities on a periodic basis. Any changes in the fair value of contingent consideration liabilities are recorded through earnings as “Selling, general and administrative” in the accompanying consolidated statements of earnings. The total estimated fair value of contingent

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consideration liabilities was $224.3 million and $214.6 million at December 31, 2012 and 2011, respectively, and was included in “Other accrued expenses” and “Other liabilities” in our consolidated balance sheets.

Pensions

We sponsor various pension plans in the United States and abroad in accordance with local laws and regulations. Our U.S. pension plans account for a large majority of our aggregate pension plans' net periodic benefit costs and projected benefit obligations. In connection with these plans, we use certain actuarial assumptions to determine the plans' net periodic benefit costs and projected benefit obligations, the most significant of which are the expected long-term rate of return on assets and the discount rate.

Our assumption for the weighted average expected long-term rate of return on assets in our U.S. funded pension plan for determining the net periodic benefit cost is 6.75%, 7.25% and 8.25% for 2012, 2011 and 2010, respectively. Our assumptions for the weighted average expected long-term rate of return on assets in our non-U.S. funded pension plans are 4.80%, 5.70% and 5.85% for 2012, 2011 and 2010, respectively. For our U.S. funded pension plan, we determine, based upon recommendations from our pension plan's investment advisors, the expected rate of return using a building block approach that considers diversification and rebalancing for a long-term portfolio of invested assets. Our investment advisors study historical market returns and preserve long-term historical relationships between equities and fixed income in a manner consistent with the widely-accepted capital market principle that assets with higher volatility generate a greater return over the long run. They also evaluate market factors such as inflation and interest rates before long-term capital market assumptions are determined. For our non-U.S. funded pension plans, the expected rate of return was determined based on asset distribution and assumed long-term rates of return on fixed income instruments and equities. Market conditions and other factors can vary over time and could significantly affect our estimates of the weighted average expected long-term rate of return on plan assets. The expected rate of return is applied to the market-related value of plan assets. As a sensitivity measure, the effect of a 0.25% decline in our rate of return on assets assumptions for our U.S. and non-U.S. funded pension plans would increase our expected 2013 pre-tax pension benefit cost by approximately $2.0 million.

The weighted average discount rates used to calculate our U.S. and non-U.S. pension benefit obligations at December 31, 2012 were 4.23% and 4.55%, respectively, and at December 31, 2011 were 4.63% and 5.14%, respectively. The weighted average discount rates used to calculate our U.S. and non-U.S. net periodic benefit costs for 2012 were 4.63% and 5.14%, respectively, for 2011, 5.51% and 5.57%, respectively, and for 2010, 6.04% and 6.16%, respectively. We determine the discount rate based upon a hypothetical portfolio of high quality fixed income investments with maturities that mirror the pension benefit obligations at the plans' measurement date. Market conditions and other factors can vary over time and could significantly affect our estimates for the discount rates used to calculate our pension benefit obligations and net periodic benefit costs for future years. As a sensitivity measure, the effect of a 0.25% decline in the discount rate assumption for our U.S. and non-U.S. pension plans would increase our expected 2013 pre-tax pension benefit costs by approximately $5.2 million and increase our pension plans' projected benefit obligations at December 31, 2012 by approximately $50.6 million.

Share-Based Compensation

We recognize compensation expense for all share-based awards made to employees and directors. The fair value of share-based awards is estimated at the grant date and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period.

The fair value of stock option awards that vest based on a service condition is estimated using the Black-Scholes option-pricing model. The fair value of share-based awards that contain a market condition is generally estimated using a Monte Carlo simulation model, and the fair value of modifications to share-based awards is generally estimated using a lattice model.

The determination of fair value using the Black-Scholes, Monte Carlo simulation and lattice models is affected by our stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors. We currently estimate stock price volatility based upon an equal weighting of the historical average over the expected life of the award and the average implied volatility of at-the-money options traded in the open market. We estimate employee stock option exercise behavior based on actual historical exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options.

Share-based compensation expense is recognized only for those awards that are ultimately expected to vest, and we have applied an estimated forfeiture rate to unvested awards for the purpose of calculating compensation cost. These estimates will be revised in future periods if actual forfeitures differ from the estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs. Compensation expense for share-based awards based on a service condition is recognized using the straight-line single option method.

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Product Liability Self-Insurance

As of June 1, 2012, we are largely self-insured for future product liability losses related to all of our products. We have historically been and continue to be self-insured for any product liability losses related to our breast implant products. We maintain third party insurance coverage that we believe is adequate to cover potential product liability losses for injuries alleged to have occurred prior to June 1, 2011 related to Botox ^® and Botox ^® Cosmetic and prior to June 1, 2012 related to all of our other products. In addition, as a part of our current self-insurance product liability practice, we maintain a layer of insurance coverage for potential product liability losses, excluding breast implant products, above a minimum self-insured amount. Future product liability losses are, by their nature, uncertain and are based upon complex judgments and probabilities. The factors to consider in developing product liability reserves include the merits and jurisdiction of each claim, the nature and the number of other similar current and past claims, the nature of the product use and the likelihood of settlement. In addition, we accrue for certain potential product liability losses estimated to be incurred, but not reported, to the extent they can be reasonably estimated. We estimate these accruals for potential losses based primarily on historical claims experience and data regarding product usage. The total value of self-insured product liability claims settled in 2012, 2011 and 2010, respectively, and the value of known and reasonably estimable incurred but unreported self-insured product liability claims pending as of December 31, 2012 are not expected to have a material effect on our results of operations or liquidity.

Income Taxes

The provision for income taxes is determined using an estimated annual effective tax rate, which is generally less than the U.S. federal statutory rate, primarily because of lower tax rates in certain non-U.S. jurisdictions, research and development, or R&D, tax credits available in California and other foreign jurisdictions and deductions available in the United States for domestic production activities. Our effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as the mix of pre-tax earnings in the various tax jurisdictions in which we operate, valuation allowances against deferred tax assets, the recognition or derecognition of tax benefits related to uncertain tax positions, expected utilization of R&D tax credits and changes in or the interpretation of tax laws in jurisdictions where we conduct business. The American Taxpayer Relief Act of 2012 was enacted on January 2, 2013 and retroactively reinstated the U.S. R&D tax credit to January 1, 2012. The retroactive benefit of the U.S. R&D tax credit for fiscal year 2012 is estimated to be approximately $17.3 million and will be recognized in the first quarter of 2013. We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities along with net operating loss and tax credit carryovers.

We record a valuation allowance against our deferred tax assets to reduce the net carrying value to an amount that we believe is more likely than not to be realized. When we establish or reduce the valuation allowance against our deferred tax assets, our provision for income taxes will increase or decrease, respectively, in the period such determination is made. Valuation allowances against deferred tax assets were $22.6 million and $14.9 million at December 31, 2012 and 2011, respectively. Changes in the valuation allowances, when they are recognized in the provision for income taxes, are included as a component of the estimated annual effective tax rate.

We have not provided for withholding and U.S. taxes for the unremitted earnings of certain non-U.S. subsidiaries because we have currently reinvested these earnings indefinitely in these foreign operations. At December 31, 2012, we had approximately $3,083.5 million in unremitted earnings outside the United States for which withholding and U.S. taxes were not provided. Income tax expense would be incurred if these earnings were remitted to the United States. It is not practicable to estimate the amount of the deferred tax liability on such unremitted earnings. Upon remittance, certain foreign countries impose withholding taxes that are then available, subject to certain limitations, for use as credits against our U.S. tax liability, if any. We annually update our estimate of unremitted earnings outside the United States after the completion of each fiscal year.

Acquisitions

The accounting for acquisitions requires extensive use of estimates and judgments to measure the fair value of the identifiable tangible and intangible assets acquired, including in-process research and development, and liabilities assumed. Additionally, we must determine whether an acquired entity is considered to be a business or a set of net assets, because the excess of the purchase price over the fair value of net assets acquired can only be recognized as goodwill in a business combination.

On June 17, 2011, we acquired Alacer Biomedical, Inc., or Alacer, for an aggregate purchase price of approximately $7.0 million, net of cash acquired. On July 1, 2011, we purchased the commercial assets related to the selling and distribution of our products from our distributor in South Africa for $8.6 million, net of a $2.2 million pre-existing receivable from the distributor. On July 22, 2011, we acquired Vicept Therapeutics, Inc., or Vicept, for $74.1 million in cash and estimated contingent consideration of $163.0 million as of the acquisition date. On August 8, 2011, we acquired Precision Light, Inc., or Precision Light, for $11.7 million in cash and estimated contingent consideration of $6.2 million as of the acquisition date. On February

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1, 2012, we purchased the commercial assets related to the selling and distribution of our products from our distributor in Russia for $3.1 million in cash, net of a $6.6 million pre-existing net receivable from the distributor, and estimated contingent consideration of $4.7 million as of the acquisition date. On December 19, 2012, we acquired SkinMedica, Inc., or SkinMedica, for $346.1 million in cash and estimated contingent consideration of $2.2 million as of the acquisition date. We accounted for these acquisitions as business combinations. The tangible and intangible assets acquired and liabilities assumed in connection with these acquisitions were recognized based on their estimated fair values at the acquisition dates. The determination of estimated fair values requires significant estimates and assumptions including, but not limited to, determining the timing and estimated costs to complete the in-process projects, projecting regulatory approvals, estimating future cash flows and developing appropriate discount rates. We believe the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions.

Impairment Evaluations for Goodwill and Intangible Assets

We evaluate goodwill for impairment on an annual basis, or more frequently if we believe indicators of impairment exist. We have identified two reporting units, specialty pharmaceuticals and medical devices, and perform our annual evaluation as of October 1 each year.

For our specialty pharmaceuticals reporting unit, we performed the qualitative assessment to determine whether it is more likely than not that its fair value is less than its carrying amount. For our medical devices reporting unit, we evaluated goodwill for impairment by comparing its carrying value to its estimated fair value. We primarily use the income approach and the market approach to valuation that include the discounted cash flow method, the guideline company method, as well as other generally accepted valuation methodologies to determine the fair value.

Upon completion of the October 2012 annual impairment assessment, we determined that no impairment was indicated. As of December 31, 2012, we are not aware of any significant indicators of impairment that exist for our goodwill that would require additional analysis.

We also review intangible assets for impairment when events or changes in circumstances indicate that the carrying value of our intangible assets may not be recoverable. An impairment in the carrying value of an intangible asset is recognized whenever anticipated future undiscounted cash flows from an intangible asset are estimated to be less than its carrying value.

In the fourth quarter of 2012, we recorded a pre-tax charge of $17.0 million related to the partial impairment of an indefinite-lived in-process research and development asset acquired in connection with our 2011 acquisition of Vicept. The impairment charge was recognized because the carrying amount of the asset was determined to be in excess of its estimated fair value. In the fourth quarter of 2012, we also recorded in "Selling, general and administrative" expenses a net reduction in expense of $14.2 million for a related decrease in the fair value of the contingent consideration liability associated with the Vicept acquisition. For the fiscal year 2012, the net decrease in the contingent consideration liability associated with the Vicept acquisition was $10.6 million.

In March 2011, we decided to discontinue development of the EasyBand ^™ Remote Adjustable Gastric Band System, or EasyBand ^™ , a technology that we acquired in connection with our 2007 acquisition of EndoArt SA, or EndoArt. As a result, in the first quarter of 2011 we recorded a pre-tax impairment charge of $16.1 million for the intangible assets associated with the EasyBand ^™ technology.

In the third quarter of 2011, we recorded a pre-tax charge of $4.3 million related to the impairment of an in-process research and development asset associated with a tissue reinforcement technology that has not yet achieved regulatory approval acquired in connection with our 2010 acquisition of Serica Technologies, Inc., or Serica. The impairment charge was recognized because estimates of the anticipated future undiscounted cash flows of the asset were not sufficient to recover its carrying amount.

In the third quarter of 2010, we concluded that the intangible assets and a related prepaid royalty asset associated with the Sanctura ^® franchise, or the Sanctura ^® Assets, which we acquired in connection with our 2007 acquisition of Esprit Pharma Holding Company, Inc., or Esprit, and certain subsequent licensing and commercialization transactions, had become impaired. We determined that an impairment charge was required with respect to the Sanctura ^® Assets because the estimated undiscounted future cash flows over their remaining useful life were not sufficient to recover the carrying amount of the Sanctura ^® Assets and the carrying amount exceeded the estimated fair value of those assets due to a reduction in expected future financial performance for the Sanctura ^® franchise resulting from lower than anticipated acceptance by patients, physicians and payors. As a result, in the third quarter of 2010, we recorded an aggregate charge of $369.1 million related to the impairment of the Sanctura ^® Assets and related costs, which includes a charge of $343.2 million for the impairment of the Sanctura ^® intangible assets. In the second quarter of 2011, we recorded additional related costs of $3.3 million. In the fourth quarter of 2012, we recorded an additional impairment charge of $5.3 million related to the prepaid royalty asset associated with the Sanctura ^® franchise due to the launch of a competitive generic version of Sanctura XR ^® .

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On February 1, 2013, we completed our previously announced review of strategic options for maximizing the value of our obesity intervention business, and formally committed to pursue a sale of that business unit. The obesity intervention business is included in our medical devices reporting unit for the annual goodwill impairment evaluation. In the first quarter of 2013, we expect to report our obesity intervention business as a discontinued operation, and accordingly will write-down to fair value the net assets held for sale. The net assets held for sale will include a portion of the medical devices reporting unit's goodwill allocable to the obesity intervention business based on the relative fair value of the business to be disposed of and the portion of the medical devices reporting unit that will be retained. We are currently unable to estimate the amount of goodwill that will be allocated to the obesity intervention business. In addition, once a portion of goodwill is allocated to the net assets of the obesity intervention business to be disposed of, the goodwill remaining in the portion of the medical devices reporting unit that will be retained will be tested for impairment. The evaluation for impairment of the remaining goodwill will occur in the first quarter of 2013.

Significant management judgment is required in the forecasts of future operating results that are used in our impairment evaluations. The estimates we have used are consistent with the plans and estimates that we use to manage our business. It is possible, however, that the plans may change and estimates used may prove to be inaccurate. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur future impairment charges.

Operations

Headquartered in Irvine, California, we are a multi-specialty health care company focused on developing and commercializing innovative pharmaceuticals, biologics, medical devices and over-the-counter products that enable people to live life to its full potential - to see more clearly, move more freely and express themselves more fully. We discover, develop and commercialize a diverse range of products for the ophthalmic, neurological, medical aesthetics, medical dermatology, breast aesthetics, obesity intervention, urological and other specialty markets in more than 100 countries around the world.

We are also a pioneer in specialty pharmaceutical, biologic and medical device research and development. Our research and development efforts are focused on products and technologies related to the many specialty areas in which we currently operate as well as new specialty areas where unmet medical needs are significant. We supplement our own research and development activities with our commitment to identify and obtain new technologies through in-licensing, research collaborations, joint ventures and acquisitions. At December 31, 2012, we employed approximately 10,800 persons around the world. Our principal geographic markets are the United States, Europe, Latin America and Asia Pacific.

Results of Operations

Management evaluates our business segments and various global product portfolios on a revenue basis, which is presented below in accordance with GAAP. We also report sales performance using the non-GAAP financial measure of constant currency sales. Constant currency sales represent current period reported sales, adjusted for the translation effect of changes in average foreign exchange rates between the current period and the corresponding period in the prior year. We calculate the currency effect by comparing adjusted current period reported sales, calculated using the monthly average foreign exchange rates for the corresponding period in the prior year, to the actual current period reported sales. We routinely evaluate our net sales performance at constant currency so that sales results can be viewed without the impact of changing foreign currency exchange rates, thereby facilitating period-to-period comparisons of our sales. Generally, when the U.S. dollar either strengthens or weakens against other currencies, the growth at constant currency rates will be higher or lower, respectively, than growth reported at actual exchange rates.

The following table compares net sales by product line within each reportable segment and certain selected pharmaceutical products for the years ended December 31, 2012, 2011 and 2010:

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	Year Ended December 31,						Change in Product Net Sales									Percent Change in Product Net Sales
	2012			2011			Total			Performance			Currency			Total		Performance		Currency
	(in millions)
Net Sales by Product Line:
Specialty Pharmaceuticals:
Eye Care Pharmaceuticals	$	2,692.2		$	2,520.2		$	172.0		$	244.2		$	(72.2	)	6.8	%	9.7	%	(2.9	)%
Botox ^® /Neuromodulator	1,766.3			1,594.9			171.4			202.1			(30.7		)	10.7	%	12.7	%	(2.0	)%
Skin Care	298.4			260.1			38.3			38.8			(0.5		)	14.7	%	14.9	%	(0.2	)%
Urologics	27.7			56.8			(29.1		)	(29.1		)	—			(51.2	)%	(51.2	)%	—	%
Total Specialty Pharmaceuticals	4,784.6			4,432.0			352.6			456.0			(103.4		)	8.0	%	10.3	%	(2.3	)%
Medical Devices:
Breast Aesthetics	377.1			349.3			27.8			36.8			(9.0		)	8.0	%	10.5	%	(2.5	)%
Obesity Intervention	159.5			203.1			(43.6		)	(40.3		)	(3.3		)	(21.5	)%	(19.8	)%	(1.7	)%
Facial Aesthetics	387.6			362.7			24.9			35.8			(10.9		)	6.9	%	9.9	%	(3.0	)%
Total Medical Devices	924.2			915.1			9.1			32.3			(23.2		)	1.0	%	3.5	%	(2.5	)%

Total product net sales	$	5,708.8		$	5,347.1		$	361.7		$	488.3		$	(126.6	)	6.8	%	9.1	%	(2.3	)%

Domestic product net sales	60.9		%	60.2		%
International product net sales	39.1		%	39.8		%

Selected Product Net Sales (a):
Alphagan ^® P , Alphagan ^® and Combigan ^®	$	453.2		$	419.4		$	33.8		$	44.4		$	(10.6	)	8.1	%	10.6	%	(2.5	)%
Lumigan ^® Franchise	622.6			612.7			9.9			29.8			(19.9		)	1.6	%	4.9	%	(3.3	)%
Total Glaucoma Products	1,085.8			1,042.9			42.9			74.1			(31.2		)	4.1	%	7.1	%	(3.0	)%
Restasis ^®	792.0			697.1			94.9			97.1			(2.2		)	13.6	%	13.9	%	(0.3	)%
Latisse ^®	97.3			93.6			3.7			4.2			(0.5		)	4.0	%	4.5	%	(0.5	)%

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	Year Ended December 31,						Change in Product Net Sales									Percent Change in Product Net Sales
	2011			2010			Total			Performance			Currency			Total		Performance		Currency
	(in millions)
Net Sales by Product Line:
Specialty Pharmaceuticals:
Eye Care Pharmaceuticals	$	2,520.2		$	2,262.0		$	258.2		$	222.9		$	35.3		11.4	%	9.9	%	1.5	%
Botox ^® /Neuromodulator	1,594.9			1,419.4			175.5			148.2			27.3			12.4	%	10.4	%	2.0	%
Skin Care	260.1			229.5			30.6			30.1			0.5			13.3	%	13.1	%	0.2	%
Urologics	56.8			62.5			(5.7		)	(5.7		)	—			(9.1	)%	(9.1	)%	—	%
Total Specialty Pharmaceuticals	4,432.0			3,973.4			458.6			395.5			63.1			11.5	%	10.0	%	1.5	%
Medical Devices:
Breast Aesthetics	349.3			319.1			30.2			22.9			7.3			9.5	%	7.2	%	2.3	%
Obesity Intervention	203.1			243.3			(40.2		)	(44.1		)	3.9			(16.5	)%	(18.1	)%	1.6	%
Facial Aesthetics	362.7			283.8			78.9			70.6			8.3			27.8	%	24.9	%	2.9	%
Total Medical Devices	915.1			846.2			68.9			49.4			19.5			8.1	%	5.8	%	2.3	%

Total product net sales	$	5,347.1		$	4,819.6		$	527.5		$	444.9		$	82.6		10.9	%	9.2	%	1.7	%

Domestic product net sales	60.2		%	62.6		%
International product net sales	39.8		%	37.4		%

Selected Product Net Sales (a):
Alphagan ^® P , Alphagan ^® and Combigan ^®	$	419.4		$	401.6		$	17.8		$	12.5		$	5.3		4.4	%	3.1	%	1.3	%
Lumigan ^® Franchise	612.7			526.7			86.0			73.0			13.0			16.3	%	13.9	%	2.4	%
Total Glaucoma Products	1,042.9			938.8			104.1			85.4			18.7			11.1	%	9.1	%	2.0	%
Restasis ^®	697.1			620.5			76.6			77.6			(1.0		)	12.4	%	12.5	%	(0.1	)%
Latisse ^®	93.6			81.8			11.8			11.3			0.5			14.4	%	13.8	%	0.6	%

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(a)	Percentage change in selected product net sales is calculated on amounts reported to the nearest whole dollar. Total glaucoma products include the Alphagan ^® and Lumigan ^® franchises.

Product Net Sales

Product net sales increased by $361.7 million in 2012 compared to 2011 due to an increase of $352.6 million in our specialty pharmaceuticals product net sales and an increase of $9.1 million in our medical devices product net sales. The increase in specialty pharmaceuticals product net sales is due to increases in product net sales of our eye care pharmaceuticals, Botox ^® , and skin care product lines, partially offset by a decrease in product net sales of our urologics product line. The increase in medical devices product net sales reflects an increase in product net sales of our breast aesthetics and facial aesthetics product lines, partially offset by a decrease in product net sales of our obesity intervention product line.

Several of our products, including Botox ^® Cosmetic, Latisse ^® , over-the-counter artificial tears, non-prescription aesthetics skin care products, facial aesthetics and breast implant products, as well as, in emerging markets, Botox ^® for therapeutic use and eye care products, are purchased based on consumer choice and have limited reimbursement or are not reimbursable by government or other health care plans and are, therefore, partially or wholly paid for directly by the consumer. As such, the general economic environment and level of consumer spending have a significant effect on our sales of these products.

In the United States, sales of our products that are reimbursable by government health care plans continue to be significantly impacted by the provisions of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, collectively, the PPACA, which extended Medicaid and Medicare benefits to new patient populations and increased Medicaid and Medicare rebates. Additionally, sales of our products in the United States that are reimbursed by managed care programs continue to be impacted by competitive pricing pressures. In Europe and some other international markets, sales of our products that are reimbursable by government health care plans continue to be impacted by mandatory price reductions, tenders and rebate increases.

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Certain of our products face generic competition. In May 2011, a generic version of our older-generation topical allergy medication Elestat ^® was launched in the United States. In June 2011, the U.S. patent for Tazorac ^® cream, indicated for psoriasis and acne, expired. The U.S. patents for Tazorac ^® gel expire in June 2014. The U.S. Food and Drug Administration, or FDA, has posted guidance regarding requirements for clinical bioequivalence for a generic of tazarotene cream, separately for both psoriasis and acne. We believe that this will require generic manufacturers to conduct a trial, at risk, for both indications. In April 2012, the U.S. District Court for the District of Delaware ruled that our U.S. patents for Sanctura XR ^® are invalid, a decision that was upheld by the U.S. Court of Appeals for the Federal Circuit in June 2012. In October 2012, a competitive generic version of Sanctura XR ^® was launched in the United States. Additionally, a generic version of Zymar ^® , our older-generation fluoroquinolone indicated for the treatment of bacterial conjunctivitis, may be launched in the United States in the near future. Our products also compete with generic versions of some branded pharmaceutical products sold by our competitors. Although generic competition in the United States negatively affected our aggregate product net sales in 2012, the impact was not material. We do not currently believe that our aggregate product net sales will be materially impacted in 2013 by generic competition, but we could experience a rapid and significant decline in net sales of certain products if we are unable to successfully maintain or defend our patents and patent applications relating to such products. For a more complete discussion of the risks relating to generic competition and patent protection, see Item 1A of Part I of this report, “Risk Factors - We may be unable to obtain and maintain adequate protection for our intellectual property rights.”

Eye care pharmaceuticals product net sales increased in 2012 compared to 2011 in the United States, Canada, Europe and Asia Pacific. Net sales of eye care pharmaceutical products in Latin America decreased in 2012 compared to 2011 due to the negative translation effect of average foreign currency exchange rates in effect during 2012 compared to 2011. When measured at constant currency, net sales of eye care pharmaceutical products in Latin America increased in 2012 compared to 2011.

The overall increase in total sales in dollars of our eye care pharmaceutical products is primarily due to an increase in sales of Restasis ^® , our therapeutic treatment for chronic dry eye disease, an increase in sales of our glaucoma products, including Lumigan ^® 0.01%, Combigan ^® , Alphagan ^® P 0.1% and Alphagan ^® P 0.15%, an increase in sales of Ozurdex ^® , our biodegradable, sustained-release steroid implant for the treatment of certain retinal diseases, an increase in sales of Lastacaft ^® , our topical allergy medication for the treatment and prevention of itching associated with allergic conjunctivitis, and an increase in sales of our Refresh ^® artificial tears products, partially offset by decreases in sales of our older-generation products, including our glaucoma drugs Alphagan ^® and Lumigan ^® 0.03%, and our topical allergy medication Elestat ^® , and decreases in sales of our fluoroquinolone products Zymar ^® and Zymaxid ^® and our non-steroid anti-inflammatory drugs Acular ^® and Acuvail ^® .

We increased prices on certain eye care pharmaceutical products in the United States in 2012. Effective January 7, 2012, we increased the published U.S. list price for Alphagan ^® P 0.15% by three percent, Acular ^® , Acular LS ^® and Acuvail ^® by four percent, Lumigan ^® 0.1% and Lumigan ^® 0.3% by five percent, Alphagan ^® P 0.1%, Combigan ^® and Zymaxid ^® by eight percent and Lastacaft ^® by ten percent. Effective April 7, 2012, we increased the published U.S. list price for Restasis ^® by five percent. Effective May 12, 2012, we increased the published U.S. list price for Lastacaft ^® by an additional five percent, Alphagan ^® P 0.15%, Alphagan ^® P 0.1%, Lumigan ^® 0.1%, Lumigan ^® 0.3% and Combigan ^® by an additional eight percent, and Acular ^® , Acular LS ^® , Acuvail ^® and Zymaxid ^® by an additional ten percent. These price increases had a positive net effect on our U.S. sales in 2012 compared to 2011, but the actual net effect is difficult to determine due to the various managed care sales rebate and other incentive programs in which we participate. Wholesaler buying patterns and the change in dollar value of the prescription product mix also affected our reported net sales dollars, although we are unable to determine the impact of these effects. Due to the strong acceptance of Lumigan ^® 0.1% in the United States market, we ceased manufacturing Lumigan ^® 0.3% for the U.S. market in the fourth quarter of 2012.

Total sales of Botox ^® increased in 2012 compared to 2011 due to strong growth in sales for both therapeutic and cosmetic uses. Sales of Botox ^® for therapeutic use increased in the United States due to strong growth in sales for the prophylactic treatment of headaches in adults with chronic migraine, urinary incontinence in adults with neurological conditions, and upper limb spasticity. Sales of Botox ^® for therapeutic use also increased in Latin America and Asia Pacific. Sales of Botox ^® for cosmetic use increased in all of our principal geographic markets. Sales of Botox ^® in international markets were negatively affected by the translation effect of average foreign currency exchange rates in effect during 2012 compared to 2011. When measured at constant currency, total sales of Botox ^® increased in Europe in 2012 compared to 2011. Based on internal information and assumptions, we estimate in 2012 that Botox ^® therapeutic sales accounted for approximately 52% of total consolidated Botox ^® sales and increased by approximately 13% compared to 2011. In 2012, Botox ^® Cosmetic sales accounted for approximately 48% of total consolidated Botox ^® sales and increased by approximately 8% compared to 2011. We believe our worldwide market share for neuromodulators, including Botox ^® , was approximately 77% in the third quarter of 2012, the last quarter for which market data is available.

In March 2012, a U.S. District Court, after conducting a full trial, ruled that Merz Pharmaceuticals and Merz Aesthetics, or, jointly, Merz, violated California's Uniform Trade Secrets Act and issued an injunction prohibiting Merz from providing, selling or soliciting purchases of Xeomin ^® or its Radiesse ^® dermal filler products, provided that Merz may sell Xeomin ^® in the

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therapeutic market to customers not identified on court mandated exclusion lists and may sell dermal filler products to certain pre-existing customers. On October 1, 2012, the Company announced that the U.S. District Court had entered an order providing that the injunction related to Xeomin ^® for the facial aesthetics market would remain in place until January 9, 2013. The injunction related to Xeomin ^® for therapeutic use and Radiesse ^® was in effect until November 1, 2012. The District Court injunctions positively affected net sales of Botox ^® and provided a small benefit to net sales of Juvéderm ^® in 2012.

Skin care product net sales increased in 2012 compared to 2011 primarily due to an increase in sales of Aczone ^® , our topical dapsone treatment for acne vulgaris, an increase in sales of Tazorac ^® , Zorac ^® and Avage ^® , our topical tazarotene products and an increase in sales of Latisse ^® , our treatment for inadequate or insufficient eyelashes. Effective January 7, 2012, we increased the published U.S. list price for Aczone ^® , Tazorac ^® and Avage ^® by five percent. Effective May 12, 2012, we increased the published U.S. list price for Aczone ^® by an additional three percent.

Urologics sales, which are presently concentrated in the United States and consist of our Sanctura ^® franchise products for the treatment of overactive bladder, or OAB, decreased in 2012 compared to 2011, primarily due to lower sales of Sanctura XR ^® , our second-generation, once-daily anticholinergic for the treatment of OAB, which was negatively impacted by a decrease in promotional activity and the launch of a competitive generic version of Sanctura XR ^® in the United States in October 2012. Effective January 7, 2012, we increased the published U.S. list price for Sanctura XR ^® by nine percent and Sanctura ^® by ten percent. Effective May 12, 2012, we increased the published U.S. list price for Sanctura XR ^® by an additional fifteen percent. We currently expect to discontinue sales of our Sanctura ^® franchise products by the end of 2013.

We have a policy to attempt to maintain average U.S. wholesaler inventory levels of our specialty pharmaceuticals products at an amount less than eight weeks of our net sales. At December 31, 2012, based on available external and internal information, we believe the amount of average U.S. wholesaler inventories of our specialty pharmaceutical products was near the lower end of our stated policy levels.

Breast aesthetics product net sales, which consist primarily of sales of silicone gel and saline breast implants and tissue expanders, increased in 2012 compared to 2011 due to increases in sales in all of our principal geographic markets. The increase in sales of breast aesthetics products in the United States was primarily due to higher implant and tissue expander unit volume and favorable product mix due to the continued transition of the U.S. market to higher priced tissue expanders and silicone gel products from lower priced saline products, partially offset by a small decline in market share due to the entrance of a new competitor in the U.S. market. The overall increase in sales of breast aesthetics products in our international markets was primarily due to higher unit volume, offset by the negative translation effect of average foreign currency exchange rates in effect during 2012 compared to 2011.

Obesity intervention product net sales, which consist primarily of sales of devices used for minimally invasive long-term treatments of obesity such as our Lap-Band ^® and Lap-Band AP ^® Systems and Orbera ^™ System, decreased in 2012 compared to 2011 in all of our principal geographic markets, except Brazil. We believe sales of obesity intervention products in the United States and other principal geographic markets continued to be negatively impacted by general economic conditions given the substantial patient co-pays associated with these products, government spending restrictions and access restrictions imposed by insurance plans. In addition, net sales of our obesity intervention products continued to be negatively impacted by a general increase in the market share of other competitive bariatric surgery procedures, especially in the United States and Australia. Sales in Brazil increased due to increased unit volumes sold of Orbera ^™ . In October 2012, we announced that we were exploring strategic options for maximizing the value of our obesity intervention business. In February 2013, we completed this review and formally committed to pursue a sale of the business unit.

Facial aesthetics product net sales, which consist primarily of sales of hyaluronic acid-based dermal fillers used to correct facial wrinkles, increased in 2012 compared to 2011 primarily due to strong growth in sales in Europe and Asia Pacific. The increase in international sales of facial aesthetics products was due primarily to the recent launch of Juvéderm ^® Voluma ^™ with lidocaine in a number of countries in Europe and Asia, partially offset by the negative translation effect of average foreign currency exchange rates in effect during 2012 compared to 2011. Sales of facial aesthetics products in the United States increased slightly in 2012 compared to 2011, primarily due to overall growth in unit volume in the dermal filler market, partially offset by increased rebate activity.

Foreign currency changes decreased product net sales by $126.6 million in 2012 compared to 2011, primarily due to the weakening of the euro, Brazilian real, Mexican peso, Canadian dollar, Turkish lira and Indian rupee compared to the U.S. dollar.

U.S. product net sales as a percentage of total product net sales increased by 0.7 percentage points to 60.9% in 2012 compared to U.S. sales of 60.2% in 2011, due primarily to higher sales growth in the U.S. market compared to our international markets for our Botox ^® product line, an increase in sales of our skin care products, which are highly concentrated in the United States, and the negative overall translation impact on international sales due to a general weakening of foreign currencies

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compared to the U.S. dollar in markets where we sold products in 2012 compared to 2011, partially offset by higher sales growth, when measured at constant currency, in international markets compared to the U.S. market for our facial aesthetics, breast aesthetics and eye care pharmaceuticals product lines and a greater percentage decline in sales in the U.S. market compared to our total international markets for our obesity intervention product line.

Product net sales increased by $527.5 million in 2011 compared to 2010 due to an increase of $458.6 million in our specialty pharmaceuticals product net sales and an increase of $68.9 million in our medical devices product net sales. The increase in specialty pharmaceuticals product net sales is due to increases in product net sales of our eye care pharmaceuticals, Botox ^® , and skin care product lines, partially offset by a small decrease in product net sales of our urologics product line. The increase in medical devices product net sales reflects an increase in product net sales of our breast aesthetics and facial aesthetics product lines, partially offset by a decrease in product net sales of our obesity intervention product line.

Eye care pharmaceuticals product net sales increased in 2011 compared to 2010 primarily due to an increase in net sales of Restasis ^® , our therapeutic treatment for chronic dry eye disease, an increase in sales of our glaucoma drug Lumigan ^® 0.01%, which was launched in the United States in the fourth quarter of 2010, an increase in international sales of Ganfort ^™ , our Lumigan ^® and timolol combination for the treatment of glaucoma, an increase in sales of Combigan ^® , our Alphagan ^® and timolol combination for the treatment of glaucoma, an increase in sales of Alphagan ^® P 0.1%, an increase in sales of Ozurdex ^® , our biodegradable, sustained-release steroid implant for the treatment of certain retinal diseases, an increase in sales of Zymaxid ^® , our next-generation anti-infective product in the fluoroquinolone category indicated for the treatment of bacterial conjunctivitis, an increase in new product sales of Lastacaft ^® , our topical allergy medication for the treatment and prevention of itching associated with allergic conjunctivitis, which we launched in the United States in January 2011, and an increase in sales of our artificial tears products Refresh ^® and Refresh ^® Optive ^™ , partially offset by a decrease in sales of our glaucoma drugs Alphagan ^® , Alphagan ^® P 0.15% and Lumigan ^® 0.03%, our older-generation fluoroquinolone Zymar ^® , our older-generation topical allergy medication Elestat ^® , and our non-steroidal anti-inflammatory drug Acuvail ^® . Beginning in February 2011 we discontinued the U.S. sales of Zymar ^® .

We increased prices on certain eye care pharmaceutical products in the United States in 2011. Effective January 8, 2011, we increased the published U.S. list price for Restasis ^® , Alphagan ^® P 0.1%, Alphagan ^® P 0.15%, Combigan ^® , Zymar ^® , Zymaxid ^® , Acular ^® , Acular LS ^® and Acuvail ^® by four percent and Lumigan ^® 0.1% and Lumigan ^® 0.3% by eight percent. Effective July 9, 2011, we increased the published U.S. list price for Alphagan ^® P 0.1% and Combigan ^® by an additional four percent, Alphagan ^® P 0.15% by an additional eight percent, Acular ^® and Acular LS ^® by an additional five percent, Zymaxid ^® and Acuvail ^® by an additional fourteen percent and Lastacaft ^® by eight percent. Effective September 10, 2011, we increased the published U.S. list price for Lumigan ^® 0.1% and Lumigan ^® 0.3% by an additional six percent, and effective October 22, 2011, we increased the published U.S. list price for Restasis ^® by an additional five percent. These price increases had a positive net effect on our U.S. sales in 2011 compared to 2010, but the actual net effect is difficult to determine due to the various managed care sales rebate and other incentive programs in which we participate. Wholesaler buying patterns and the change in dollar value of the prescription product mix also affected our reported net sales dollars, although we are unable to determine the impact of these effects.

Total sales of Botox ^® increased in 2011 compared to 2010 due to an increase in sales of Botox ^® for both cosmetic and therapeutic use in all of our principal geographic markets. Sales of Botox ^® for therapeutic use in the United States benefited from sales for the prophylactic treatment of headaches in adults with chronic migraine and the treatment of upper limb spasticity, indications which were approved by the FDA in 2010. In Europe, sales of Botox ^® for therapeutic use were negatively impacted in 2011 by government mandated price reductions, and sales of Botox ^® for cosmetic use, marketed as Vistabel ^® / Vistabex ^® , were negatively impacted in 2011 due to launches of competitive products in certain geographical markets. Based on internal information and assumptions, we estimate in 2011 that Botox ^® therapeutic sales accounted for approximately 51% of total consolidated Botox ^® sales and increased by approximately 12% compared to 2010. In 2011, Botox ^® Cosmetic sales accounted for approximately 49% of total consolidated Botox ^® sales and increased by approximately 12% compared to 2010.

Skin care product net sales increased in 2011 compared to 2010 primarily due to an increase in sales of Aczone ^® , our topical dapsone treatment for acne vulgaris and an increase in sales of Latisse ^® , our treatment for inadequate or insufficient eyelashes, partially offset by a decrease in total sales of Tazorac ^® , Zorac ^® and Avage ^® , our topical tazarotene products. Effective January 8, 2011, we increased the published U.S. list price for Aczone ^® by approximately four percent, and Tazorac ^® and Avage ^® by approximately fifteen percent. Effective June 11, 2011, we increased the published U.S. list price for Aczone ^® by approximately an additional five percent, and Tazorac ^® and Avage ^® by approximately an additional ten percent.

Urologics sales, which are presently concentrated in the United States and consist of our Sanctura ^® franchise products for the treatment of OAB decreased in 2011 compared to 2010, primarily due to lower sales of Sanctura ^® , our twice-a-day anticholinergic for the treatment of OAB, which was negatively impacted by the launch of trospium chloride generics in September 2010, partially offset by a small increase in sales of Sanctura XR ^® , our second-generation, once-daily anticholinergic for the treatment of OAB. Effective January 8, 2011, we increased the published U.S. list price for Sanctura XR ^® by eight percent and

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Sanctura ^® by ten percent. In addition, effective June 11, 2011, we increased the published U.S. list price for Sanctura XR ^® by an additional seven percent.

Breast aesthetics product net sales, which consist primarily of sales of silicone gel and saline breast implants and tissue expanders, increased in 2011 compared to 2010 due to increases in sales in all of our principal geographic markets. The increase in sales of breast aesthetics products in the United States was primarily due to higher unit volume, an increase in market share, the continued transition of the U.S. market to higher priced silicone gel products from lower priced saline products and new product sales of tissue expanders with suture tabs. The overall increase in sales of breast aesthetics products in our international markets was primarily due to higher unit volume.

Obesity intervention product net sales, which consist primarily of sales of devices used for minimally invasive long-term treatments of obesity such as our Lap-Band ^® and Lap-Band AP ^® Systems and Orbera ^™ System, decreased in 2011 compared to 2010 primarily due to a decrease in sales in the United States, Australia and Spain, partially offset by an increase in sales in Latin America. We believe sales of obesity intervention products in the United States and other principal geographic markets continued to be negatively impacted by general economic conditions given the substantial patient co-pays associated with these products, government spending restrictions and access restrictions imposed by insurance plans. In addition, net sales of our obesity intervention products continued to be negatively impacted by a general increase in the market share of other competitive surgical obesity procedures, especially in the United States.

Facial aesthetics product net sales, which consist primarily of sales of hyaluronic acid-based dermal fillers used to correct facial wrinkles, increased in 2011 compared to 2010 primarily due to a significant increase in sales in the United States and all of our other principal geographic markets. We believe the increase in sales of facial aesthetic products was primarily due to an increase in sales of Juvéderm ^® XC with lidocaine in the United States, recent launches of Juvéderm ^® with lidocaine and Juvéderm ^® Voluma ^™ in many of our international markets and a global expansion of the dermal filler market, partially offset by a decline in sales of older generation collagen-based dermal fillers, which we discontinued selling in early 2011.

Foreign currency changes increased product net sales by $82.6 million in 2011 compared to 2010, primarily due to the strengthening of the euro, Australian dollar, Brazilian real, Canadian dollar and U.K. pound compared to the U.S. dollar.

U.S. product net sales as a percentage of total product net sales decreased by 2.4 percentage points to 60.2% in 2011 compared to U.S. sales of 62.6% in 2010, due primarily to higher sales growth in our international markets compared to the U.S. market for our eye care pharmaceuticals, breast aesthetics and facial aesthetics product lines, and a greater percentage decline in sales in the U.S. market compared to our total international markets for our obesity intervention product line, partially offset by an increase in sales of skin care products, which are highly concentrated in the United States. Additionally, international sales benefited from a positive translation impact due to a general strengthening of foreign currencies compared to the U.S. dollar in markets where we sold products in 2011 compared to 2010.

Other Revenues

Other revenues increased $25.3 million to $97.3 million in 2012 compared to $72.0 million in 2011, primarily due to an increase in royalty income and the achievement of substantive milestone events in 2012 under certain license agreements. Royalty income increased due to an increase in sales of Lumigan ^® and new product sales of Aiphagan ^® ophthalmic solution 0.1%, or Aiphagan ^® , in Japan under a license agreement with Senju Pharmaceutical Co., Ltd., or Senju, and an increase in sales of Botox ^® for therapeutic use in Japan and China under a licensing agreement with GlaxoSmithKline, partially offset by a decline in royalty income from sales of brimonidine products by Alcon, Inc., or Alcon, in the United States under a licensing agreement. Other revenues in 2012 include the achievement of substantive milestones related to the approval of Aiphagan ^® in Japan and the achievement of two sales milestones related to sales of Lumigan ^® in Japan.

Other revenues decreased $27.8 million to $72.0 million in 2011 compared to $99.8 million in 2010, primarily due to the prior year impact of an upfront net licensing fee of $36.0 million that we recognized in the first quarter of 2010 related to an agreement with Bristol-Myers Squibb Company, for the exclusive worldwide rights to develop, manufacture and commercialize an investigational medicine for neuropathic pain and a reduction in reimbursement income, primarily related to a strategic support agreement with GlaxoSmithKline. These reductions were partially offset by an increase in royalty income in 2011 compared to 2010 from sales of a brimonidine product by Alcon in the United States under a licensing agreement, an increase in royalty income from sales of Lumigan ^® by Senju in Japan under a licensing agreement and an increase in royalty income from sales of Botox ^® for therapeutic use in Japan and China by GlaxoSmithKline under a licensing agreement.

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Income and Expenses

The following table sets forth the relationship to product net sales of various items in our consolidated statements of earnings:



	Year Ended December 31,
	2012	2011	2010
Product net sales	100.0%	100.0%	100.0%
Other revenues	1.7	1.3	2.1
Operating costs and expenses:
Cost of sales (excludes amortization of intangible assets)	13.6	14.0	15.0
Selling, general and administrative	39.7	42.0	41.9
Research and development	17.3	16.9	16.7
Amortization of intangible assets	2.3	2.4	2.9
Legal settlement	—	—	12.6
Impairment of intangible assets and related costs	0.4	0.4	7.7
Restructuring charges	0.1	0.1	—
Operating income	28.3	25.5	5.3
Non-operating expense	(1.4)	(1.2)	(1.8)
Earnings before income taxes	26.9%	24.3%	3.5%

Net earnings attributable to Allergan, Inc.	19.2%	17.5%	0.0%

Cost of Sales

Cost of sales increased $26.8 million, or 3.6%, in 2012 to $775.5 million, or 13.6% of product net sales, compared to $748.7 million, or 14.0% of product net sales in 2011. This increase in cost of sales primarily resulted from the 6.8% increase in total product net sales and an increase in provisions for inventory reserves, partially offset by a decrease in cost of sales as a percentage of product net sales primarily related to a positive change in product mix, lower royalty expenses, and volume-based manufacturing efficiencies related to our eye care, skin care and facial aesthetics product lines. Specialty pharmaceutical products, which generally have a lower cost of sales as a percentage of product net sales than our medical device products, increased as a percentage of our total product net sales in 2012 compared to 2011.

Cost of sales increased $26.7 million, or 3.7%, in 2011 to $748.7 million, or 14.0% of product net sales, compared to $722.0 million, or 15.0% of product net sales in 2010. This increase in cost of sales primarily resulted from the 10.9% increase in total product net sales, partially offset by a decrease in cost of sales as a percentage of product net sales primarily due to lower royalty expenses, volume-based manufacturing efficiencies related to our eye care, Botox ^® and facial aesthetics product lines, and positive changes in product mix.

Selling, General and Administrative

Selling, general and administrative, or SG&A, expenses increased $21.8 million, or 1.0%, to $2,268.4 million, or 39.7% of product net sales, in 2012 compared to $2,246.6 million, or 42.0% of product net sales, in 2011. SG&A expenses in 2012 include aggregate expenses of $9.7 million for external costs of stockholder derivative litigation and other legal costs associated with the 2010 global settlement with the U.S. Department of Justice, or DOJ, regarding our past U.S. sales and marketing practices relating to certain therapeutic uses of Botox ^® and other legal contingency expenses, a $5.4 million charge related to the change in fair value of contingent consideration liabilities associated with certain business combinations, and $1.5 million of transaction and integration costs related to our acquisition of SkinMedica. SG&A expenses in 2011 include an upfront payment of $60.0 million and a regulatory milestone payment of $20.0 million related to the Levadex ^® collaboration and co-promotion agreement with MAP Pharmaceuticals, Inc., or MAP, a gain of $9.4 million from the substantially complete liquidation of a foreign subsidiary and fixed asset impairment charges of $2.2 million related to the discontinued development of EasyBand ^™ , $3.4 million of stockholder derivative litigation costs associated with the 2010 global settlement with the DOJ regarding our past U.S. sales and marketing practices relating to certain therapeutic uses of Botox ^® , $2.0 million of costs associated with tax audit settlements for prior years' filings, and $11.9 million in charges related to the change in fair value of contingent consideration liabilities associated with business combinations. Excluding the effect of the items described above, SG&A expenses increased $95.3 million, or 4.4%, to $2,251.8 million, or 39.4% of product net sales, in 2012 compared to $2,156.5 million, or 40.3% of

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product net sales in 2011. The increase in SG&A expenses in dollars, excluding the charges described above, primarily relates to increases in selling, marketing and general and administrative expenses, partially offset by a reduction in promotion expenses. The increase in selling and marketing expenses in 2012 compared to 2011 principally relates to increased personnel and related incentive compensation costs that support the 6.8% increase in product net sales, and additional costs supporting the expansion of our sales forces, including those in our direct operations in emerging markets and a new, dedicated U.S. Botox ^® sales team for neuro-rehabilitation covering cervical dystonia and upper limb spasticity. The increase in general and administrative expenses is primarily due to increased compliance costs, an increase in compensation costs, including an increase in regional management costs related to the expansion of our direct selling operations in emerging markets, and an increase in legal expenses and general insurance costs, partially offset by a decrease in bad debt expenses. The decrease in promotion expenses is primarily due to an overall net reduction in promotion programs, including a decrease in direct-to-consumer advertising for Latisse ^® and promotion spending for obesity intervention products, partially offset by an increase in direct-to-consumer advertising for Botox ^® for the treatment of chronic migraine and Restasis ^® in the United States. The decrease in SG&A expenses as a percentage of product net sales, excluding the items described above, in 2012 compared to 2011 is primarily due to the lower 4.4% increase in SG&A expenses relative to the higher 6.8% increase in product net sales during the same period.

Under the provisions of the PPACA, companies that sell branded prescription drugs or biologics to specified government programs in the United States are subject to an annual non-deductible fee based on the company's relative market share of branded prescription drugs or biologics sold to the specified government programs. We recorded SG&A expenses of approximately $27 million and $23 million related to the non-deductible fee in 2012 and 2011, respectively. Also under the provisions of the PPACA, we will be required to pay a tax deductible excise tax of 2.3% on the sale of certain medical devices beginning January 1, 2013. We do not currently expect that this excise tax will significantly impact our operating expenses in 2013.

SG&A expenses increased $229.0 million, or 11.4%, to $2,246.6 million, or 42.0% of product net sales, in 2011 compared to $2,017.6 million, or 41.9% of product net sales, in 2010. SG&A expenses in 2011 include an upfront payment of $60.0 million and a regulatory milestone payment of $20.0 million related to the Levadex ^® collaboration and co-promotion agreement with MAP, a gain of $9.4 million from the substantially complete liquidation of a foreign subsidiary and fixed asset impairment charges of $2.2 million related to the discontinued development of EasyBand ^™ , $3.4 million of stockholder derivative litigation costs associated with the 2010 global settlement with the DOJ regarding our past U.S. sales and marketing practices relating to certain therapeutic uses of Botox ^® , $2.0 million of costs associated with tax audit settlements for prior years' filings, and $11.9 million in charges related to the change in fair value of contingent consideration liabilities associated with business combinations. SG&A expenses in 2010 include $14.4 million of costs associated with the DOJ investigation relating to sales and marketing practices in connection with Botox ^® and related derivative litigation costs associated with the 2010 global settlement with the DOJ described above, a charge of $33.0 million related to the termination of a distributor agreement in Turkey, a $10.6 million charge for the write-off of manufacturing assets related to the abandonment of an eye care product, and a $7.9 million charge related to the change in fair value of a contingent consideration liability associated with a business combination. Excluding the effect of the items described above, SG&A expenses increased $204.8 million, or 10.5%, to $2,156.5 million, or 40.3% of product net sales, in 2011 compared to $1,951.7 million, or 40.5% of product net sales in 2010. The increase in SG&A expenses in dollars, excluding the charges described above, primarily relates to increases in selling, marketing, promotion and general and administrative expenses and the negative translation impact due to a general strengthening of foreign currencies compared to the U.S. dollar. The increase in selling and marketing expenses in 2011 compared to 2010 principally relates to increased personnel and related incentive compensation costs that support the 10.9% increase in product net sales, and additional costs supporting the expansion of our sales forces, including the addition of several new direct operations in emerging markets. The increase in promotion expenses is primarily due to increased professional promotion activity, primarily related to Botox ^® and facial aesthetics products, and an increase in expense for a consumer-focused unbranded advertising campaign for chronic migraine, partially offset by a small decline in other direct-to-consumer advertising, primarily related to Latisse ^® and Restasis ^® . The increase in general and administrative expenses is primarily due to the negative impact of the fee established by the PPACA for selling branded pharmaceuticals to certain U.S. government programs, increased compliance costs associated with the Corporate Integrity Agreement entered into in 2010 with the Office of Inspector General of the U.S. Department of Health and Human Services, an increase in legal costs, an increase in incentive compensation costs and an increase in regional management costs related to the expansion of our direct selling operations in emerging markets, partially offset by an insurance recovery related to damaged inventory. The small decrease in SG&A expenses as a percentage of product net sales, excluding the items described above, in 2011 compared to 2010 is primarily due to the lower 10.5% increase in SG&A expenses relative to the higher 10.9% increase in product net sales during the same period.

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Research and Development

We believe that our future medium- and long-term revenue and cash flows are most likely to be affected by the successful development and approval of our significant late-stage research and development candidates. As of December 31, 2012, we have the following significant R&D projects in late-stage development:


•	Botox ^® (U.S. - Filed) for crow's feet lines


•	Juvéderm Voluma ^™ (U.S. - Filed) for volumizing the mid-face


•	Latisse ^® (Europe - Pending refiling) for eyelash growth


•	Latisse ^® (U.S - Phase III) for brow


•	Levadex ^® (U.S. - Filed) for migraine (in collaboration with MAP)


•	Ozurdex ^® (U.S. and Europe - Phase III) for diabetic macular edema


•	Restasis ^® (Europe - Phase III) for ocular surface disease


•	Ser-120 (U.S. - Phase III) for nocturia (in collaboration with Serenity)

In March 2012, MAP announced that the FDA issued a Complete Response letter related to its filing for Levadex ^® . In the Complete Response letter the FDA requested that MAP address issues related to chemistry, manufacturing and controls, or CMC, and observations from a recent facility inspection of a third party manufacturer. The FDA also indicated that it had not been able to complete the review of inhaler usability information requested late in the review cycle. The FDA did not cite any clinical safety or efficacy issues, nor did the FDA request that any additional clinical studies be conducted prior to approval. In October 2012, MAP announced that it had resubmitted its filing for Levadex ^® with the FDA.

In December 2012, we announced that Botox ^® received a positive opinion from the Irish Medicines Board for the treatment of idiopathic overactive bladder with symptoms of urinary incontinence, urgency and frequency in adult patients who have an inadequate response to, or are intolerant of, anticholinergic medications. This is an important step towards securing national licenses in the 14 European countries involved in the Mutual Recognition Procedure.

In January 2013, we announced that the FDA approved Botox ^® for the treatment of overactive bladder with symptoms of urge urinary incontinence, urgency and frequency in adults who have had an inadequate response to or are intolerant of an anticholinergic medication.

In January 2013, we restructured our collaboration agreement with Spectrum Pharmaceuticals, Inc., or Spectrum, for the development of apaziquone, pursuant to which Spectrum reacquired all rights from us under the collaboration agreement in exchange for agreeing to pay us a royalty on future net sales of licensed products. We have no further obligation under the agreement to share development costs or perform any development, regulatory or other activities.

In February 2013, we announced that the FDA approved our Natrelle ^® 410 Highly Cohesive Anatomically Shaped Silicone-Filled Breast Implants for use in breast reconstruction, augmentation and revision surgery.

For management purposes, we accumulate direct costs for R&D projects, but do not allocate all indirect project costs, such as R&D administration, infrastructure and regulatory affairs costs, to specific R&D projects. Additionally, R&D expense includes upfront payments to license or purchase in-process R&D assets that have not achieved regulatory approval. Our overall R&D expenses are not materially concentrated in any specific project or stage of development. The following table sets forth direct costs for our late-stage projects (which include candidates in Phase III clinical trials) and other R&D projects, upfront payments to license or purchase in-process R&D assets and all other R&D expenses for the years ended December 31, 2012, 2011 and 2010:



	2012		2011		2010
	(in millions)
Direct costs for:
Late-stage projects	$	181.4	$	198.7	$	208.6
Other R&D projects	640.3		550.7		456.3
Upfront payments to license or purchase in-process R&D assets	62.5		45.0		43.0
Other R&D expenses	105.4		108.4		96.7
Total	$	989.6	$	902.8	$	804.6

R&D expenses increased $86.8 million, or 9.6%, to $989.6 million in 2012, or 17.3% of product net sales, compared to $902.8 million, or 16.9% of product net sales in 2011. R&D expenses in 2012 include an aggregate charge of $62.5 million for upfront payments associated with two agreements for the in-licensing of technologies for the treatment of serious ophthalmic

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diseases, including age-related macular degeneration, from Molecular Partners AG that have not yet achieved regulatory approval. R&D expenses in 2011 included a charge of $45.0 million for an upfront payment for the in-licensing of technology for the treatment of retinal diseases from Molecular Partners AG that has not yet achieved regulatory approval. Excluding the effect of the charges described above, R&D expenses increased by $69.3 million, or 8.1%, to $927.1 million in 2012, or 16.2% of product net sales, compared to $857.8 million, or 16.0% of product net sales, in 2011. The increase in R&D expenses in dollars, excluding these charges, and as a percentage of product net sales, was primarily due to increased spending on next generation eye care pharmaceuticals products for the treatment of glaucoma and retinal diseases, the development of technology for the treatment of rosacea acquired in the Vicept acquisition, the development of tissue reinforcement technology acquired in the Serica acquisition, an increase in costs associated with our collaboration with Serenity Pharmaceuticals, LLC, or Serenity, related to Ser-120 for the treatment of nocturia, increased spending on Botox ^® for the treatment of movement disorders, including juvenile cerebral palsy, increased spending on potential new treatment applications for Latisse ^® and increased spending on hyaluronic-acid based dermal filler products, partially offset by a decrease in expenses associated with our collaboration with Spectrum related to the development of apaziquone for the treatment of non-muscle invasive bladder cancer, a decrease in expenses related to obesity intervention products and Botox ^® for the treatment of OAB and crow's feet lines and a small decrease in expenses for new technology discovery programs.

R&D expenses increased $98.2 million, or 12.2%, to $902.8 million in 2011, or 16.9% of product net sales, compared to $804.6 million, or 16.7% of product net sales in 2010. R&D expenses in 2011 included a charge of $45.0 million for an upfront payment for the in-licensing of technology for the treatment of retinal diseases from Molecular Partners AG that has not yet achieved regulatory approval. R&D expenses in 2010 included a charge of $43.0 million for an upfront payment for the in-licensing of technology for the treatment of nocturia, a urological disorder characterized by frequent urination at nighttime, from Serenity, that has not yet achieved regulatory approval. Excluding the effect of the charges described above, R&D expenses increased by $96.2 million, or 12.6%, to $857.8 million in 2011, or 16.0% of product net sales, compared to $761.6 million, or 15.8% of product net sales, in 2010. The increase in R&D expenses in dollars, excluding these charges, and as a percentage of product net sales, was primarily due to increased spending on next generation eye care pharmaceuticals products for the treatment of glaucoma and retinal diseases, potential new treatment applications for Latisse ^® , new technology discovery programs, the development of technology for the treatment of rosacea acquired in the Vicept acquisition, the development of tissue reinforcement technology acquired in the Serica acquisition, an increase in costs associated with our collaboration with Serenity related to the development of technology for the treatment of nocturia, an increase in costs associated with our collaboration with Spectrum Pharmaceuticals, Inc. related to the development of apaziquone for the treatment of non-muscle invasive bladder cancer, and increased spending on hyaluronic-acid based dermal filler products, partially offset by a reduction in expenses related to Botox ^® for the treatment of overactive bladder and a reduction in expenses related to the development of Ozurdex ^® .

Amortization of Intangible Assets

Amortization of intangible assets increased $3.7 million to $131.3 million in 2012, or 2.3% of product net sales, compared to $127.6 million, or 2.4% of product net sales in 2011. The increase in amortization expense is primarily due to an increase in the balance of intangible assets subject to amortization, including intangible assets that we acquired in connection with our August 2011 acquisition of Precision Light and our February 2012 purchase of our distributor’s business related to our products in Russia, and the accelerated amortization of intangible assets associated with Sanctura XR ^® , partially offset by a decline in amortization expenses associated with developed technology acquired in connection with our 2007 acquisition of Groupe Cornéal Laboratoires, some of which became fully amortized at the end of 2011 and trademarks acquired in connection with our 2006 acquisition of Inamed Corporation, or Inamed, which became fully amortized at the end of the first quarter of 2011.

Amortization of intangible assets decreased $10.4 million to $127.6 million in 2011, or 2.4% of product net sales, compared to $138.0 million, or 2.9% of product net sales in 2010. The decrease in amortization expense is primarily due to the impairment of the Sanctura ^® intangible assets in the third quarter of 2010, the impairment of the intangible assets associated with the EasyBand ^™ technology in the first quarter of 2011 and a decline in amortization expense associated with trademarks acquired in connection with our 2006 acquisition of Inamed, which became fully amortized at the end of the first quarter of 2011, partially offset by an increase in the balance of intangible assets subject to amortization, including a capitalized upfront licensing payment in September 2010 for Lastacaft ^® and other intangible assets that we acquired in connection with our July 2010 purchase of our distributor's business related to our products in Turkey, our July 2011 purchase of our distributor's business related to our products in South Africa and our August 2011 acquisition of Precision Light.

Legal Settlement

In 2010, we recorded total pre-tax charges of $609.2 million in connection with the global settlement with the DOJ regarding our past U.S. sales and marketing practices relating to certain therapeutic uses of Botox ^® . This amount includes a criminal fine of $350.0 million related to a single misdemeanor “misbranding” charge, $25.0 million in forfeited assets, a civil settlement of $225.0 million to resolve civil claims asserted by the DOJ, and estimated interest and certain attorneys’ fees that

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we are obligated to pay in connection with the global settlement, but excludes our ongoing administrative legal fees and other costs. The “misbranding” charge is known as a strict liability offense, and does not involve false or deceptive conduct.

Impairment of Intangible Assets and Related Costs

In March 2011, we decided to discontinue development of EasyBand ^™ , a technology that we acquired in connection with our 2007 acquisition of EndoArt. As a result, in the first quarter of 2011 we recorded a pre-tax impairment charge of $16.1 million for the intangible assets associated with the EasyBand ^™ technology.

In the third quarter of 2011, we recorded a pre-tax charge of $4.3 million related to the impairment of an in-process research and development asset associated with a tissue reinforcement technology that has not yet achieved regulatory approval acquired in connection with our 2010 acquisition of Serica. The impairment charge was recognized because estimates of the anticipated future undiscounted cash flows of the asset were not sufficient to recover its carrying amount.

In the third quarter of 2010, we concluded that the intangible assets and a related prepaid royalty asset associated with the Sanctura ^® franchise, which we acquired in connection with our 2007 acquisition of Esprit and certain subsequent licensing and commercialization transactions, had become impaired. As a result, in the third quarter of 2010, we recorded an aggregate charge of $369.1 million related to the impairment of the Sanctura ^® Assets and related costs, which includes charges for impairing the intangible assets and a related prepaid royalty asset and estimated costs associated with the termination of an agreement with Quintiles Transnational Corp. primarily related to the promotion of Sanctura XR ^® to general practitioners in the United States. In the second quarter of 2011, we recorded additional costs of $3.3 million for the termination of the third-party agreement. In the fourth quarter of 2012, we recorded an additional impairment charge of $5.3 million related to the prepaid royalty asset associated with the Sanctura ^® franchise due to the launch of a competitive generic version of Sanctura XR ^® .

Restructuring Charges and Integration Costs

2012 Restructuring and Realignment Plan

In 2012, we initiated a restructuring and realignment plan to streamline the obesity intervention business and promote organizational efficiency. Specifically, the initiatives primarily involve eliminating a number of positions in the U.S. sales, R&D and support staff functions associated with the obesity intervention business, integrating several customer service departments into a single new call center in Austin, Texas and relocating certain other back-office functions to the Austin facility. As a result, in 2012 we recorded $5.0 million of restructuring charges, consisting of $4.1 million of employee severance and other one-time termination benefits for approximately 64 people affected by the workforce reduction and $0.9 million of contract termination costs. In addition, we recorded $2.1 million of SG&A expenses and $0.3 million of R&D expenses in 2012 related to the restructuring and realignment initiatives. As of December 31, 2012, we have substantially completed all activities related to the 2012 restructuring and realignment plan.

Discontinued Development of EasyBand ^™

In March 2011, we decided to discontinue development of EasyBand ^™ and close the related research and development facility in Switzerland. As a result, during 2011 we recorded a pre-tax impairment charge of $16.1 million for the intangible assets associated with the EasyBand ^™ technology , fixed asset impairment charges of $2.2 million and a gain of $9.4 million from the substantially complete liquidation of our investment in a foreign subsidiary. In addition, we recorded $4.7 million of restructuring charges, consisting of $3.0 million of employee severance and other one-time termination benefits for approximately 30 people affected by the facility closure, $1.6 million of contract termination costs and $0.1 million of other related costs. In 2012, we recorded a $0.1 million restructuring charge reversal primarily related to employee severance and other one-time termination benefits.

Other Restructuring Activities and Integration Costs

Included in 2012, 2011 and 2010 are $0.8 million of restructuring charges, a $0.1 million restructuring charge reversal and $0.3 million of restructuring charges, respectively, related to restructuring activities initiated in prior years.

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million and $2.0 million, respectively, of SG&A expenses related to transaction and integration costs associated with the purchase of various businesses and collaboration agreements .

Operating Income

Management evaluates business segment performance on an operating income basis exclusive of general and administrative expenses and other indirect costs, legal settlement expenses, impairment of intangible assets and related costs, restructuring charges, in-process research and development expenses, amortization of certain identifiable intangible assets related to business combinations and asset acquisitions and related capitalized licensing costs and certain other adjustments, which are not allocated to our business segments for performance assessment by our chief operating decision maker. Other adjustments excluded from our business segments for purposes of performance assessment represent income or expenses that do not reflect, according to established Company-defined criteria, operating income or expenses associated with our core business activities.

For 2012, general and administrative expenses, other indirect costs and other adjustments not allocated to our business segments for purposes of performance assessment consisted of general and administrative expenses of $425.5 million, upfront licensing fees of $62.5 million paid to Molecular Partners AG for technology that has not achieved regulatory approval and related transaction costs of $0.3 million, aggregate charges of $9.7 million for stockholder derivative and tax litigation costs in connection with the 2010 global settlement with the DOJ regarding our past U.S. sales and marketing practices relating to Botox ^® and other legal contingency expenses, charges of $5.4 million for changes in the fair value of contingent consideration liabilities, a purchase accounting fair market value inventory adjustment of $0.3 million associated with the purchase of our distributor's business related to our products in Russia, integration and transaction costs of $2.1 million associated with the purchase of various businesses, expenses related to the 2012 restructuring and realignment initiatives of $2.4 million and other net indirect costs of $19.2 million.

For 2011, general and administrative expenses, other indirect costs and other adjustments not allocated to our business segments for purposes of performance assessment consisted of general and administrative expenses of $387.2 million, an upfront payment of $60.0 million and subsequent milestone payment of $20.0 million paid to MAP for the FDA acceptance of a New Drug Application filing for technology that has not achieved regulatory approval and related transaction costs of $0.6 million, an upfront licensing fee of $45.0 million to Molecular Partners AG for technology that has not achieved regulatory approval and related transaction costs of $0.1 million, fixed asset impairment charges of $2.2 million, a gain of $9.4 million from the substantially complete liquidation of the Company's investment in a foreign subsidiary, stockholder derivative litigation costs of $3.4 million in connection with the 2010 global settlement with the DOJ regarding our past U.S. sales and marketing practices relating to Botox ^® , charges of $11.9 million for changes in the fair value of contingent consideration liabilities, a purchase accounting fair market value inventory adjustment of $0.4 million associated with the purchase of our distributor's business related to our products in South Africa, integration and transaction costs of $1.9 million associated with the purchase of various businesses, costs associated with tax audit settlements for prior years' filings of $2.0 million and other net indirect costs of $26.6 million.

For 2010, general and administrative expenses, other indirect costs and other adjustments not allocated to our business segments for purposes of performance assessment consisted of licensing fee income of $36.0 million for a development and commercialization agreement with Bristol-Myers Squibb, general and administrative expenses of $343.8 million, costs associated with the DOJ investigation regarding our past U.S. sales and marketing practices relating to Botox ^® and related stockholder derivative litigation costs of $14.4 million, an upfront licensing fee included in R&D expenses of $43.0 million paid to Serenity for technology that has not achieved regulatory approval and related transaction costs of $0.4 million, a charge of $7.9 million for the change in fair value of a contingent consideration liability, a distributor termination fee of $33.0 million and integration and transaction costs of $1.1 million associated with the purchase of our distributor’s business related to our products in Turkey, the write-off of manufacturing assets related to the abandonment of an eye care product of $10.6 million, integration and transaction costs of $0.5 million related to our acquisition of Serica and other net indirect costs of $16.2 million.

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The following table presents operating income for each reportable segment for the years ended December 31, 2012, 2011 and 2010 and a reconciliation of our segments’ operating income to consolidated operating income:



	2012		2011		2010
	(in millions)
Operating income:
Specialty pharmaceuticals	$	1,997.7	$	1,763.3	$	1,501.9
Medical devices	278.8		286.0		284.7
Total segments	2,276.5		2,049.3		1,786.6
General and administrative expenses, other indirect costs and other adjustments	527.4		551.9		434.9
Amortization of intangible assets (a)	107.8		104.0		114.5
Legal settlement	—		—		609.2
Impairment of intangible assets and related costs	22.3		23.7		369.1
Restructuring charges	5.7		4.6		0.3
Total operating income	$	1,613.3	$	1,365.1	$	258.6

——————————


(a)	Represents amortization of certain identifiable intangible assets related to business combinations and asset acquisitions and related capitalized licensing costs, as applicable.

Our consolidated operating income for the year ended December 31, 2012 was $1,613.3 million, or 28.3% of product net sales, compared to consolidated operating income of $1,365.1 million, or 25.5% of product net sales in 2011. The $248.2 million increase in consolidated operating income was due to a $361.7 million increase in product net sales, a $25.3 million increase in other revenues and a $1.4 million decrease in the impairment of intangible assets and related costs, partially offset by a $26.8 million increase in cost of sales, a $21.8 million increase in SG&A expenses, a $86.8 million increase in R&D expenses, a $3.7 million increase in amortization of intangible assets and a $1.1 million increase in restructuring charges.

Our specialty pharmaceuticals segment operating income in 2012 was $1,997.7 million, compared to operating income of $1,763.3 million in 2011. The $234.4 million increase in our specialty pharmaceuticals segment operating income was due primarily to an increase in product net sales of our eye care pharmaceuticals, Botox ^® and skin care product lines and a reducti on in total promotion expenses, partially offset by a decrease in net sales of our urologics product line, an increase in selling and marketing expenses and an increase in R&D expenses.

Our medical devices segment operating income in 2012 was $278.8 million, compared to operating income of $286.0 million in 2011. The $7.2 million decrease in our medical devices segment operating income was due primarily to a decrease in product net sales of our obesity intervention product line, an increase in overall selling and marketing expenses and an increase in R&D expenses, partially offset by an increase in product net sales of our breast aesthetics and facial aesthetics product lines and a decrease in total promotion expenses.

Our consolidated operating income for the year ended December 31, 2011 was $1,365.1 million, or 25.5% of product net sales, compared to consolidated operating income of $258.6 million, or 5.3% of product net sales in 2010. The $1,106.5 million increase in consolidated operating income was due to $609.2 million of legal settlement costs in 2010 that did not recur in 2011, a $527.5 million increase in product net sales, a $10.4 million decrease in amortization of intangible assets and a $345.4 million decrease in impairment of intangible assets and related costs, partially offset by a $27.8 million decrease in other revenues, a $26.7 million increase in cost of sales, a $229.0 million increase in SG&A expenses, a $98.2 million increase in R&D expenses and a $4.3 million increase in restructuring charges.

Our specialty pharmaceuticals segment operating income in 2011 was $1,763.3 million, compared to operating income of $1,501.9 million in 2010. The $261.4 million increase in our specialty pharmaceuticals segment operating income was due primarily to an increase in product net sales of our eye care pharmaceuticals, Botox ^® and skin care product lines and lower cost of sales as a percentage of net sales, primarily for our eye care and Botox ^® products, partially offset by an increase in promotion, selling and marketing expenses and an increase in R&D expenses.

Our medical devices segment operating income in 2011 was $286.0 million, compared to operating income of $284.7 million in 2010. The $1.3 million increase in our medical devices segment operating income was due primarily to an increase in product net sales of our breast aesthetics and facial aesthetics product lines, partially offset by a decrease in product net sales of our obesity intervention product line, an increase in promotion, selling and marketing expenses, principally for breast aesthetics and facial aesthetics products, and an increase in overall R&D expenses.

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Non-Operating Income and Expenses

Total net non-operating expense in 2012 was $80.0 million compared to $65.4 million in 2011. Interest income decreased $0.2 million in 2012 to $6.7 million compared to $6.9 million in 2011. Interest expense decreased $8.2 million to $63.6 million in 2012 compared to $71.8 million in 2011. Interest expense decreased primarily due to the conversion of our 1.50% Convertible Senior Notes due 2026, or 2026 Convertible Notes, in the second quarter of 2011. Other, net expense was $23.1 million in 2012, consisting primarily of net losses on foreign currency derivative instruments and other foreign currency transactions. Other, net expense was $0.5 million in 2011, consisting primarily of a loss of $3.2 million related to the impairment of a non-marketable third party equity investment, partially offset by $0.3 million in net gains on foreign currency derivative instruments and other foreign currency transactions and a gain of $1.9 million on the sale of a third party equity investment.

Total net non-operating expense in 2011 was $65.4 million compared to $87.8 million in 2010. Interest income decreased $0.4 million in 2011 to $6.9 million compared to $7.3 million in 2010. Interest expense decreased $6.9 million to $71.8 million in 2011 compared to $78.7 million in 2010. Interest expense decreased primarily due to the conversion of our 2026 Convertible Notes in the second quarter of 2011, partially offset by an increase in interest expense due to the issuance in September 2010 of our 3.375% Senior Notes due 2020, or 2020 Notes. Other, net expense was $0.5 million in 2011, consisting primarily of a loss of $3.2 million related to the impairment of a non-marketable third party equity investment, partially offset by $0.3 million in net gains on foreign currency derivative instruments and other foreign currency transactions and a gain of $1.9 million on the sale of a third party equity investment. Other, net expense was $16.4 million in 2010, consisting primarily of net losses on foreign currency derivative instruments and other foreign currency transactions.

Income Taxes

Our effective tax rate in 2012 was 28.1% compared to the effective tax rate of 27.8% in 2011. Included in our earnings before income taxes for 2012 are charges related to changes in the fair value of contingent consideration associated with certain business combination agreements of $5.4 million, upfront payments of $62.5 million associated with two agreements for the in-licensing of technologies from Molecular Partners AG, the fair market value inventory adjustment rollout and integration costs related to the purchase of a distributor's business in Russia of $0.9 million, external costs of stockholder derivative litigation and other legal costs associated with the 2010 global settlement with the DOJ regarding our past U.S. sales and marketing practices relating to certain therapeutic uses of Botox ^® and other legal contingency expenses of $9.7 million, $0.9 million of interest expense associated with changes in estimated taxes related to uncertain tax positions included in prior year filings, restructuring charges of $5.7 million and impairment of intangible assets and related costs of $22.3 million. In 2012 we recorded no income tax benefits related to the changes in the fair value of contingent consideration liabilities, $15.7 million of income tax benefits related to the upfront payments associated with the two agreements for the in-licensing of technologies from Molecular Partners AG, $0.1 million of income tax benefits related to the fair market value inventory adjustment rollout and integration costs related to the purchase of a distributor's business in Russia, $1.3 million of income tax benefits related to external costs of stockholder derivative litigation and other legal costs associated with the 2010 global settlement with the DOJ regarding our past U.S. sales and marketing practices relating to certain therapeutic uses of Botox ^® and other legal contingency expenses, income tax benefits of $0.3 million related to interest expense associated with changes in estimated taxes related to uncertain tax positions included in prior year filings, $1.8 million of income tax benefits related to the restructuring charges and $8.2 million of income tax benefits related to the impairment of intangible assets and related costs. In 2012 we also recorded an income tax provision of $7.7 million for changes in estimated taxes related to uncertain tax positions included in prior year filings. Excluding the impact of the pretax charges of $107.4 million and the net income tax benefits of $19.7 million for the items discussed above, our adjusted effective tax rate for 2012 was 27.5%. We believe that the use of an adjusted effective tax rate provides a more meaningful measure of the impact of income taxes on our results of operations because it excludes the effect of certain items that are not included as part of our core business activities. This allows investors to better determine the effective tax rate associated with our core business activities.

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The calculation of our adjusted effective tax rate for 2012 is summarized below:



	2012
	(in millions)
Earnings before income taxes, as reported	$	1,533.3
Changes in the fair value of contingent consideration liabilities related to business combinations	5.4
Upfront payments associated with two agreements for the in-licensing of technologies from Molecular Partners AG	62.5
Fair market value inventory adjustment rollout and integration costs related to the purchase of a distributor's business in Russia	0.9
External costs for stockholder derivative litigation and other legal contingency expenses	9.7
Interest expense associated with changes in estimated taxes related to uncertain tax positions in prior year filings	0.9
Restructuring charges	5.7
Impairment of intangible assets and related costs	22.3
	$	1,640.7

Provision for income taxes, as reported	$	430.8
Income tax benefit (provision) for:
Changes in the fair value of contingent consideration liabilities related to business combinations	—
Upfront payments associated with two agreements for the in-licensing of technologies from Molecular Partners AG	15.7
Fair market value inventory adjustment rollout and integration costs related to the purchase of a distributor's business in Russia	0.1
External costs for stockholder derivative litigation and other legal contingency expenses	1.3
Interest expense associated with changes in estimated taxes related to uncertain tax positions in prior year filings	0.3
Restructuring charges	1.8
Impairment of intangible assets and related costs	8.2
Changes in estimated taxes related to uncertain tax positions in prior year filings	(7.7		)
	$	450.5
Adjusted effective tax rate	27.5		%

Our effective tax rate in 2011 was 27.8% compared to the effective tax rate of 97.1% in 2010. Included in our earnings before income taxes for 2011 are a $60.0 million upfront payment and a $20.0 million regulatory milestone payment related to a collaboration and co-promotion agreement with MAP, a $45.0 million upfront payment related to a collaboration and license agreement with Molecular Partners AG, intangible asset impairment charges of $20.4 million, restructuring charges of $4.6 million, fixed asset impairment charges of $2.2 million and a gain of $9.4 million from the substantially complete liquidation of a foreign subsidiary resulting from the discontinued development of EasyBand ^™ . In 2011, we recorded income tax benefits of $22.2 million and $7.4 million, respectively, associated with the upfront payment and regulatory milestone payment related to the collaboration and co-promotion agreement with MAP and income tax benefits of $4.6 million associated with the upfront payment related to the collaboration and license agreement with Molecular Partners AG. In 2011, we did not record any tax benefits related to the intangible asset impairment charges, restructuring charges, fixed asset impairment charges and the gain from the substantially complete liquidation of our investment in a foreign subsidiary resulting from the discontinued development of EasyBand ^™ since a portion of these charges are not tax deductible and we do not expect to be able to utilize the deductions for the tax deductible portion of these charges in the jurisdiction where the costs were incurred. Excluding the impact of the net pre-tax charges of $142.8 million and the net income tax benefits of $34.2 million for the items discussed above, our adjusted effective tax rate for 2011 was 27.4%.

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The calculation of our adjusted effective tax rate for 2011 is summarized below:



	2011
	(in millions)
Earnings before income taxes, as reported	$	1,299.7
Upfront payment for a collaboration and co-promotion agreement with MAP	60.0
Regulatory milestone payment for a collaboration and co-promotion agreement with MAP	20.0
Upfront payment for a collaboration and license agreement with Molecular Partners AG	45.0
Restructuring charges	4.6
Impairment of intangible assets	20.4
Aggregate net gain for the fixed asset impairment and gain from the substantially complete liquidation of a foreign subsidiary resulting from the discontinued development of EasyBand ™	(7.2		)
	$	1,442.5

Provision for income taxes, as reported	$	361.6
Income tax benefit for:
Upfront payment for a collaboration and co-promotion agreement with MAP	22.2
Regulatory milestone payment for a collaboration and co-promotion agreement with MAP	7.4
Upfront payment for a collaboration and license agreement with Molecular Partners AG	4.6
	$	395.8
Adjusted effective tax rate	27.4		%

Our effective tax rate in 2010 was 97.1%. Included in our earnings before income taxes for 2010 are total pre-tax charges of $609.2 million in connection with the global settlement with the DOJ regarding our past U.S. sales and marketing practices relating to certain therapeutic uses of Botox ^® , a $369.1 million aggregate charge related to the impairment of the Sanctura ^® Assets and related costs, a $33.0 million charge related to the termination of a distributor agreement in Turkey, a $43.0 million charge for an upfront payment for technology that has not achieved regulatory approval, restructuring charges of $0.3 million and license fee income of $36.0 million related to an upfront fee for product rights we licensed to Bristol-Myers Squibb. In 2010, we recorded income tax benefits of $21.4 million related to the global settlement with the DOJ regarding our past U.S. sales and marketing practices relating to certain therapeutic uses of Botox ^® , $140.5 million related to the impairment of the Sanctura ^® Assets and related costs, $2.8 million related to the termination of a distributor agreement in Turkey, $15.6 million related to the upfront payment for technology that has not achieved regulatory approval and $0.2 million related to the restructuring charges, and an income tax expense of $13.7 million related to the upfront license fee income. Excluding the impact of the net pre-tax charges of $1,018.6 million and the net income tax benefits of $166.8 million for the items discussed above, our adjusted effective tax rate for 2010 was 28.0%.

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The calculation of our adjusted effective tax rate for the year ended December 31, 2010 is summarized below:



	2010
	(in millions)
Earnings before income taxes, as reported	$	170.8
Settlement with the DOJ related to U.S. sales and marketing practices for Botox ^®	609.2
Impairment of the Sanctura ^® Assets and related costs	369.1
Termination of a distributor agreement in Turkey	33.0
Upfront payment for technology that has not achieved regulatory approval	43.0
Restructuring charges	0.3
Upfront license fee income	(36.0		)
	$	1,189.4

Provision for income taxes, as reported	$	165.9
Income tax benefit (provision) for:
Settlement with the DOJ related to U.S. sales and marketing practices for Botox ^®	21.4
Impairment of the Sanctura ^® Assets and related costs	140.5
Termination of a distributor agreement in Turkey	2.8
Upfront payment for technology that has not achieved regulatory approval	15.6
Restructuring charges	0.2
Upfront license fee income	(13.7		)
	$	332.7
Adjusted effective tax rate	28.0		%

The increase in the adjusted effective tax rate to 27.5% in 2012 compared to the adjusted effective tax rate in 2011 of 27.4% is primarily due to the negative impact of the expiration of the U.S. federal research and development tax credit, partially offset by an increase in the mix of earnings in lower tax rate jurisdictions, which resulted from an increase in the mix of earnings contributed by our Botox ^® product line as a percentage of our total operating income in 2012 compared to 2011. An extension of the U.S. federal research and development tax credit with retroactive effect for 2012 was signed into law on January 2, 2013. Accordingly, we will recognize an estimated tax benefit of approximately $17.3 million related to the U.S. federal research and development tax credit for the 2012 period in the first quarter of 2013.

The decrease in the adjusted effective tax rate to 27.4% in 2011 compared to the adjusted effective tax rate in 2010 of 28.0% is primarily due to the increase in the mix of earnings in lower tax rate jurisdictions, which resulted from an increase in the mix of earnings contributed by our Botox ^® product line as a percentage of our total operating income in 2011 compared to 2010 and the beneficial impact of changes in California tax law, partially offset by the detrimental tax rate effect of an increase in the mix of earnings contributed by our eye care pharmaceuticals product line as a percentage of our total operating income in 2011 compared to 2010 and changes in tax positions affecting unrecognized tax benefits.

Net Earnings Attributable to Noncontrolling Interest

Our net earnings attributable to noncontrolling interest for our majority-owned subsidiaries were $3.7 million in 2012, $3.6 million in 2011 and $4.3 million in 2010.

Net Earnings Attributable to Allergan, Inc.

Our net earnings attributable to Allergan, Inc. in 2012 were $1,098.8 million compared to net earnings attributable to Allergan, Inc. of $934.5 million in 2011. The $164.3 million increase in net earnings attributable to Allergan, Inc. was primarily the result of the increase in operating income of $248.2 million, partially offset by the increase in net non-operating expense of $14.6 million, the increase in net earnings attributable to noncontrolling interest of $0.1 million and the increase in the provision for income taxes of $69.2 million.

Our net earnings attributable to Allergan, Inc. in 2011 were $934.5 million compared to net earnings attributable to Allergan, Inc. of $0.6 million in 2010. The $933.9 million increase in net earnings attributable to Allergan, Inc. was primarily the result of the increase in operating income of $1,106.5 million, the decrease in net non-operating expense of $22.4 million

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and the decrease in net earnings attributable to noncontrolling interest of $0.7 million, partially offset by the increase in the provision for income taxes of $195.7 million.

Liquidity and Capital Resources

We assess our liquidity by our ability to generate cash to fund our operations. Significant factors in the management of liquidity are: funds generated by operations; levels of accounts receivable, inventories, accounts payable and capital expenditures; the extent of our stock repurchase program; funds required for acquisitions and other transactions; funds available under our credit facilities; and financial flexibility to attract long-term capital on satisfactory terms.

Historically, we have generated cash from operations in excess of working capital requirements. The net cash provided by operating activities was $1,599.9 million in 2012 compared to $1,081.9 million in 2011 and $463.9 million in 2010. Cash flow from operating activities increased in 2012 compared to 2011 primarily as a result of an increase in cash from net earnings from operations, including the effect of adjusting for non-cash items, and a decrease in cash required to fund changes in net operating assets and liabilities, principally trade receivables, inventories, other current assets, accounts payable, accrued expenses, income taxes and other non-current assets. In September 2012, we terminated the $300.0 million notional amount interest rate swap and received $54.7 million, which included accrued interest of $3.7 million. In 2012, we made upfront and milestone payments of $62.5 million for various licensing and collaboration agreements compared to $125.0 million in 2011, which were included in our net earnings for the respective periods. In 2011, we paid $15.2 million in connection with the 2010 global settlement with the DOJ regarding our past U.S. sales and marketing practices related to certain therapeutic uses of Botox ^® . We paid pension contributions of $47.1 million in 2012 compared to $48.7 million in 2011.

Cash flow from operating activities increased in 2011 compared to 2010 primarily as a result of an increase in cash from net earnings from operations, including the effect of adjusting for non-cash items, and a decrease in cash required to fund changes in accrued expenses and other liabilities, partially offset by an increase in cash used to fund changes in trade receivables, inventories, other current assets and accounts payable. In 2011, we made upfront and milestone payments of $125.0 million for various licensing and collaboration agreements compared to $43.0 million in 2010, which were included in our net earnings for the respective periods. In 2010, we received an upfront licensing fee receipt of $36.0 million that did not recur in 2011. In 2010, we recorded total pre-tax charges of $609.2 million in connection with the global settlement with the DOJ regarding our past U.S. sales and marketing practices related to certain therapeutic uses of Botox ^® . We paid $594.0 million of the global settlement costs in 2010 and the remaining $15.2 million in 2011. We paid pension contributions of $48.7 million in 2011 compared to $21.4 million in 2010.

Net cash used in investing activities was $589.3 million in 2012 compared to net cash provided by investing activities of $340.8 million in 2011 and net cash used in investing activities of $977.2 million in 2010. In 2012, we received $784.6 million from the maturities of short-term investments and $1.8 million from the sale of property, plant and equipment. In 2012, we purchased $865.2 million of short-term investments, paid $349.2 million, net of cash acquired, for the acquisition of SkinMedica, Inc., or SkinMedica, and the purchase of our distributor’s business related to our products in Russia and paid $4.1 million for trademarks and developed technology intangible assets. Additionally, we invested $143.3 million in new facilities and equipment and $13.9 million in capitalized software. We currently expect to invest between approximately $200 million and $250 million in capital expenditures for manufacturing and administrative facilities, manufacturing equipment and other property, plant and equipment during 2013.

In 2011, we received $1,140.3 million from the maturities of short-term investments and $3.1 million from the sale of equity investments and property, plant and equipment. In 2011, we purchased $571.1 million of short-term investments and paid $101.4 million, net of cash acquired, for the acquisitions of Vicept, Alacer and Precision Light and the purchase of our distributor's business related to our products in South Africa. Additionally, we invested $118.6 million in new facilities and equipment and $11.2 million in capitalized software.

In 2010, we purchased $824.1 million of short-term investments and paid $69.8 million, net of cash acquired, for the acquisition of Serica and the purchase of our distributor's business related to our products in Turkey and $1.7 million for a contractual purchase price adjustment related to our 2009 acquisition of Samil Allergan Ophthalmic Joint Venture Company . Additionally, we invested $102.8 million in new facilities and equipment and $13.3 million in capitalized software and paid $40.9 million for intangible assets related to the reacquisition of Botox ^® Cosmetic distribution rights in Japan and China and an upfront licensing payment for an eye care product previously approved for marketing. In 2010, we received $75.0 million from the maturities of short-term investments.

Net cash used in financing activities was $717.5 million in 2012 compared to $1,002.3 million in 2011 and net cash provided by financing activities of $563.0 million in 2010. In 2012, we repurchased approximately 10.0 million shares of our common stock for $909.0 million, paid $60.4 million in dividends to stockholders, made net repayments of notes payable of

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$35.1 million and paid contingent consideration of $5.1 million. This use of cash was partially offset by $246.4 million received from the sale of stock to employees and $45.7 million in excess tax benefits from share-based compensation.

In 2011, we paid $808.9 million for the repayment and conversion of our 1.50% Convertible Senior Notes due 2026 ($649.7 million principal amount and $159.2 million equity repurchase), repurchased 6.0 million shares of our common stock for $461.7 million, paid $61.1 million in dividends to stockholders and paid contingent consideration of $3.0 million. This use of cash was partially offset by $30.7 million in net borrowings of notes payable, $264.0 million received from the sale of stock to employees and $37.7 million in excess tax benefits from share-based compensation.

In September 2010, we issued our 3.375% Senior Notes due 2020, or 2020 Notes, in a registered offering for an aggregate principal amount of $650.0 million and received proceeds of $648.0 million, net of original discount. Additionally, in 2010, we received $6.6 million in net borrowings of notes payable, $234.0 million from the sale of stock to employees and $27.1 million in excess tax benefits from share-based compensation. These amounts were partially reduced by the repurchase of 4.5 million shares of our common stock for $286.0 million, a cash payment of $6.1 million for offering fees related to the issuance of the 2020 Notes and $60.6 million in dividends paid to stockholders.

Effective February 1, 2013, our Board of Directors declared a cash dividend of $0.05 per share, payable March 21, 2013 to stockholders of record on February 28, 2013.

We maintain an evergreen stock repurchase program. Our evergreen stock repurchase program authorizes us to repurchase our common stock for the primary purpose of funding our stock-based benefit plans. Under the stock repurchase program, we may maintain up to 18.4 million repurchased shares in our treasury account at any one time. At December 31, 2012, we held approximately 7.2 million treasury shares under this program. Effective January 1, 2013, our current Rule 10b5-1 plan authorizes our broker to purchase our common stock traded in the open market pursuant to our evergreen stock repurchase program. The terms of the plan set forth a maximum limit of 6.0 million shares to be repurchased through March 31, 2013, and the plan is cancellable at any time in our sole discretion and in accordance with applicable insider trading laws.

Our 2020 Notes, which were sold at 99.697% of par value with an effective interest rate of 3.41%, are unsecured and pay interest semi-annually on the principal amount of the notes at a rate of 3.375% per annum, and are redeemable at any time at our option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. The aggregate outstanding principal amount of the 2020 Notes will be due and payable on September 15, 2020, unless earlier redeemed by us.

Our 5.75% Senior Notes due 2016, or 2016 Notes, were sold at 99.717% of par value with an effective interest rate of 5.79%, pay interest semi-annually on the principal amount of the notes at a rate of 5.75% per annum, and are redeemable at any time at our option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. The aggregate outstanding principal amount of the 2016 Notes will be due and payable on April 1, 2016, unless earlier redeemed by us. In September 2012, we terminated the $300.0 million notional amount interest rate swap related to the 2016 Notes and received $54.7 million, which included accrued interest of $3.7 million. Upon termination of the interest rate swap, we added the net fair value received of $51.0 million to the carrying value of the 2016 Notes. The amount received for the termination of the interest rate swap will be amortized as a reduction to interest expense over the remaining life of the debt, which effectively fixes the interest rate for the remaining term of the 2016 Notes at 3.94%.

At December 31, 2012, we had a committed long-term credit facility, a commercial paper program, a shelf registration statement that allows us to issue additional securities, including debt securities, in one or more offerings from time to time, a real estate mortgage and various foreign bank facilities. Our committed long-term credit facility will expire in October 2016. The termination date can be further extended from time to time upon our request and acceptance by the issuer of the facility for a period of one year from the last scheduled termination date for each request accepted. The committed long-term credit facility allows for borrowings of up to $800.0 million. The commercial paper program also provides for up to $800.0 million in borrowings. However, our combined borrowings under our committed long-term credit facility and our commercial paper program may not exceed $800.0 million in the aggregate. Borrowings under the committed long-term credit facility are subject to certain financial and operating covenants that include, among other provisions, maximum leverage ratios. Certain covenants also limit subsidiary debt. We believe we were in compliance with these covenants at December 31, 2012. At December 31, 2012, we had no borrowings under our committed long-term credit facility, $20.0 million in borrowings outstanding under the real estate mortgage, $48.8 million in borrowings outstanding under various foreign bank facilities and no borrowings under the commercial paper program. Commercial paper, when outstanding, is issued at current short-term interest rates. Additionally, any future borrowings that are outstanding under the long-term credit facility may be subject to a floating interest rate. We may from time to time seek to retire or purchase our outstanding debt.

On August 21, 2012, we announced that we entered into two separate agreements with Molecular Partners AG to discover,

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develop, and commercialize proprietary therapeutic DARPin ^® products for the treatment of serious ophthalmic diseases. Under the terms of the agreements, we made combined upfront payments of $62.5 million to Molecular Partners AG in August 2012. The terms of the agreements also include potential future development, regulatory and sales milestone payments to Molecular Partners AG of up to $1.4 billion, as well as potential future royalty payments.

On December 19, 2012, we completed the acquisition of SkinMedica for an upfront payment of $346.1 million, net of cash acquired. The terms of the agreement also include an additional payment of $25.0 million contingent upon acquired products achieving certain sales milestones.

On January 22, 2013, we announced that we have entered into a definitive merger agreement with MAP Pharmaceuticals, Inc., or MAP, whereby we expect to acquire 100% of the shares of MAP for a price of $25.00 per share. The transaction would be accomplished pursuant to a cash tender offer followed by a second step merger. The per share cash offer price represents a total equity value of approximately $958 million, on a fully-diluted basis. The acquisition is expected to close late in the first quarter or in the second quarter of 2013 and will be funded from a combination of our cash and equivalents and short-term borrowings under our commercial paper program.

On February 1, 2013, we completed our previously announced review of strategic options for maximizing the value of our obesity intervention business, and have formally committed to pursue a sale of that business unit. We currently expect to execute a signed agreement in the first half of 2013.

At December 31, 2012, we had net pension and postretirement benefit obligations totaling $263.2 million. Future funding requirements are subject to change depending on the actual return on net assets in our funded pension plans and changes in actuarial assumptions. In 2013, we expect to pay pension contributions of between $40.0 million and $50.0 million for our U.S. and non-U.S. pension plans and between $1.0 million and $2.0 million for our other postretirement plan.

Generic versions of Elestat ^® and Sanctura XR ^® were launched in the United States in May 2011 and October 2012, respectively, and a generic version of Zymar ^® may be launched in the United States in the near future. In addition, our products compete with generic versions of some branded pharmaceutical products sold by our competitors. We do not believe that our liquidity will be materially impacted in 2013 by generic competition.

As of December 31, 2012, $1,741.3 million of our existing cash and equivalents and short-term investments are held by non-U.S. subsidiaries. We currently plan to use these funds indefinitely in our operations outside the United States. Withholding and U.S. taxes have not been provided for unremitted earnings of certain non-U.S. subsidiaries because we have reinvested these earnings indefinitely in such operations. At December 31, 2012, we had approximately $3,083.5 million in unremitted earnings outside the United States for which withholding and U.S. taxes were not provided. Tax costs would be incurred if these earnings were remitted to the United States.

We sell products to public and semi-public hospitals in Italy and Spain, which are wholly or partially funded by their respective sovereign governments. The following table provides information related to trade receivables outstanding as of December 31, 2012 from product net sales in Italy and Spain:



	Italy		Spain
	(in millions)
Trade receivables from public and semi-public hospitals primarily funded by the sovereign government	$	25.4	$	15.3
Trade receivables from other customers	8.9		13.8
Total trade receivables	$	34.3	$	29.1

Amount of trade receivables that is past due	$	20.7	$	15.3
Allowance for doubtful accounts	$	8.9	$	3.4

We believe the reserves established against these trade receivables are sufficient to cover the amounts that will ultimately be uncollectible. However, the economic stability in these countries is unpredictable and we cannot provide assurance that additional allowances will not be necessary if current economic conditions in these countries continue to decline. Negative changes in the amount of allowances for doubtful accounts could adversely affect our future results of operations.

As of December 31, 2012, we have no significant trade accounts receivable from customers in Greece or Portugal that are primarily funded by their respective sovereign governments.

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We believe that the net cash provided by operating activities, supplemented as necessary with borrowings available under our existing credit facilities and existing cash and equivalents and short-term investments, will provide us with sufficient resources to meet our current expected obligations, working capital requirements, debt service and other cash needs over the next year.

Inflation

Although at reduced levels in recent years and at the end of 2012, inflation continues to apply upward pressure on the cost of goods and services that we use. The competitive and regulatory environments in many markets substantially limit our ability to fully recover these higher costs through increased selling prices. We continually seek to mitigate the adverse effects of inflation through cost containment and improved productivity and manufacturing processes.

Foreign Currency Fluctuations

Approximately 39.1% of our product net sales in 2012 were derived from operations outside the United States, and a portion of our international cost structure is denominated in currencies other than the U.S. dollar. As a result, we are subject to fluctuations in sales and earnings reported in U.S. dollars due to changing currency exchange rates. We routinely monitor our transaction exposure to currency rates and implement certain economic hedging strategies to limit such exposure, as we deem appropriate. The net impact of foreign currency fluctuations on our sales was a decrease of $126.6 million in 2012 and an increase of $82.6 million in 2011. The 2012 sales decrease included $63.8 million related to the euro, $33.8 million related to the Brazilian real, $6.4 million related to the Indian rupee, $5.0 million related to the Turkish lira, $3.5 million related to the Mexican peso, $2.9 million related to the Canadian dollar, $2.1 million related to the U.K. pound and $9.1 million related to other currencies. The 2011 sales increase included $36.1 million related to the euro, $15.4 million related to the Australian dollar, $10.7 million related to the Brazilian real, $8.7 million related to the Canadian dollar, $5.6 million related to the U.K. pound and $6.1 million related to other currencies. See Note 1, “Summary of Significant Accounting Policies,” in the notes to the consolidated financial statements listed under Item 15 of Part IV of this report, “Exhibits and Financial Statement Schedules,” for a description of our accounting policy on foreign currency translation.

Contractual Obligations and Commitments

The table below presents information about our contractual obligations and commitments at December 31, 2012:



	Payments Due by Period
	Less than One Year		1-3 Years		3-5 Years		More than Five Years		Total
	(in millions)
Debt obligations (a)	$	118.6	$	139.3	$	888.9	$	714.8	$	1,861.6
Operating lease obligations	66.2		83.1		33.1		63.0		245.4
Purchase obligations	356.0		135.7		23.2		0.7		515.6
Pension minimum funding (b)	44.0		74.6		64.7		—		183.3
Other long-term obligations (c)	—		125.4		75.4		214.3		415.1
Total	$	584.8	$	558.1	$	1,085.3	$	992.8	$	3,221.0

——————————


(a)	Debt obligations include expected principal and interest obligations, but exclude an unamortized amount related to a terminated interest rate swap of $44.6 million at December 31, 2012.

(b)

For purposes of this table, we assume that we will be required to fund our U.S. and non-U.S. funded pension plans based on the minimum funding required by applicable regulations. In determining the minimum required funding, we utilize current actuarial assumptions and exchange rates to forecast estimates of amounts that may be payable for up to five years in the future. In management’s judgment, minimum funding estimates beyond a five year time horizon cannot be reliably estimated. Where minimum funding as determined for each individual plan would not achieve a funded status to the level of local statutory requirements, additional discretionary funding may be provided from available cash resources.


(c)	Other long-term obligations include contingent consideration liabilities, deferred executive compensation liabilities and certain other obligations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, our operations are exposed to risks associated with fluctuations in interest rates and foreign currency exchange rates. We address these risks through controlled risk management that includes the use of derivative financial instruments to economically hedge or reduce these exposures. We do not enter into derivative financial instruments for trading or speculative purposes. See Note 10, “Financial Instruments,” in the notes to the consolidated financial statements listed under Item 15 of Part IV of this report, “Exhibits and Financial Statement Schedules,” for activities relating to interest rate and foreign currency risk management.

To ensure the adequacy and effectiveness of our interest rate and foreign exchange hedge positions, we continually monitor our interest rate swap positions and foreign exchange forward and option positions both on a stand-alone basis and in conjunction with our underlying interest rate and foreign currency exposures, from an accounting and economic perspective.

However, given the inherent limitations of forecasting and the anticipatory nature of the exposures intended to be hedged, we cannot assure you that such programs will offset more than a portion of the adverse financial impact resulting from unfavorable movements in either interest or foreign exchange rates. In addition, the timing of the accounting for recognition of gains and losses related to mark-to-market instruments for any given period may not coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely affect our consolidated operating results and financial position.

As of December 31, 2012, we had no interest rate swap contracts outstanding. However, we may from time to time seek to enter into interest rate hedge transactions in the future.

Interest Rate Risk

Our interest income and expense are more sensitive to fluctuations in the general level of U.S. interest rates than to changes in rates in other markets. Changes in U.S. interest rates affect the interest earned on our cash and equivalents and short-term investments and interest expense on our debt, as well as costs associated with foreign currency contracts.

On January 31, 2007, we entered into a nine-year, two-month interest rate swap with a $300.0 million notional amount with semi-annual settlements and quarterly interest rate reset dates. The swap received interest at a fixed rate of 5.75% and paid interest at a variable interest rate equal to 3-month LIBOR plus 0.368%, and effectively converted $300.0 million of the $800.0 million aggregate principal amount of our 2016 Notes to a variable interest rate. Based on the structure of the hedging relationship, the hedge met the criteria for using the short-cut method for a fair value hedge. The investment in the derivative and the related long-term debt were recorded at fair value. The differential to be paid or received as interest rates change was accrued and recognized as an adjustment to interest expense related to the 2016 Notes. In September 2012, we terminated the interest rate swap and received $54.7 million, which included accrued interest of $3.7 million. Upon termination of the interest rate swap, we added the net fair value received of $51.0 million to the carrying value of the 2016 Notes. The amount received for the termination of the interest rate swap will be amortized as a reduction to interest expense over the remaining life of the debt, which effectively fixes the interest rate for the remaining term of the 2016 Notes at 3.94%. As of December 31, 2012, the unamortized amount of the terminated interest rate swap that was included in the carrying value of the 2016 Notes was $44.6 million. At December 31, 2011, we recognized in our consolidated balance sheet an asset reported in “Investments and other assets” and a corresponding increase in “Long-term debt” associated with the fair value of the derivative of $48.1 million. During 2012, 2011 and 2010, we recognized $13.8 million, $15.0 million and $15.1 million, respectively, as a reduction of interest expense due to the effect of the interest rate swap.

In February 2006, we entered into interest rate swap contracts based on 3-month LIBOR with an aggregate notional amount of $800.0 million, a swap period of 10 years and a starting swap rate of 5.198%. We entered into these swap contracts as a cash flow hedge to effectively fix the future interest rate for our 2016 Notes. In April 2006, we terminated the interest rate swap contracts and received approximately $13.0 million. The total gain is being amortized as a reduction to interest expense over a 10 year period to match the term of the 2016 Notes. As of December 31, 2012, the remaining unrecognized gain, net of tax, of $2.6 million is recorded as a component of accumulated other comprehensive loss.

At December 31, 2012, we had approximately $48.8 million of variable rate debt. If interest rates were to increase or decrease by 1% for the year, annual interest expense would increase or decrease by approximately $0.5 million. Commercial paper, when outstanding, is issued at current short-term interest rates. Additionally, any future borrowings that are outstanding under the long-term credit facility may be subject to a floating interest rate. Therefore, higher interest costs could occur if interest rates increase in the future.

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The following tables present information about certain of our investment portfolio and our debt obligations at December 31, 2012 and 2011.



	December 31, 2012
	Maturing in																			Fair Value
	2013			2014		2015		2016			2017			Thereafter			Total			Fair Value
	(in millions, except interest rates)
ASSETS
Cash Equivalents and Short-Term Investments:
Commercial Paper	$	1,709.0		$	—	$	—	$	—		$	—		$	—		$	1,709.0		$	1,709.0
Weighted Average Interest Rate	0.14		%	—		—		—			—			—			0.14		%
Foreign Time Deposits	341.7			—		—		—			—			—			341.7			341.7
Weighted Average Interest Rate	0.17		%	—		—		—			—			—			0.17		%
Other Cash Equivalents	685.0			—		—		—			—			—			685.0			685.0
Weighted Average Interest Rate	0.17		%	—		—		—			—			—			0.17		%
Total Cash Equivalents and Short-Term Investments	$	2,735.7		$	—	$	—	$	—		$	—		$	—		$	2,735.7		$	2,735.7
Weighted Average Interest Rate	0.15		%	—		—		—			—			—			0.15		%

LIABILITIES
Debt Obligations:
Fixed Rate (US$) (a)	$	—		$	—	$	—	$	843.9		$	20.0		$	648.5		$	1,512.4		$	1,673.0
Weighted Average Interest Rate	—			—		—		3.94		%	5.65		%	3.41		%	3.74		%
Other Variable Rate (non-US$)	48.8			—		—		—			—			—			48.8			48.8
Weighted Average Interest Rate	6.06		%	—		—		—			—			—			6.06		%
Total Debt Obligations	$	48.8		$	—	$	—	$	843.9		$	20.0		$	648.5		$	1,561.2		$	1,721.8
Weighted Average Interest Rate	6.06		%	—		—		3.94		%	5.65		%	3.41		%	3.81		%

——————————


(a)	The carrying value of debt obligations maturing in 2016 includes an unamortized amount of $44.6 million related to a terminated interest rate swap associated with the 2016 Notes.

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	December 31, 2011
	Maturing in																		Fair Value
	2012			2013		2014		2015		2016			Thereafter			Total			Fair Value
	(in millions, except interest rates)
ASSETS
Cash Equivalents and Short-Term Investments:
Commercial Paper	$	1,171.9		$	—	$	—	$	—	$	—		$	—		$	1,171.9		$	1,171.9
Weighted Average Interest Rate	0.10		%	—		—		—		—			—			0.10		%
Foreign Time Deposits	189.1			—		—		—		—			—			189.1			189.1
Weighted Average Interest Rate	0.56		%	—		—		—		—			—			0.56		%
Other Cash Equivalents	1,078.9			—		—		—		—			—			1,078.9			1,078.9
Weighted Average Interest Rate	0.02		%	—		—		—		—			—			0.02		%
Total Cash Equivalents and Short-Term Investments	$	2,439.9		$	—	$	—	$	—	$	—		$	—		$	2,439.9		$	2,439.9
Weighted Average Interest Rate	0.10		%	—		—		—		—			—			0.10		%

LIABILITIES
Debt Obligations:
Fixed Rate (US$)	$	25.0		$	—	$	—	$	—	$	799.0		$	668.3		$	1,492.3		$	1,667.2
Weighted Average Interest Rate	7.47		%	—		—		—		5.79		%	3.48		%	4.78		%
Other Variable Rate (non-US$)	58.9			—		—		—		—			—			58.9			58.9
Weighted Average Interest Rate	10.05		%	—		—		—		—			—			10.05		%
Total Debt Obligations (a)	$	83.9		$	—	$	—	$	—	$	799.0		$	668.3		$	1,551.2		$	1,726.1
Weighted Average Interest Rate	9.28		%	—		—		—		5.79		%	3.48		%	4.98		%

INTEREST RATE DERIVATIVES
Interest Rate Swaps:
Fixed to Variable (US$)	$	—		$	—	$	—	$	—	$	—		$	300.0		$	300.0		$	48.1
Average Pay Rate	—			—		—		—		—			0.95		%	0.95		%
Average Receive Rate	—			—		—		—		—			5.75		%	5.75		%

——————————


(a)	Total debt obligations in the consolidated balance sheet at December 31, 2011 include debt obligations of $1,551.2 million and the interest rate swap fair value adjustment of $48.1 million.

Foreign Currency Risk

Overall, we are a net recipient of currencies other than the U.S. dollar and, as such, benefit from a weaker dollar and are adversely affected by a stronger dollar relative to major currencies worldwide. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may negatively affect our consolidated revenues or operating costs and expenses as expressed in U.S. dollars.

From time to time, we enter into foreign currency option and forward contracts to reduce earnings and cash flow volatility associated with foreign exchange rate changes to allow our management to focus its attention on our core business issues. Accordingly, we enter into various contracts which change in value as foreign exchange rates change to economically offset the effect of changes in the value of foreign currency assets and liabilities, commitments and anticipated foreign currency denominated sales and operating expenses. We enter into foreign currency option and forward contracts in amounts between minimum and maximum anticipated foreign exchange exposures, generally for periods not to exceed 18 months.

We use foreign currency option contracts, which provide for the sale or purchase of foreign currencies to economically hedge the currency exchange risks associated with probable but not firmly committed transactions that arise in the normal course of our business. Probable but not firmly committed transactions are comprised primarily of sales of products and purchases of raw material in currencies other than the U.S. dollar. The foreign currency option contracts are entered into to reduce the volatility of earnings generated in currencies other than the U.S. dollar, primarily earnings denominated in the Canadian dollar, Mexican

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peso, Australian dollar, Brazilian real, euro, Korean won, Turkish lira, Polish zloty, Russian ruble, Swedish krona, South African rand and Swiss franc. While these instruments are subject to fluctuations in value, such fluctuations are anticipated to offset changes in the value of the underlying exposures. Changes in the fair value of open foreign currency option contracts and any realized gains (losses) on settled contracts are recorded through earnings as “Other, net” in the accompanying consolidated statements of earnings. The premium costs of purchased foreign exchange option contracts are recorded in “Other current assets” and amortized to “Other, net” over the life of the options.

All of our outstanding foreign exchange forward contracts are entered into to offset the change in value of certain intercompany receivables or payables that are subject to fluctuations in foreign currency exchange rates. The realized and unrealized gains and losses from foreign currency forward contracts and the revaluation of the foreign denominated intercompany receivables or payables are recorded through “Other, net” in the accompanying consolidated statements of earnings.

The following table provides information about our foreign currency derivative financial instruments outstanding as of December 31, 2012 and 2011. The information is provided in U.S. dollars, as presented in our consolidated financial statements:



	December 31, 2012			December 31, 2011
	Notional Amount		Average Contract Rate or Strike Amount	Notional Amount			Average Contract Rate or Strike Amount
	(in millions)			(in millions)
Foreign currency forward contracts:
(Receive U.S. dollar/pay foreign currency)
Japanese yen	$	8.3	83.88	$	9.0		77.85
Australian dollar	17.3		1.05	17.3			0.99
Russian ruble	17.9		31.31	6.5			32.48
Polish zloty	1.1		3.14	1.5			3.48
New Zealand dollar	—		—	1.1			0.76
	$	44.6		$	35.4

Estimated fair value	$	0.3		$	(0.4	)

Foreign currency forward contracts:
(Pay U.S. dollar/receive foreign currency)
Euro	$	39.6	1.32	$	39.1		1.30

Estimated fair value	$	—		$	(0.3	)

Foreign currency sold — put options:
Canadian dollar	$	105.6	1.02	$	83.2		0.99
Mexican peso	17.8		13.10	21.3			13.79
Australian dollar	67.9		1.00	50.9			1.01
Brazilian real	45.5		2.14	49.4			1.78
Euro	168.0		1.29	141.2			1.36
Korean won	20.1		1,086.16	21.3			1,143.10
Turkish lira	27.0		1.83	18.8			1.93
Polish zloty	8.7		3.19	8.8			3.41
Swiss franc	8.6		0.92	9.8			0.92
Russian ruble	10.6		31.74	—			—
Swedish krona	9.7		6.70	—			—
South African rand	12.1		8.94	—			—
	$	501.6		$	404.7

Estimated fair value	$	9.9		$	26.3

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Item 8.	Financial Statements and Supplementary Data

The information required by this Item is incorporated herein by reference to the financial statements set forth in Item 15 of Part IV of this report, “Exhibits and Financial Statement Schedules.”


Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.


Item 9A.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our management, including our Principal Executive Officer and our Principal Financial Officer, does not expect that our disclosure controls or procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Also, we have investments in certain unconsolidated entities. As we do not control or manage these entities, our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.

We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2012, the end of the annual period covered by this report. The evaluation of our disclosure controls and procedures included a review of the disclosure controls’ and procedures’ objectives, design, implementation and the effect of the controls and procedures on the information generated for use in this report. In the course of our evaluation, we sought to identify data errors, control problems or acts of fraud and to confirm the appropriate corrective actions, including process improvements, were being undertaken.

Based on the foregoing, our Principal Executive Officer and our Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective and were operating at the reasonable assurance level.

Further, management determined that, as of December 31, 2012, there were no changes in our internal control over financial reporting that occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management report on internal control over financial reporting and the report of our independent registered public accounting firm on our internal control over financial reporting are contained in Item 15 of Part IV of this report, “Exhibits and Financial Statement Schedules.”


Item 9B.	Other Information

None.

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PART III


Item 10.	Directors, Executive Officers and Corporate Governance

For information required by this Item regarding our executive officers, see Item 1 of Part I of this report, “Business.”

The information to be included in the sections entitled “Item No. 1 - Election of Directors” and “Corporate Governance” in the Proxy Statement to be filed by us with the U.S. Securities and Exchange Commission no later than 120 days after the close of our fiscal year ended December 31, 2012, or the Proxy Statement, is incorporated herein by reference.

The information to be included in the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement is incorporated herein by reference.

The information to be included in the section entitled “Code of Business Conduct and Ethics” in the Proxy Statement is incorporated herein by reference.

We have filed, as exhibits to this report, the certifications of our Principal Executive Officer and Principal Financial Officer required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

O n May 24, 2012, we submitted to the New York Stock Exchange the Annual CEO Certification required pursuant to Section 303A.12(a) of the New York Stock Exchange Listed Company Manual.


Item 11.	Executive Compensation

The information to be included in the sections entitled “Compensation Disclosure,” “Non-Employee Directors' Compensation” and “Organization and Compensation Committee Report” in the Proxy Statement is incorporated herein by reference.


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information to be included in the section entitled “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in the Proxy Statement is incorporated herein by reference.


Item 13.	Certain Relationships and Related Transactions, and Director Independence

The information to be included in the sections entitled “Certain Relationships and Related Person Transactions” and “Corporate Governance” in the Proxy Statement is incorporated herein by reference.


Item 14.	Principal Accounting Fees and Services

The information to be included in the section entitled “Independent Registered Public Accounting Firm's Fees” in the Proxy Statement is incorporated herein by reference.

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PART IV


Item 15.	Exhibits and Financial Statement Schedules


(a)	1. Consolidated Financial Statements and Supplementary Data:

The following financial statements are included herein under Item 8 of Part II of this report, “Financial Statements and Supplementary Data:”



	Page Number
Management’s Report on Internal Control Over Financial Reporting	F- 1

Reports of Independent Registered Public Accounting Firm	F- 2

Consolidated Balance Sheets at December 31, 2012 and December 31, 2011	F- 4

Consolidated Statements of Earnings for Each of the Years in the Three Year Period Ended December 31, 2012	F- 5

Consolidated Statements of Comprehensive Income for Each of the Years in the Three Year Period Ended December 31, 2012	F- 6

Consolidated Statements of Equity for Each of the Years in the Three Year Period Ended December 31, 2012	F- 7

Consolidated Statements of Cash Flows for Each of the Years in the Three Year Period Ended December 31, 2012	F- 8

Notes to Consolidated Financial Statements	F- 9

Quarterly Data	F- 48


(a)	2. Financial Statement Schedules:



	Page Number
Schedule II — Valuation and Qualifying Accounts	F- 50

All other schedules have been omitted for the reason that the required information is presented in the financial statements or notes thereto, the amounts involved are not significant or the schedules are not applicable.

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(a) 3. Exhibits:

EXHIBIT INDEX



Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation of Allergan, Inc (incorporated by reference to Exhibit 3.1 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended March 31, 2011)

3.2		Allergan, Inc. Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to Allergan, Inc.'s Current Report on Form 8-K filed on October 7, 2008)

4.1		Form of Stock Certificate for Allergan, Inc. Common Stock, par value $0.01 (incorporated by reference to Exhibit 4.2 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2008)

4.2		Indenture, dated as of April 12, 2006, between Allergan, Inc. and Wells Fargo Bank, National Association relating to the $800,000,000 5.75% Senior Notes due 2016 (incorporated by reference to Exhibit 4.2 to Allergan, Inc.'s Current Report on Form 8-K filed on April 12, 2006)

4.3		Form of 5.75% Senior Note due 2016 (incorporated by reference to (and included in) the Indenture dated as of April 12, 2006 between Allergan, Inc. and Wells Fargo Bank, National Association at Exhibit 4.2 to Allergan, Inc.'s Current Report on Form 8-K filed on April 12, 2006)

4.4		Registration Rights Agreement, dated as of April 12, 2006, between Allergan, Inc. and Morgan Stanley & Co. Incorporated, as representative of the Initial Purchasers named therein, relating to the $800,000,000 5.75% Senior Notes due 2016 (incorporated by reference to Exhibit 4.4 to Allergan, Inc.'s Current Report on Form 8-K filed on April 12, 2006)

4.5		Indenture, dated as of September 14, 2010, between Allergan, Inc. and Wells Fargo Bank, National Association relating to the $650,000,000 3.375% Notes due 2020 (incorporated by reference to Exhibit 4.1 to Allergan, Inc.'s Current Report on Form 8-K filed on September 14, 2010)

4.6		Supplemental Indenture, dated as of September 14, 2010, between Allergan, Inc. and Wells Fargo Bank, National Association relating to the $650,000,000 3.375% Notes due 2020 (incorporated by reference to Exhibit 4.2 to Allergan, Inc.'s Current Report on Form 8-K filed on September 14, 2010)

4.7		Form of 3.375% Note due 2020 (incorporated by reference to (and included in) the Supplemental Indenture dated as of September 14, 2010 between Allergan, Inc. and Wells Fargo Bank, National Association at Exhibit 4.2 to Allergan, Inc.'s Current Report on Form 8-K filed on September 14, 2010)

10.1		Form of Director and Executive Officer Indemnity Agreement (incorporated by reference to Exhibit 10.1 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2006)

10.2		Allergan, Inc. Change in Control Policy (Effective April 2010) (incorporated by reference to Exhibit 10.2 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2010)

10.3		Amended and Restated Form of Allergan, Inc. Change in Control Agreement (Restated December 2010) (applicable to certain employees of Allergan, Inc., including executive officers, hired on or before December 4, 2006) (incorporated by reference to Exhibit 10.3 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2010)

10.4		Amended and Restated Form of Allergan, Inc. Change in Control Agreement (Restated December 2010) (applicable to certain employees of Allergan, Inc., including executive officers, hired on or after December 4, 2006) (incorporated by reference to Exhibit 10.4 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2010)

10.5		Allergan, Inc. 2003 Nonemployee Director Equity Incentive Plan (incorporated by reference to Appendix A to Allergan, Inc.'s Proxy Statement filed on March 14, 2003)

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Exhibit No.		Description
10.6		First Amendment to Allergan, Inc. 2003 Nonemployee Director Equity Incentive Plan (incorporated by reference to Appendix A to Allergan, Inc.'s Proxy Statement filed on March 21, 2006)

10.7		Second Amendment to Allergan, Inc. 2003 Nonemployee Director Equity Incentive Plan (incorporated by reference to Exhibit 10.14 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended March 30, 2007)

10.8		Third Amendment to Allergan, Inc. 2003 Nonemployee Director Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2010)

10.9		Amended Form of Non-Qualified Stock Option Award Agreement under the Allergan, Inc. 2003 Nonemployee Director Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.16 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended March 30, 2007)

10.10		Allergan, Inc. Deferred Directors' Fee Program (Restated December 2010) (incorporated by reference to Exhibit 10.11 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2010)

10.11		Allergan, Inc. 1989 Incentive Compensation Plan (Restated November 2000) (incorporated by reference to Exhibit 10.5 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2000)

10.12		First Amendment to Allergan, Inc. 1989 Incentive Compensation Plan (Restated November 2000) (incorporated by reference to Exhibit 10.51 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended September 26, 2003)

10.13		Second Amendment to Allergan, Inc. 1989 Incentive Compensation Plan (Restated November 2000) (incorporated by reference to Exhibit 10.7 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2004)

10.14		Third Amendment to Allergan, Inc. 1989 Incentive Compensation Plan (Restated November 2000) (incorporated by reference to Exhibit 10.15 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2010)

10.15		Allergan, Inc. Pension Plan (Restated 2013)

10.16		Allergan, Inc. Supplemental Executive Benefit Plan and Supplemental Retirement Income Plan (Restated 2011) (incorporated by reference to Exhibit 10.3 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended September 30, 2011)

10.17		First Amendment to Allergan, Inc. Supplemental Executive Benefit Plan (incorporated by reference to Exhibit 10.18 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2011)

10.18		Allergan, Inc. Executive Severance Pay Plan (Effective January 2011) (incorporated by reference to Exhibit 10.1 to Allergan, Inc.'s Current Report on Form 8-K filed on December 21, 2010)

10.19		Allergan, Inc. 2011 Executive Bonus Plan (incorporated by reference to Annex A to Allergan, Inc.'s Proxy Statement filed on March 8, 2011)

10.20		Allergan, Inc. 2011 Executive Bonus Plan - 2013 Performance Objectives

10.21		Allergan, Inc. 2013 Management Bonus Plan

10.22		Allergan, Inc. Executive Deferred Compensation Plan (Restated 2009) (incorporated by reference to Exhibit 10.23 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2008)

10.23		Form of Non-Qualified Stock Option Grant Notice for Non-Employee Directors under the Allergan, Inc. 2008 Incentive Award Plan (incorporated by reference to Exhibit 10.4 to Allergan, Inc.'s Current Report on Form 8-K filed on May 6, 2008)

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Exhibit No.		Description
10.24		Form of Non-Qualified Stock Option Grant Notice for Non-Employee Directors under the Allergan, Inc. 2008 Incentive Award Plan (Amended February 2010) (incorporated by reference to Exhibit 10.30 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2009)

10.25		Form of Non-Qualified Stock Option Grant Notice for Employees under the Allergan, Inc. 2008 Incentive Award Plan (incorporated by reference to Exhibit 10.5 to Allergan, Inc.'s Current Report on Form 8-K filed on May 6, 2008)

10.26		Form of Non-Qualified Stock Option Grant Notice for Employees under the Allergan, Inc. 2008 Incentive Award Plan (Amended February 2010) (incorporated by reference to Exhibit 10.32 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2009)

10.27		Form of Restricted Stock Award Grant Notice for Non-Employee Directors under the Allergan, Inc. 2008 Incentive Award Plan (incorporated by reference to Exhibit 10.10 to Allergan, Inc.'s Current Report on Form 8-K filed on May 6, 2008)

10.28		Form of Restricted Stock Award Grant Notice for Non-Employee Directors under the Allergan, Inc. 2008 Incentive Award Plan (Amended February 2010) (incorporated by reference to Exhibit 10.34 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2009)

10.29		Form of Restricted Stock Award Grant Notice for Employees under the Allergan, Inc. 2008 Incentive Award Plan (incorporated by reference to Exhibit 10.11 to Allergan, Inc.'s Current Report on Form 8-K filed on May 6, 2008)

10.30		Form of Restricted Stock Award Grant Notice for Employees under the Allergan, Inc. 2008 Incentive Award Plan (Amended February 2010) (incorporated by reference to Exhibit 10.36 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2009)

10.31		Allergan, Inc. 2011 Incentive Award Plan (formerly known as the Allergan, Inc. 2008 Incentive Award Plan) (incorporated by reference to Annex B to Allergan, Inc.'s Proxy Statement filed on March 8, 2011)

10.32		Form of Non-Qualified Stock Option Grant Notice for Employees under the Allergan, Inc. 2011 Incentive Award Plan (incorporated by reference to Exhibit 10.6 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended March 31, 2011)

10.33		Form of Restricted Stock Award Grant Notice for Employees under the Allergan, Inc. 2011 Incentive Award Plan (incorporated by reference to Exhibit 10.7 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended March 31, 2011)

10.34		Form of Restricted Stock Award Grant Notice for Employees (Management Bonus Plan) under the Allergan, Inc. 2011 Incentive Award Plan (incorporated by reference to Exhibit 10.8 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended March 31, 2011)

10.35		Form of Restricted Stock Unit Award Grant Notice for Employees under the Allergan, Inc. 2011 Incentive Award Plan (incorporated by reference to Exhibit 10.9 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended March 31, 2011)

10.36		Form of Restricted Stock Unit Award Grant Notice for Employees (Management Bonus Plan) under the Allergan, Inc. 2011 Incentive Award Plan (incorporated by reference to Exhibit 10.10 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended March 31, 2011)

10.37		Form of Restricted Stock Unit Award Grant Notice for Non-Employees Directors under the Allergan, Inc. 2011 Incentive Award Plan (incorporated by reference to Exhibit 10.11 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended March 31, 2011)

10.38		Form of Restricted Stock Unit Award Grant Notice for Non-Employees Directors under the Allergan, Inc. 2011 Incentive Award Plan (incorporated by reference to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2011)

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Exhibit No.		Description
10.39		Form of Performance-Based Restricted Stock Unit Award Grant Notice for Employees under the Allergan, Inc. 2011 Incentive Award Plan (incorporated by reference to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2011)

10.40		Form of Non-Qualified Stock Option Grant Notice for Non-Employee Directors under the Allergan, Inc. 2011 Incentive Award Plan

10.41		Amended and Restated Credit Agreement, dated as of October 28, 2011, among Allergan, Inc. as Borrower and Guarantor, the Eligible Subsidiaries referred to therein, as Borrowers, the Lenders party thereto, JPMorgan Chase Bank, N.A, as Administrative Agent, Citibank N.A., as Syndication Agent and Bank of America, N.A., as Documentation Agent (incorporated by reference to Exhibit 10.1 to Allergan, Inc.'s Current Report on Form 8-K filed on October 31, 2011)

10.42		Botox ^® - China License Agreement, dated as of September 30, 2005, among Allergan, Inc., Allergan Sales, LLC and Glaxo Group Limited (incorporated by reference to Exhibit 10.51 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended September 30, 2005)**

10.43		Amendment No. 1 to Botox ^® - China License Agreement, dated as of March 9, 2010, among Allergan, Inc., Allergan Sales, LLC, Allergan Pharmaceuticals Holdings (Ireland) Ltd., Allergan Botox Limited, Allergan Pharmaceuticals Ireland, and Glaxo Group Limited (incorporated by reference to Exhibit 10.1 to Allergan, Inc.'s Current Report on Form 8-K filed on March 11, 2010)**

10.44		Botox ^® - Japan License Agreement, dated as of September 30, 2005, among Allergan, Inc., Allergan Sales, LLC and Glaxo Group Limited (incorporated by reference to Exhibit 10.52 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended September 30, 2005)**

10.45		Amendment No. 1 to Botox ^® - Japan License Agreement, dated as of March 9, 2010, among Allergan, Inc., Allergan Sales, LLC, Allergan K.K., Allergan NK, and Glaxo Group Limited (incorporated by reference to Exhibit 10.2 to Allergan, Inc.'s Current Report on Form 8-K filed on March 11, 2010)**

10.46		Amended and Restated License, Commercialization and Supply Agreement, dated as of September 18, 2007, between Esprit Pharma, Inc. and Indevus Pharmaceuticals, Inc. (incorporated by reference and included as Exhibit C to Exhibit 2.1 to Allergan, Inc.'s Current Report on Form 8-K/A filed on September 24, 2007)**

10.47		First Amendment to Amended and Restated License, Commercialization and Supply Agreement, dated as of January 9, 2009, between Allergan USA, Inc. and Indevus Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.60 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2008)

10.48		License, Development, Supply and Distribution Agreement, dated as of October 28, 2008, among Allergan, Inc., Allergan Sales, LLC, Allergan USA, Inc. and Spectrum Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.61 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2008)**

10.49		First Amendment to License, Development, Supply and Distribution Agreement, dated as of April 20, 2009, among Allergan, Inc., Allergan Sales, LLC, Allergan USA, Inc. and Spectrum Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.62 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended March 31, 2009)

10.50		Amendment to License, Development, Supply and Distribution Agreement, dated as of June 13, 2011, among Allergan, Inc., Allergan Sales, LLC, Allergan USA, Inc. and Spectrum Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.2 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended June 30, 2011)**

10.51		Second Amendment to License, Development, Supply and Distribution Agreement, dated as of January 29, 2013, among Allergan, Inc. Allergan Sales, LLC, Allergan USA, Inc. and Spectrum Pharmaceuticals, Inc.*

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Exhibit No.		Description
10.52		License, Transfer, and Development Agreement, dated as of March 31, 2010, among Serenity Pharmaceuticals LLC and Allergan Sales, LLC, Allergan USA, Inc., and Allergan, Inc. (incorporated by reference to Exhibit 10.1 to Allergan, Inc.'s Current Report on Form 8-K filed on April 2, 2010)**

10.53		License and Collaboration Agreement, dated as of May 3, 2011, among Allergan, Inc., Allergan Sales, LLC, and Molecular Partners AG*

10.54		Collaboration Agreement, dated as of January 28, 2011, among MAP Pharmaceuticals, Inc., Allergan USA, Inc., Allergan Sales, LLC and Allergan, Inc. (incorporated by reference to Exhibit 10.55 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2010)**

10.55		First Amendment to Collaboration Agreement, dated May 10, 2011, among MAP Pharmaceuticals, Inc., Allergan USA, Inc., Allergan Sales, LLC and Allergan, Inc. (incorporated by reference to Exhibit 10.1 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended June 30, 2011)**

10.56		Co-Promotion Agreement, dated as of January 28, 2011, among MAP Pharmaceuticals, Inc., Allergan USA, Inc. and Allergan, Inc. (incorporated by reference to Exhibit 10.56 to Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2010)**

10.57		Agreement and Plan of Merger, dated as of January 22, 2013, among Allergan, Inc., Groundhog Acquisition, Inc. and MAP Pharmaceuticals, Inc. (incorporated by reference to Exhibit 2.1 of Allergan, Inc.'s Current Report on Form 8-K filed on January 23, 2013)

10.58		Agreement and Plan of Merger, dated as of July 18, 2011, among Allergan, Inc., Erythema Acquisition, Inc., Vicept Therapeutics, Inc. and the Shareholders' Representative (incorporated by reference to Exhibit 2.1 to Allergan, Inc.'s Current Report on Form 8-K filed on July 22, 2011)**

10.59		Agreement and Plan of Merger, dated as of November 15, 2012, among Allergan, Inc., Aphrodite Acquisition, Inc., SkinMedica, Inc. and the Equityholders' Representative (incorporated by reference to Exhibit 2.1 to Allergan, Inc.'s Current Report on Form 8-K filed on November 16, 2012)

10.60		Letter of Understanding, dated as of August 1, 2010, between Allergan, Inc. and Douglas S. Ingram (incorporated by reference to Exhibit 10.66 to Allergan, Inc.'s Report on Form 10-Q for the Quarter ended June 30, 2010)

10.61		Settlement Agreement, dated as of August 31, 2010, among Allergan, Inc., Allergan USA, Inc., the United States Department of Justice and the other parties listed therein (incorporated by reference to Exhibit 10.1 to Allergan, Inc.'s Current Report on Form 8-K filed on September 1, 2010)

10.62		Corporate Integrity Agreement, dated as of August 30, 2010, between Allergan, Inc. and the Office of Inspector General of the Department of Health and Human Services (incorporated by reference to Exhibit 10.2 to Allergan, Inc.'s Current Report on Form 8-K filed on September 1, 2010)

10.63		Plea Agreement, dated as of October 5, 2010, between Allergan, Inc. and the United States Attorney's Office for the Northern District of Georgia as counsel for the United States (incorporated by reference to Exhibit 10.70 to Allergan, Inc.'s Current Report on Form 10-Q for the Quarter ended September 30, 2011)

21		List of Subsidiaries of Allergan, Inc.

23.1		Consent of Independent Registered Public Accounting Firm

31.1		Certification of Principal Executive Officer Required Under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

31.2		Certification of Principal Financial Officer Required Under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

32		Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350

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Exhibit No.		Description
101		The following financial statements are from Allergan, Inc.'s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Earnings; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements

——————————

* Confidential treatment was requested with respect to the omitted portions of this Exhibit, which portions have been filed separately with the U.S. Securities and Exchange Commission.


**	Confidential treatment was requested with respect to the omitted portions of this Exhibit, which portions have been filed separately with the U.S. Securities and Exchange Commission and were granted confidential treatment.

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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.



A LLERGAN , I NC .

By	/ S / D AVID E.I. P YOTT
	David E.I. Pyott
	Chairman of the Board, President and Chief Executive Officer

Date: February 26, 2013

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:	February 26, 2013	By	/ S / D AVID E.I. P YOTT
			David E.I. Pyott
			Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

Date:	February 26, 2013	By	/ S / J EFFREY L. E DWARDS
			Jeffrey L. Edwards
			Executive Vice President, Finance and Business Development, Chief Financial Officer (Principal Financial Officer)

Date:	February 26, 2013	By	/ S / J AMES F. B ARLOW
			James F. Barlow
			Senior Vice President, Corporate Controller (Principal Accounting Officer)

Date:	February 26, 2013	By	/ S / H ERBERT W. B OYER
			Herbert W. Boyer, Ph.D.,
			Vice Chairman of the Board

Date:	February 26, 2013	By	/ S / D EBORAH D UNSIRE
			Deborah Dunsire , M.D. , Director

Date:	February 26, 2013	By	/ S / M ICHAEL R. G ALLAGHER
			Michael R. Gallagher , Director

Date:	February 22, 2013	By	/ S / D AWN H UDSON
			Dawn Hudson, Director

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Date:	February 26, 2013	By	/ S / T REVOR M. J ONES
			Trevor M. Jones, Ph.D., Director

Date:	February 26, 2013	By	/ S / L OUIS J. L AVIGNE , J R .
			Louis J. Lavigne, Jr., Director

Date:	February 17, 2013	By	/ S / P ETER J. M CDONNELL
			Peter J. McDonnell, M.D., Director

Date:	February 26, 2013	By	/ S / T IMOTHY D. P ROCTOR
			Timothy D. Proctor, Director

Date:	February 26, 2013	By	/ S / R USSELL T. R AY
			Russell T. Ray, Director

Date:	February 26, 2013	By	/ S / S TEPHEN J. R YAN
			Stephen J. Ryan, M.D., Director

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended, refers to the process designed by, or under the supervision of, our Principal Executive Officer and Principal Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:


(1)	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Allergan;


(2)	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Allergan are being made only in accordance with authorizations of management and directors of Allergan; and


(3)	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Allergan’s assets that could have a material effect on the financial statements.

Management is responsible for establishing and maintaining adequate internal control over financial reporting for Allergan. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Allergan’s internal control over financial reporting has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report on internal control over financial reporting as of December 31, 2012.

Management has used the criteria set forth in the report entitled “Internal Control — Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of Allergan’s internal control over financial reporting. Management has concluded that Allergan’s internal control over financial reporting was effective as of December 31, 2012, based on those criteria.

David E.I. Pyott

Chairman of the Board,

President and

Chief Executive Officer

(Principal Executive Officer)

Jeffrey L. Edwards

Executive Vice President,

Finance and Business Development,

Chief Financial Officer

(Principal Financial Officer)

Februar y 22, 2013

F- 1

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Allergan, Inc.

We have audited Allergan, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Allergan, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Allergan, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Allergan, Inc. as of December 31, 2012 and 2011, and the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2012 of Allergan, Inc. and our report dated February 26, 2013 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Irvine, California

February 26, 2013

F- 2

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Allergan, Inc.

We have audited the accompanying consolidated balance sheets of Allergan, Inc. as of December 31, 2012 and 2011, and the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2012. Our audits also included the financial statement schedule listed in the Index at Item 15(a)2. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Allergan, Inc. at December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Allergan, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2013 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Irvine, California

February 26, 2013

F- 3

Table of Contents

ALLERGAN, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)



	As of December 31,
	2012			2011
ASSETS
Current assets:
Cash and equivalents	$	2,701.8		$	2,406.1
Short-term investments	260.6			179.9
Trade receivables, net	764.2			730.6
Inventories	282.9			249.7
Other current assets	449.3			482.0
Total current assets	4,458.8			4,048.3
Investments and other assets	192.1			247.1
Deferred tax assets	206.9			152.6
Property, plant and equipment, net	852.9			807.0
Goodwill	2,239.5			2,088.4
Intangibles, net	1,229.1			1,165.2
Total assets	$	9,179.3		$	8,508.6
LIABILITIES AND EQUITY
Current liabilities:
Notes payable	$	48.8		$	83.9
Accounts payable	233.1			200.4
Accrued compensation	223.7			200.6
Other accrued expenses	589.6			470.1
Total current liabilities	1,095.2			955.0
Long-term debt	1,512.4			1,515.4
Other liabilities	709.1			705.8
Commitments and contingencies
Equity:
Allergan, Inc. stockholders’ equity:
Preferred stock, $.01 par value; authorized 5,000,000 shares; none issued	—			—
Common stock, $.01 par value; authorized 500,000,000 shares; issued 307,537,860 and 307,527,460 shares as of December 31, 2012 and 2011, respectively	3.1			3.1
Additional paid-in capital	2,900.6			2,761.8
Accumulated other comprehensive loss	(244.6		)	(241.4		)
Retained earnings	3,832.1			2,969.3
	6,491.2			5,492.8
Less treasury stock, at cost (7,213,757 and 2,254,935 shares as of December 31, 2012 and 2011, respectively)	(654.1		)	(183.2		)
Total stockholders’ equity	5,837.1			5,309.6
Noncontrolling interest	25.5			22.8
Total equity	5,862.6			5,332.4
Total liabilities and equity	$	9,179.3		$	8,508.6

See accompanying notes to consolidated financial statements.

F- 4

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ALLERGAN, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except per share amounts)



	Year Ended December 31,
	2012			2011			2010
Revenues:
Product net sales	$	5,708.8		$	5,347.1		$	4,819.6
Other revenues	97.3			72.0			99.8
Total revenues	5,806.1			5,419.1			4,919.4

Operating costs and expenses:
Cost of sales (excludes amortization of intangible assets)	775.5			748.7			722.0
Selling, general and administrative	2,268.4			2,246.6			2,017.6
Research and development	989.6			902.8			804.6
Amortization of intangible assets	131.3			127.6			138.0
Legal settlement	—			—			609.2
Impairment of intangible assets and related costs	22.3			23.7			369.1
Restructuring charges	5.7			4.6			0.3
Operating income	1,613.3			1,365.1			258.6

Non-operating income (expense):
Interest income	6.7			6.9			7.3
Interest expense	(63.6		)	(71.8		)	(78.7		)
Other, net	(23.1		)	(0.5		)	(16.4		)
	(80.0		)	(65.4		)	(87.8		)

Earnings before income taxes	1,533.3			1,299.7			170.8
Provision for income taxes	430.8			361.6			165.9

Net earnings	1,102.5			938.1			4.9
Net earnings attributable to noncontrolling interest	3.7			3.6			4.3
Net earnings attributable to Allergan, Inc.	$	1,098.8		$	934.5		$	0.6

Earnings per share attributable to Allergan, Inc. stockholders:
Basic	$	3.64		$	3.07		$	0.00
Diluted	$	3.58		$	3.01		$	0.00

See accompanying notes to consolidated financial statements.

F- 5

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ALLERGAN, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)



	Year Ended December 31,
	2012			2011			2010

Net earnings	$	1,102.5		$	938.1		$	4.9

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	9.6			(42.6		)	(3.2		)
Reclassification adjustment for foreign currency translation gains included in net earnings from the substantially complete liquidation of an investment in a foreign subsidiary	—			(9.4		)	—
Amortization of deferred holding gains on derivatives designated as cash flow hedges included in net earnings, net of tax benefit of $0.6 million for the year ended December 31, 2012 and $0.5 million for the years ended December 31, 2011 and 2010, respectively	(0.7		)	(0.8		)	(0.8		)
Pension and postretirement benefit plan adjustments:
Net loss, net of tax benefit of $1.1 million, $24.9 million and $20.2 million for the years ended December 31, 2012, 2011 and 2010, respectively	(35.9		)	(62.7		)	(53.5		)
Net gain on remeasurement of postretirement benefit plan liability, net of tax expense of $7.4 million	—			13.1			—
Amortization, net of tax expense of $0.8 million, $5.1 million and $3.1 million for the years ended December 31, 2012, 2011 and 2010, respectively	25.1			12.7			8.2
Other comprehensive loss	(1.9		)	(89.7		)	(49.3		)

Total comprehensive income (loss)	1,100.6			848.4			(44.4		)
Comprehensive income attributable to noncontrolling interest	5.0			2.4			5.1

Comprehensive income (loss) attributable to Allergan, Inc.	$	1,095.6		$	846.0		$	(49.5	)

See accompanying notes to consolidated financial statements.

F- 6

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ALLERGAN, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in millions, except per share amounts)



	Stockholders’ Equity
	Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Treasury Stock					Noncontrolling Interest			Total Equity
	Shares	Par Value		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Shares		Amount			Noncontrolling Interest			Total Equity
Balance December 31, 2009	307.5	$	3.1	$	2,730.3		$	(102.8	)	$	2,356.7		(3.1	)	$	(164.5	)	$	21.1		$	4,843.9
Net earnings										0.6								4.3			4.9
Other comprehensive (loss) income							(50.1		)									0.8			(49.3		)
Dividends ($0.20 per share)										(60.9		)									(60.9		)
Stock options exercised										(73.9		)	5.4		305.1						231.2
Excess tax benefits from share-based compensation				27.1																	27.1
Activity under other stock plans				2.6						0.7			0.1		3.9						7.2
Purchase of treasury stock													(4.5	)	(286.0		)				(286.0		)
Stock-based award activity				55.5						2.7			0.1		7.6						65.8
Noncontrolling interest from an acquisition																		(0.4		)	(0.4		)
Dividends to noncontrolling interest																		(2.4		)	(2.4		)
Balance December 31, 2010	307.5	3.1		2,815.5			(152.9		)	2,225.9			(2.0	)	(133.9		)	23.4			4,781.1
Net earnings										934.5								3.6			938.1
Other comprehensive loss							(88.5		)									(1.2		)	(89.7		)
Dividends ($0.20 per share)										(61.1		)									(61.1		)
Stock options exercised				0.7						(131.2		)	5.5		394.5						264.0
Excess tax benefits from share-based compensation				37.7																	37.7
Activity under other stock plans				0.1						(0.4		)			6.3						6.0
Purchase of treasury stock													(6.0	)	(461.7		)				(461.7		)
Stock-based award activity				67.0						1.6			0.2		11.6						80.2
Repurchase of equity component of convertible borrowings				(159.2		)															(159.2		)
Dividends to noncontrolling interest																		(3.0		)	(3.0		)
Balance December 31, 2011	307.5	3.1		2,761.8			(241.4		)	2,969.3			(2.3	)	(183.2		)	22.8			5,332.4
Net earnings										1,098.8								3.7			1,102.5
Other comprehensive (loss) income							(3.2		)									1.3			(1.9		)
Dividends ($0.20 per share)										(60.4		)									(60.4		)
Stock options exercised				0.6						(177.3		)	4.9		422.9						246.2
Excess tax benefits from share-based compensation				45.7																	45.7
Activity under other stock plans				(0.2		)							0.1		6.6						6.4
Purchase of treasury stock													(10.0	)	(909.0		)				(909.0		)
Stock-based award activity				92.7						1.7			0.1		8.6						103.0
Dividends to noncontrolling interest																		(2.3		)	(2.3		)
Balance December 31, 2012	307.5	$	3.1	$	2,900.6		$	(244.6	)	$	3,832.1		(7.2	)	$	(654.1	)	$	25.5		$	5,862.6

See accompanying notes to consolidated financial statements.

F- 7

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ALLERGAN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)



	Year Ended December 31,
	2012			2011			2010
Cash flows from operating activities:
Net earnings	$	1,102.5		$	938.1		$	4.9
Non-cash items included in net earnings:
Depreciation and amortization	256.6			253.4			257.1
Amortization of original issue discount and debt issuance costs	1.9			9.7			28.4
Amortization of net realized gain on interest rate swap	(7.7		)	(1.3		)	(1.3		)
Deferred income tax benefit	(88.3		)	(68.9		)	(249.1		)
Loss on disposal and impairment of assets	5.7			—			17.9
Unrealized loss (gain) on derivative instruments	15.3			(11.1		)	7.6
Expense of share-based compensation plans	109.1			86.3			73.9
Legal settlement	—			—			15.2
Impairment of intangible assets and related costs	22.3			20.4			369.1
Expense from changes in fair value of contingent consideration	5.4			11.9			7.9
Restructuring charges	5.7			4.6			0.3
Loss on investments, net	—			1.3			—
Changes in operating assets and liabilities:
Trade receivables	(34.3		)	(105.6		)	(71.4		)
Inventories	(7.3		)	(24.0		)	(5.6		)
Other current assets	(16.0		)	(33.1		)	7.3
Other non-current assets	44.1			(13.4		)	(18.6		)
Accounts payable	32.7			(19.3		)	8.6
Accrued expenses	73.1			39.1			34.4
Income taxes	52.4			(19.8		)	(17.6		)
Other liabilities	26.7			13.6			(5.1		)
Net cash provided by operating activities	1,599.9			1,081.9			463.9

Cash flows from investing activities:
Purchases of short-term investments	(865.2		)	(571.1		)	(824.1		)
Acquisitions, net of cash acquired	(349.2		)	(101.4		)	(69.8		)
Additions to property, plant and equipment	(143.3		)	(118.6		)	(102.8		)
Additions to capitalized software	(13.9		)	(11.2		)	(13.3		)
Additions to intangible assets	(4.1		)	(0.3		)	(40.9		)
Contractual purchase price adjustment to prior acquisition	—			—			(1.7		)
Proceeds from maturities of short-term investments	784.6			1,140.3			75.0
Proceeds from sale of equity investments	—			1.9			—
Proceeds from sale of property, plant and equipment	1.8			1.2			0.4
Net cash (used in) provided by investing activities	(589.3		)	340.8			(977.2		)

Cash flows from financing activities:
Repayments of convertible borrowings	—			(808.9		)	—
Dividends to stockholders	(60.4		)	(61.1		)	(60.6		)
Payments to acquire treasury stock	(909.0		)	(461.7		)	(286.0		)
Payments of contingent consideration	(5.1		)	(3.0		)	—
Net (repayments) borrowings of notes payable	(35.1		)	30.7			6.6
Debt issuance costs	—			—			(6.1		)
Proceeds from issuance of senior notes, net of discount	—			—			648.0
Sale of stock to employees	246.4			264.0			234.0
Excess tax benefits from share-based compensation	45.7			37.7			27.1
Net cash (used in) provided by financing activities	(717.5		)	(1,002.3		)	563.0

Effect of exchange rate changes on cash and equivalents	2.6			(5.5		)	(5.6		)
Net increase in cash and equivalents	295.7			414.9			44.1
Cash and equivalents at beginning of period	2,406.1			1,991.2			1,947.1
Cash and equivalents at end of period	$	2,701.8		$	2,406.1		$	1,991.2

Supplemental disclosure of cash flow information
Cash paid for:
Interest, net of amount capitalized	$	64.2		$	64.5		$	48.0
Income taxes, net of refunds	$	407.0		$	399.3		$	410.8

See accompanying notes to consolidated financial statements.

F- 8

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Summary of Significant Accounting Policies

The consolidated financial statements include the accounts of Allergan, Inc. (“Allergan” or the “Company”) and all of its subsidiaries. All significant intercompany transactions and balances among the consolidated entities have been eliminated from the consolidated financial statements.

Use of Estimates

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States and, as such, include amounts based on informed estimates and judgments of management. Actual results could differ materially from those estimates.

Foreign Currency Translation

The financial position and results of operations of the Company’s foreign subsidiaries are generally determined using local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each year end. Income statement accounts are translated at the average rate of exchange prevailing during the year. Adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive loss in equity. Aggregate net realized and unrealized (losses) gains resulting from foreign currency transactions and derivative contracts of approximately $(23.4) million , $0.3 million and $(17.8) million for the years ended December 31, 2012, 2011 and 2010, respectively, are included in “Other, net” in the Company’s consolidated statements of earnings.

Cash and Equivalents

The Company considers cash in banks, repurchase agreements, commercial paper, money-market funds and deposits with financial institutions with maturities of three months or less when purchased and that can be liquidated without prior notice or penalty, to be cash and equivalents.

Short-Term Investments

Short-term investments consist primarily of investment grade commercial paper with maturities from three months to one year when purchased and are classified as available-for-sale. As of December 31, 2012, short-term investments are valued at cost, which approximates fair value due to their short-term maturities.

Investments

The Company has non-marketable equity investments in conjunction with its various collaboration arrangements. The non-marketable equity investments represent investments in start-up technology companies and are recorded at cost. The non-marketable equity investments are evaluated periodically for impairment. If it is determined that a decline of any investment is other than temporary, then the investment basis would be written down to fair value and the write-down would be included in earnings as a loss.

Inventories

Inventories are valued at the lower of cost or market (net realizable value). Cost is determined by the first-in, first-out method.

Long-Lived Assets

Property, plant and equipment are stated at cost. Additions, major renewals and improvements are capitalized, while maintenance and repairs are expensed. Upon disposition, the net book value of assets is relieved and resulting gains or losses are reflected in earnings. For financial reporting purposes, depreciation is generally provided on the straight-line method over the useful life of the related asset. The useful lives for buildings, including building improvements, range from seven years to 40 years and, for machinery and equipment, three years to 15 years .

Leasehold improvements are amortized over the shorter of their economic lives or lease terms. Accelerated depreciation methods are generally used for income tax purposes.

F- 9

Table of Contents

ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

All long-lived assets are reviewed for impairment in value when changes in circumstances dictate, based upon undiscounted future operating cash flows, and appropriate losses are recognized and reflected in current earnings, to the extent the carrying amount of an asset exceeds its estimated fair value determined by the use of appraisals, discounted cash flow analyses or comparable fair values of similar assets.

Goodwill and Intangible Assets

Goodwill represents the excess of acquisition cost over the fair value of the net assets of acquired businesses. Goodwill has an indefinite useful life and is not amortized, but instead tested for impairment annually. Intangible assets include developed technology, customer relationships, licensing agreements, trademarks, core technology and other rights, which are being amortized over their estimated useful lives ranging from two years to 21 years , and in-process research and development assets with indefinite useful lives that are not amortized, but instead tested for impairment until the successful completion and commercialization or abandonment of the associated research and development efforts, at which point the in-process research and development assets are either amortized over their estimated useful lives or written-off immediately.

Treasury Stock

Treasury stock is accounted for by the cost method. The Company maintains an evergreen stock repurchase program. The evergreen stock repurchase program authorizes management to repurchase the Company’s common stock for the primary purpose of funding its stock-based benefit plans. Under the stock repurchase program, the Company may maintain up to 18.4 million repurchased shares in its treasury account at any one time. As of December 31, 2012 and 2011, the Company held approximately 7.2 million and 2.3 million treasury shares, respectively, under this program.

Revenue Recognition

The Company recognizes revenue from product sales when goods are shipped and title and risk of loss transfer to its customers. A portion of the Company’s revenue is generated from consigned inventory of breast implants maintained at physician, hospital and clinic locations. These customers are contractually obligated to maintain a specific level of inventory and to notify the Company upon use. Revenue for consigned inventory is recognized at the time the Company is notified by the customer that the product has been used. Notification is usually through the replenishing of the inventory, and the Company periodically reviews consignment inventories to confirm the accuracy of customer reporting.

The Company generally offers cash discounts to customers for the early payment of receivables. Those discounts are recorded as a reduction of revenue and accounts receivable in the same period that the related sale is recorded. The amounts reserved for cash discounts were $4.4 million and $4.5 million at December 31, 2012 and 2011, respectively. The Company permits returns of product from most product lines by any class of customer if such product is returned in a timely manner, in good condition and from normal distribution channels. Return policies in certain international markets and for certain medical device products, primarily breast implants, provide for more stringent guidelines in accordance with the terms of contractual agreements with customers. Estimated allowances for sales returns are based upon the Company’s historical patterns of product returns matched against sales, and management’s evaluation of specific factors that may increase the risk of product returns. The amount of allowances for sales returns recognized in the Company’s consolidated balance sheets at December 31, 2012 and 2011 were $78.9 million and $68.5 million , respectively, and are recorded in “Other accrued expenses” and “Trade receivables, net” in the Company’s consolidated balance sheets. (See Note 4, “Composition of Certain Financial Statement Captions.”) Actual historical allowances for cash discounts and product returns have been consistent with the amounts reserved or accrued.

The Company participates in various managed care sales rebate and other incentive programs, the largest of which relates to Medicaid, Medicare and the U.S. Department of Veterans Affairs. Sales rebate and other incentive programs also include contractual volume rebate programs and chargebacks, which are contractual discounts given primarily to federal government agencies, health maintenance organizations, pharmacy benefits managers and group purchasing organizations. The Company also offers rebate and other incentive programs for its aesthetic products and certain therapeutic products, including Botox ^® Cosmetic, Juvéderm ^® , Latisse ^® , Acuvail ^® , Aczone ^® , Sanctura XR ^® and Restasis ^® , and for certain other skin care products. Sales rebates and incentive accruals reduce revenue in the same period that the related sale is recorded and are included in “Other accrued expenses” in the Company’s consolidated balance sheets. (See Note 4, “Composition of Certain Financial Statement Captions.”) The amounts accrued for sales rebates and other incentive programs were $270.6 million and $249.1 million at December 31, 2012 and 2011, respectively.

The Company’s procedures for estimating amounts accrued for sales rebates and other incentive programs at the end of any period are based on available quantitative data and are supplemented by management’s judgment with respect to many

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factors, including but not limited to, current market dynamics, changes in contract terms, changes in sales trends, an evaluation of current laws and regulations and product pricing. Quantitatively, the Company uses historical sales, product utilization and rebate data and applies forecasting techniques in order to estimate the Company’s liability amounts. Qualitatively, management’s judgment is applied to these items to modify, if appropriate, the estimated liability amounts. Additionally, there is a significant time lag between the date the Company determines the estimated liability and when the Company actually pays the liability. Due to this time lag, the Company records adjustments to its estimated liabilities over several periods, which can result in a net increase to earnings or a net decrease to earnings in those periods.

The Company recognizes license fees, royalties and reimbursement income for services provided as other revenues based on the facts and circumstances of each contractual agreement. In general, the Company recognizes income upon the signing of a contractual agreement that grants rights to products or technology to a third party if the Company has no further obligation to provide products or services to the third party after entering into the contract. The Company recognizes contingent consideration earned from the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. The Company defers income under contractual agreements when it has further obligations that indicate that a separate earnings process has not been completed.

Contingent Consideration

Contingent consideration liabilities represent future amounts the Company may be required to pay in conjunction with various business combinations. The ultimate amount of future payments is based on specified future criteria, such as sales performance and the achievement of certain future development, regulatory and sales milestones and other contractual performance conditions. The Company estimates the fair value of the contingent consideration liabilities related to sales performance using the income approach, which involves forecasting estimated future net cash flows and discounting the net cash flows to their present value using a risk-adjusted rate of return. The Company estimates the fair value of the contingent consideration liabilities related to the achievement of future development and regulatory milestones by assigning an achievement probability to each potential milestone and discounting the associated cash payment to its present value using a risk-adjusted rate of return. The Company estimates the fair value of the contingent consideration liabilities associated with sales milestones by employing Monte Carlo simulations to estimate the volatility and systematic relative risk of revenues subject to sales milestone payments and discounting the associated cash payment amounts to their present values using a credit-risk-adjusted interest rate. The fair value of other contractual performance conditions is measured by assigning an achievement probability to each payment and discounting the payment to its present value using the Company's estimated cost of borrowing. The Company evaluates its estimates of the fair value of contingent consideration liabilities on a periodic basis. Any changes in the fair value of contingent consideration liabilities are recorded through earnings as “Selling, general and administrative” in the Company’s consolidated statements of earnings. The total estimated fair value of contingent consideration liabilities was $224.3 million and $214.6 million at December 31, 2012 and 2011, respectively, and was included in "Other accrued expenses" and "Other liabilities" in the consolidated balance sheets.

Share-Based Compensation

The Company recognizes compensation expense for all share-based awards made to employees and directors. The fair value of share-based awards is estimated at the grant date and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. The fair value of stock option awards that vest based solely on a service condition is estimated using the Black-Scholes option-pricing model. The fair value of share-based awards that contain a market condition is generally estimated using a Monte Carlo simulation model, and the fair value of modifications to share-based awards is generally estimated using a lattice model.

Advertising Expenses

Advertising expenses relating to production costs are expensed as incurred and the costs of television time, radio time and space in publications are expensed when the related advertising occurs. Advertising expenses were approximately $162.2 million , $177.3 million and $171.4 million in 2012, 2011 and 2010, respectively.

Product Liability Self-Insurance

As of June 1, 2012, the Company is largely self-insured for future product liability losses related to all of its products. The Company has historically been and continues to be self-insured for any product liability losses related to its breast implant products. The Company maintains third party insurance coverage that it believes is adequate to cover potential product liability losses for injuries alleged to have occurred prior to June 1, 2011 related to Botox ^® and Botox ^® Cosmetic and prior to June 1,

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2012 related to all of its other products. In addition, as a part of its current self-insurance product liability practice, the Company maintains a layer of insurance coverage for potential product liability losses, excluding breast implant products, above a minimum self-insured amount. Future product liability losses are, by their nature, uncertain and are based upon complex judgments and probabilities. The factors to consider in developing product liability reserves include the merits and jurisdiction of each claim, the nature and the number of other similar current and past claims, the nature of the product use and the likelihood of settlement. In addition, the Company accrues for certain potential product liability losses estimated to be incurred, but not reported, to the extent they can be reasonably estimated. The Company estimates these accruals for potential losses based primarily on historical claims experience and data regarding product usage.

Income Taxes

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities along with net operating loss and tax credit carryovers. The Company records a valuation allowance against its deferred tax assets to reduce the net carrying value to an amount that it believes is more likely than not to be realized. When the Company establishes or reduces the valuation allowance against its deferred tax assets, its provision for income taxes will increase or decrease, respectively, in the period such determination is made.

Valuation allowances against the Company’s deferred tax assets were $22.6 million and $14.9 million at December 31, 2012 and December 31, 2011, respectively. Changes in the valuation allowances, when they are recognized in the provision for income taxes, are included as a component of the estimated annual effective tax rate.

The Company has not provided for withholding and U.S. taxes for the unremitted earnings of certain non-U.S. subsidiaries because it has currently reinvested these earnings indefinitely in these foreign operations. At December 31, 2012, the Company had approximately $3,083.5 million in unremitted earnings outside the United States for which withholding and U.S. taxes were not provided. Income tax expense would be incurred if these earnings were remitted to the United States. It is not practicable to estimate the amount of the deferred tax liability on such unremitted earnings. Upon remittance, certain foreign countries impose withholding taxes that are then available, subject to certain limitations, for use as credits against the Company’s U.S. tax liability, if any.

Acquisitions

The accounting for acquisitions requires extensive use of estimates and judgments to measure the fair value of the identifiable tangible and intangible assets acquired, including in-process research and development, and liabilities assumed. Additionally, the Company must determine whether an acquired entity is considered to be a business or a set of net assets, because the excess of the purchase price over the fair value of net assets acquired can only be recognized as goodwill in a business combination.

On June 17, 2011 , the Company acquired Alacer Biomedical, Inc. for an aggregate purchase price of approximately $7.0 million , net of cash acquired. On July 1, 2011 , the Company purchased the commercial assets related to the selling and distribution of the Company’s products from its distributor in South Africa for $8.6 million , net of a $2.2 million pre-existing receivable from the distributor. On July 22, 2011 , the Company acquired Vicept Therapeutics, Inc. for $74.1 million in cash and estimated contingent consideration of $163.0 million as of the acquisition date. On August 8, 2011 , the Company acquired Precision Light, Inc. for $11.7 million in cash and estimated contingent consideration of $6.2 million as of the acquisition date. On February 1, 2012 , the Company purchased the commercial assets related to the selling and distribution of the Company's products from its distributor in Russia for $3.1 million in cash, net of a $6.6 million pre-existing net receivable from the distributor, and estimated contingent consideration of $4.7 million as of the acquisition date. On December 19, 2012 , the Company acquired SkinMedica, Inc. for $346.1 million in cash and estimated contingent consideration of $2.2 million as of the acquisition date. The Company accounted for these acquisitions as business combinations. The tangible and intangible assets acquired and liabilities assumed in connection with these acquisitions were recognized based on their estimated fair values at the acquisition dates. The determination of estimated fair values requires significant estimates and assumptions including, but not limited to, determining the timing and estimated costs to complete the in-process projects, projecting regulatory approvals, estimating future cash flows and developing appropriate discount rates. The Company believes the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions.

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Comprehensive Income (Loss)

Comprehensive income (loss) encompasses all changes in equity other than those with stockholders and consists of net earnings (losses), foreign currency translation adjustments, certain pension and other postretirement benefit plan adjustments, unrealized gains or losses on marketable equity investments and unrealized and realized gains or losses on derivative instruments, if applicable. The Company does not recognize U.S. income taxes on foreign currency translation adjustments since it does not provide for such taxes on undistributed earnings of foreign subsidiaries.

Reclassifications

Certain reclassifications of prior year amounts have been made to conform with the current year presentation.

Recently Adopted Accounting Standards

In June 2011, the Financial Accounting Standards Board (FASB) issued an accounting standards update that eliminates the option to present components of other comprehensive income as part of the statement of changes in equity and requires an entity to present items of net income and other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This guidance also required an entity to present on the face of the financial statements reclassification adjustments from other comprehensive income to net income, but in December 2011, the FASB issued an accounting standards update that deferred this requirement. This guidance became effective for fiscal years beginning after December 15, 2011. The Company adopted the provisions of the guidance in the first quarter of 2012 and elected to present items of net income and other comprehensive income in two separate but consecutive statements.

In May 2011, the FASB issued an accounting standards update that clarifies and amends the existing fair value measurement and disclosure requirements. This guidance became effective prospectively for interim and annual periods beginning after December 15, 2011. The Company adopted the provisions of the guidance in the first quarter of 2012. The adoption did not have a material impact on the Company’s consolidated financial statements.

New Accounting Standards Not Yet Adopted

In February 2013, the FASB issued an accounting standards update that requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amounts are required to be reclassified in their entirety to net income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This guidance will be effective for reporting periods beginning after December 15, 2012, which will be the Company's fiscal year 2013, with early adoption permitted. The Company does not expect the adoption of the guidance will have a material impact on the Company's consolidated financial statements.

In January 2013, the FASB approved the issuance of an accounting standards update that provides guidance on the accounting for the cumulative translation adjustment (CTA) upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. Under this guidance, an entity should recognize the CTA in earnings based on meeting certain criteria, including when it ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity or upon a sale or transfer that results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets resides. This guidance is expected to be effective for fiscal years beginning on or after December 15, 2013, which will be the Company's fiscal year 2014, with early adoption permitted. The Company currently does not expect the adoption of the guidance will have a material impact on the Company's consolidated financial statements.

In July 2012, the FASB issued an accounting standards update that gives an entity the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. This guidance will be effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, which will be the Company's fiscal year 2013, with early adoption permitted. The Company does not expect the adoption of the guidance will have a material impact on the Company's consolidated financial statements.

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Note 2: Acquisitions and Collaborations

SkinMedica Acquisition

On December 19, 2012 , the Company completed the acquisition of SkinMedica, Inc. (SkinMedica), a privately-held aesthetics skin care company based in the United States focused on developing and commercializing products that improve the appearance of skin, for an upfront payment of $346.1 million , net of cash acquired. The Company is also required to pay an additional $25.0 million contingent upon acquired products achieving certain sales milestones. The estimated fair value of the contingent consideration as of the acquisition date was $2.2 million . The acquisition was funded from current cash and equivalents balances.

The Company recognized tangible and intangible assets acquired, liabilities assumed and the contingent consideration liability in connection with the SkinMedica acquisition based on their estimated fair values at the acquisition date. The excess of the purchase price over the fair value of net assets acquired was recognized as goodwill. The goodwill acquired in the SkinMedica acquisition is not deductible for federal income tax purposes. In connection with the acquisition, the Company acquired assets with a fair value of $424.5 million , consisting of current assets of $30.2 million , property, plant and equipment of $6.6 million , deferred tax assets of $46.4 million , intangible assets of $198.6 million and goodwill of $142.7 million , and assumed liabilities of $76.2 million , consisting of current liabilities of $11.3 million and non-current deferred tax liabilities of $64.9 million . As of December 31, 2012, the total estimated fair value of the contingent consideration of $2.2 million was included in “Other liabilities.”

The intangible assets consist of developed technology, customer relationships, trademarks and an in-process research and development asset. Acquired developed technology assets consist of the currently marketed SkinMedica ^® family of products, including TNS products, Vaniqa ^® , Lytera ^™ and Scar recovery gel. The amounts assigned to each class of intangible assets and the related weighted average amortization periods are summarized in the following table:



	Value of Intangible Assets Acquired		Weighted Average Amortization Period
	(in millions)		(in years)
Developed technology	$	87.1	10.6
Customer relationships	50.6		2.7
Trademarks	60.6		15.0
In-process research and development	0.3		—
	$	198.6

Goodwill represents the excess of the SkinMedica purchase price over the sum of the amounts assigned to assets acquired less liabilities assumed. The SkinMedica acquisition complements the Company's existing facial aesthetics business and enables the Company to take a leadership position in the growing ‘physician dispensed’ topical aesthetics skin care market and to create certain sales and marketing operating synergies, which the Company believes support the amount of goodwill recognized as a result of the purchase price paid for SkinMedica, in relation to other acquired tangible and intangible assets.

Purchase of Distributor’s Business in Russia

On February 1, 2012 , the Company terminated its existing distributor agreement in Russia and completed the purchase from its distributor of all assets related to the selling and distribution of the Company’s products in Russia. The termination of the existing distributor agreement and purchase of the commercial assets enabled the Company to initiate direct operations for its medical aesthetics and neurosciences businesses in Russia.

The purchase of the commercial assets was accounted for as a business combination. In connection with the purchase of the assets, the Company paid $3.1 million , net of a $6.6 million pre-existing net receivable from the distributor, and is also required to pay additional contingent consideration based on certain contractual obligations of the former distributor over a two year period from the acquisition date. The estimated fair value of the contingent consideration as of the acquisition date was $4.7 million . The Company acquired assets with a fair value of $14.4 million , consisting of inventories of $2.0 million , intangible assets of $8.6 million and goodwill of $3.8 million . No liabilities were assumed in connection with the purchase. The intangible assets relate to customer relationships that have an estimated useful life of three years and other contractual rights that have an

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estimated useful life of two years . As of December 31, 2012, the total estimated fair value of the contingent consideration was $4.9 million , of which $3.0 million was included in "Other accrued expenses" and $1.9 million was included in “Other liabilities.”

Precision Light Acquisition

On August 8, 2011 , the Company completed the acquisition of Precision Light, Inc. (Precision Light), a privately-held medical device company based in the United States focused on developing breast, facial and body imaging systems to simulate the outcome of aesthetic medical procedures, including breast surgery, for an upfront payment of $11.7 million , net of cash acquired. The Company is also required to pay additional contingent consideration based on the achievement of certain commercial milestones. The estimated fair value of the contingent consideration as of the acquisition date was $6.2 million . In connection with the acquisition, the Company acquired assets with a fair value of $28.0 million , consisting of an intangible asset of $20.2 million , non-current deferred tax assets of $1.2 million and goodwill of $6.6 million , and assumed liabilities of $10.1 million , consisting of current liabilities of $2.6 million and non-current deferred tax liabilities of $7.5 million . The intangible asset relates to distribution rights that have an estimated useful life of five years . As of December 31, 2012, the total estimated fair value of the contingent consideration was $6.9 million , of which $1.0 million was included in "Other accrued expenses" and $5.9 million was included in “Other liabilities.”

Vicept Acquisition

On July 22, 2011 , the Company completed the acquisition of Vicept Therapeutics, Inc. (Vicept), a privately-held dermatology company based in the United States focused on developing a novel compound to treat erythema (redness) associated with rosacea, for an upfront payment of $74.1 million , net of cash acquired, plus up to an aggregate of $200.0 million in payments contingent upon achieving certain future development and regulatory milestones plus additional payments contingent upon acquired products achieving certain sales milestones. The estimated fair value of the contingent consideration as of the acquisition date was $163.0 million . In connection with the acquisition, the Company acquired assets with a fair value of $343.8 million , consisting of an in-process research and development asset of $287.0 million , non-current deferred tax assets of $7.6 million and goodwill of $49.2 million , and assumed liabilities of $106.7 million , consisting of current liabilities of $2.3 million and non-current deferred tax liabilities of $104.4 million . As of December 31, 2012, the total estimated fair value of the contingent consideration was $160.0 million , of which $49.8 million was included in "Other accrued expenses" and $110.2 million was included in “Other liabilities.”

Purchase of Distributor’s Business in South Africa

On July 1, 2011 , the Company terminated its existing distributor agreement in South Africa and completed the purchase from its distributor of all assets related to the selling and distribution of the Company’s products in South Africa. The termination of the existing distributor agreement and purchase of the commercial assets enabled the Company to initiate direct operations in South Africa.

The purchase of the commercial assets was accounted for as a business combination. In connection with the purchase of the assets, the Company paid $8.6 million , net of a $2.2 million pre-existing receivable from the distributor. The Company acquired assets with a fair value of $11.1 million , consisting of inventories of $5.6 million , an intangible asset of $3.9 million and goodwill of $1.6 million , and assumed accrued liabilities of $0.3 million . The intangible asset relates to distribution rights that have an estimated useful life of ten years .

Alacer Acquisition

On June 17, 2011 , the Company completed the acquisition of Alacer Biomedical, Inc. (Alacer), a development stage medical device company focused on tissue reinforcement, for an aggregate purchase price of approximately $7.0 million , net of cash acquired. In connection with the acquisition, the Company acquired assets with a fair value of $12.3 million , consisting of intangible assets of $9.0 million , non-current deferred tax assets of $1.0 million and goodwill of $2.3 million , and assumed liabilities of $5.3 million , consisting of accrued liabilities of $2.0 million and non-current deferred tax liabilities of $3.3 million .

The Company does not consider the business combinations noted above to be material, either individually or in the aggregate. The Company believes that the fair values assigned to the assets acquired, liabilities assumed and the contingent consideration liabilities were based on reasonable assumptions. The Company’s fair value estimates may change during the allowable measurement period, which is up to one year from the acquisition date, if additional information becomes available.

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Molecular Partners AG Collaboration

On August 21, 2012 , the Company announced that it entered into two separate agreements with Molecular Partners AG to discover, develop, and commercialize proprietary therapeutic DARPin ^® products for the treatment of serious ophthalmic diseases. The first agreement is an exclusive license agreement for the design, development and commercialization of a potent dual anti-VEGF-A/PDGF-B DARPin ^® (MP0260) and its corresponding backups for the treatment of exudative (wet) age-related macular degeneration and related conditions. The second agreement is an exclusive discovery alliance agreement under which the parties are collaborating to design and develop DARPin ^® products against selected targets that are implicated in causing serious diseases of the eye. Under the terms of the agreements, the Company made combined upfront payments of $62.5 million to Molecular Partners AG in August 2012, which were recorded as research and development (R&D) expense in the third quarter of 2012 because the technology has not yet achieved regulatory approval. The terms of the agreements also include potential future development, regulatory and sales milestone payments to Molecular Partners AG of up to $1.4 billion , as well as potential future royalty payments.

On May 4, 2011 , the Company announced a license agreement with Molecular Partners AG pursuant to which the Company obtained exclusive global rights in the field of ophthalmology for MP0112, a Phase II proprietary therapeutic anti-VEGF DARPin ^® protein under investigation for the treatment of retinal diseases. Under the terms of the agreement, the Company made a $45.0 million upfront payment to Molecular Partners AG in May 2011, which was recorded as R&D expense in the second quarter of 2011 because the technology has not yet achieved regulatory approval. The terms of the agreement also include potential future development, regulatory and sales milestone payments to Molecular Partners AG of up to $375.0 million , as well as potential future royalty payments.

MAP Collaboration

On January 28, 2011 , the Company entered into a collaboration agreement and a co-promotion agreement with MAP Pharmaceuticals, Inc. (MAP) for the exclusive development and commercialization by the Company and MAP of Levadex ^® within the United States to certain headache specialist physicians for the acute treatment of migraine in adults, migraine in adolescents and other indications that may be approved by the parties. Levadex ^® is a self-administered, orally inhaled therapy consisting of a proprietary formulation of dihydroergotamine administered by using MAP’s proprietary Tempo ^® delivery system. Under the terms of the agreements, the Company made a $60.0 million upfront payment to MAP in February 2011, which was recorded as selling, general and administrative (SG&A) expense in the first quarter of 2011. The terms of the agreements also include up to $97.0 million in additional payments to MAP upon MAP meeting certain development and regulatory milestones. In August 2011, the Company made a $20.0 million milestone payment to MAP for the U.S. Food and Drug Administration (FDA) acceptance of its New Drug Application for Levadex ^® , which was recorded as SG&A expense in the third quarter of 2011. The upfront and milestone payments were expensed because Levadex ^® has not yet achieved regulatory approval. If Levadex ^® receives FDA approval, the Company and MAP will equally share profits from sales of Levadex ^® generated from its commercialization to neurologists and pain specialists in the United States. On January 22, 2013, the Company announced that it has entered into a definitive merger agreement with MAP whereby the Company will acquire 100% of the shares of MAP. See Note 17, "Subsequent Events," for additional information concerning the announced merger agreement with MAP.

Other Collaborations

In March 2010, the Company and Serenity Pharmaceuticals, LLC (Serenity) entered into an agreement for the license, development and commercialization of a Phase III investigational drug currently in clinical development for the treatment of nocturia, a common urological disorder in adults characterized by frequent urination at night time. In conjunction with the agreement, the Company made an upfront payment to Serenity of $43.0 million in 2010, which was recorded as R&D expense in the first quarter of 2010 because the technology has not yet achieved regulatory approval. In December 2010, the Company and Serenity executed a letter agreement which specified terms and conditions governing additional development activities for a new Phase III trial which were not set forth in the original agreement. Under the letter agreement, the Company agreed to share 50% of the cost of additional development activities for the new Phase III trial. Since the Company is providing a significant amount of the funding for the new Phase III trial, it determined that Serenity is a variable interest entity (VIE). However, the Company determined that it is not the primary beneficiary of the VIE because it does not possess the power to direct Serenity’s research and development activities, which are the activities that most significantly impact Serenity’s economic performance. The Company’s maximum future exposure to loss is the Company's share of additional development activities.

In March 2010, the Company and Bristol-Myers Squibb Company (Bristol-Myers Squibb) entered into an agreement for the development and commercialization of an investigational drug for neuropathic pain. Under the terms of the agreement, the Company granted to Bristol-Myers Squibb exclusive worldwide rights to develop, manufacture, and commercialize the

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investigational drug for neuropathic pain and backup compounds. In conjunction with the agreement, the Company received a net upfront payment of $36.0 million in 2010, which was recorded as other revenue in the first quarter of 2010. In November 2012, Bristol-Myers Squibb notified the Company of its decision to terminate the agreement, effective as of February 13, 2013.

As of December 31, 2012, the Company has aggregate potential future milestone receipts of approximately $86.0 million for the achievement of development, regulatory and sales milestones in connection with certain collaboration agreements. Due to the challenges associated with developing and obtaining approval for pharmaceutical products, there is substantial uncertainty whether any of the future milestones will be achieved. The Company evaluates whether milestone payments are substantive based on the facts and circumstances associated with each milestone payment.

Note 3: Restructuring Charges and Integration Costs

2012 Restructuring and Realignment Plan

In 2012, the Company initiated a restructuring and realignment plan to streamline the obesity intervention business and promote organizational efficiency. Specifically, the initiatives primarily involve eliminating a number of positions in the U.S. sales, R&D and support staff functions associated with the obesity intervention business, integrating several customer service departments into a single new call center in Austin, Texas and relocating certain other back-office functions to the Austin facility. As a result, in 2012 the Company recorded $5.0 million of restructuring charges, consisting of $4.1 million of employee severance and other one-time termination benefits for approximately 64 people affected by the workforce reduction and $0.9 million of contract termination costs. In addition, the Company recorded $2.1 million of SG&A expenses and $0.3 million of R&D expenses in 2012 related to the restructuring and realignment initiatives. As of December 31, 2012, the Company has substantially completed all activities related to the 2012 restructuring and realignment plan.

Discontinued Development of EasyBand ^™

In March 2011, the Company decided to discontinue development of the EasyBand ^™ Remote Adjustable Gastric Band System ( EasyBand ^™ ), a technology that the Company acquired in connection with its 2007 acquisition of EndoArt SA, or EndoArt, and close the related research and development facility in Switzerland. As a result, during 2011 the Company recorded a pre-tax impairment charge of $16.1 million for the intangible assets associated with the EasyBand ^™ technology, fixed asset impairment charges of $2.2 million and a gain of $9.4 million from the substantially complete liquidation of the Company’s investment in a foreign subsidiary. In addition, the Company recorded $4.7 million of restructuring charges, consisting of $3.0 million of employee severance and other one-time termination benefits for approximately 30 people affected by the facility closure, $1.6 million of contract termination costs and $0.1 million of other related costs. In 2012, the Company recorded a $0.1 million restructuring charge reversal primarily related to employee severance and other one-time termination benefits.

Other Restructuring Activities and Integration Costs

Included in 2012 are $0.1 million of cost of sales and $2.3 million of SG&A expenses related to transaction and integration costs associated with the purchase of various businesses and collaboration agreements . Included in 2011 and 2010 are $2.6 million and $2.0 million , respectively, of SG&A expenses related to transaction and integration costs associated with the purchase of various businesses and collaboration agreements .

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Note 4: Composition of Certain Financial Statement Captions



	December 31,
	2012		2011
	(in millions)
Trade receivables, net
Trade receivables	$	821.4	$	793.7
Less allowance for sales returns — medical device products	28.9		31.2
Less allowance for doubtful accounts	28.3		31.9
	$	764.2	$	730.6

Inventories
Finished products	$	185.3	$	167.1
Work in process	41.5		37.5
Raw materials	56.1		45.1
	$	282.9	$	249.7

Other current assets
Prepaid expenses	$	149.9	$	165.9
Deferred taxes	249.1		239.5
Other	50.3		76.6
	$	449.3	$	482.0

Investments and other assets
Deferred executive compensation investments	$	81.7	$	70.9
Capitalized software	47.3		57.8
Prepaid pensions	5.7		3.5
Prepaid royalties	—		4.9
Interest rate swap fair value	—		48.1
Debt issuance costs	8.0		9.5
Non-marketable equity investments	9.0		9.0
Other	40.4		43.4
	$	192.1	$	247.1

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



	December 31,
	2012			2011
	(in millions)
Property, plant and equipment, net
Land	$	61.9		$	58.9
Buildings	884.4			816.5
Machinery and equipment	711.3			653.8
	1,657.6			1,529.2
Less accumulated depreciation	804.7			722.2
	$	852.9		$	807.0

Other accrued expenses
Sales rebates and other incentive programs	$	270.6		$	249.1
Royalties	26.0			27.0
Interest	18.2			15.0
Sales returns — specialty pharmaceutical products	50.0			37.3
Product warranties — breast implant products	6.7			6.5
Contingent consideration	59.0			4.9
Other	159.1			130.3
	$	589.6		$	470.1

Other liabilities
Postretirement benefit plan	$	46.6		$	41.3
Qualified and non-qualified pension plans	218.3			204.4
Deferred executive compensation	85.3			75.0
Deferred income	75.1			81.1
Contingent consideration	165.3			209.7
Product warranties — breast implant products	27.7			26.1
Unrecognized tax benefit liabilities	53.8			39.3
Other	37.0			28.9
	$	709.1		$	705.8

Accumulated other comprehensive loss
Foreign currency translation adjustments	$	(25.2	)	$	(33.5	)
Deferred holding gains on derivative instruments, net of taxes of $1.7 million and $2.3 million for 2012 and 2011, respectively	2.6			3.3
Actuarial losses not yet recognized as a component of pension and postretirement benefit plan costs, net of taxes of $106.6 million and $106.3 million for 2012 and 2011, respectively	(222.0		)	(211.2		)
	$	(244.6	)	$	(241.4	)

At December 31, 2012 and 2011, approximately $ 10.0 million and $ 7.8 million , respectively, of the Company’s finished goods inventories, primarily breast implants, were held on consignment at a large number of doctors’ offices, clinics and hospitals worldwide. The value and quantity at any one location are not significant. At December 31, 2012 and 2011, approximately $14.8 million and $ 7.7 million , respectively, of specific reserves for sales returns related to certain genericized eye care pharmaceuticals and urologics products are included in accrued sales returns – specialty pharmaceutical products.

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 5: Intangibles and Goodwill

Intangibles

At December 31, 2012 and 2011, the components of intangibles and certain other related information were as follows:



	December 31, 2012						December 31, 2011
	Gross Amount		Accumulated Amortization			Weighted Average Amortization Period	Gross Amount		Accumulated Amortization			Weighted Average Amortization Period
	(in millions)					(in years)	(in millions)					(in years)
Amortizable Intangible Assets:
Developed technology	$	1,202.8	$	(525.1	)	13.3	$	1,111.0	$	(435.1	)	13.5
Customer relationships	54.5		(1.2		)	2.7	42.3		(42.3		)	3.1
Licensing	185.9		(157.8		)	9.3	185.8		(137.2		)	9.3
Trademarks	87.9		(25.3		)	12.3	26.7		(25.0		)	6.2
Core technology	182.0		(83.7		)	15.2	181.3		(71.4		)	15.2
Other	43.9		(14.1		)	6.4	38.5		(5.4		)	6.9
	1,757.0		(807.2		)	12.5	1,585.6		(716.4		)	12.6
Unamortizable Intangible Assets:
In-process research and development	279.3		—				296.0		—
	$	2,036.3	$	(807.2	)		$	1,881.6	$	(716.4	)

Developed technology consists primarily of current product offerings, primarily breast aesthetics products, obesity intervention products, dermal fillers, skin care products and eye care products acquired in connection with business combinations, asset acquisitions and initial licensing transactions for products previously approved for marketing. Customer relationship assets consist of the estimated value of relationships with customers acquired in connection with business combinations. Licensing assets consist primarily of capitalized payments to third party licensors related to the achievement of regulatory approvals to commercialize products in specified markets and up-front payments associated with royalty obligations for products that have achieved regulatory approval for marketing. Core technology consists of proprietary technology associated with silicone gel breast implants, gastric bands and intragastric balloon systems acquired in connection with the Company's 2006 acquisition of Inamed Corporation, dermal filler technology acquired in connection with the Company’s 2007 acquisition of Groupe Cornéal Laboratoires and a drug delivery technology acquired in connection with the Company’s 2003 acquisition of Oculex Pharmaceuticals, Inc. Other intangible assets consist primarily of acquired product registration rights, distributor relationships, distribution rights, government permits and non-compete agreements. The in-process research and development assets consist primarily of a novel compound to treat erythema associated with rosacea acquired in connection with the Company’s acquisition of Vicept in July 2011 that is currently under development and an intangible asset associated with technology acquired in connection with the Company’s acquisition of Alacer in June 2011 that is not yet commercialized.

In the fourth quarter of 2012, the Company recorded a pre-tax charge of $17.0 million related to the partial impairment of the in-process research and development asset acquired in connection with the Company’s 2011 acquisition of Vicept. The impairment charge was recognized because the carrying amount of the asset was determined to be in excess of its estimated fair value.

In March 2011, the Company discontinued development of EasyBand ^™ , a technology that the Company acquired in connection with its 2007 acquisition of EndoArt. As a result, in the first quarter of 2011 the Company recorded a pre-tax impairment charge of $ 16.1 million for the developed technology and core technology associated with the EasyBand ^™ technology.

In the third quarter of 2011, the Company recorded a pre-tax charge of $ 4.3 million related to the impairment of an in-process research and development asset associated with a tissue reinforcement technology that has not yet achieved regulatory approval acquired in connection with the Company’s 2010 acquisition of Serica Technologies, Inc. The impairment charge was recognized because estimates of the anticipated future undiscounted cash flows of the asset were not sufficient to recover its carrying amount.

In the third quarter of 2010, the Company concluded that the intangible assets and a related prepaid royalty asset associated

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

with the Sanctura ^® franchise (the Sanctura ^® Assets), which the Company acquired in connection with its 2007 acquisition of Esprit Pharma Holding Company, Inc. and certain subsequent licensing and commercialization transactions, had become impaired. The Company determined that an impairment charge was required with respect to the Sanctura ^® Assets because the estimated undiscounted future cash flows over their remaining useful life were not sufficient to recover the carrying amount of the Sanctura ^® Assets and the carrying amount exceeded the estimated fair value of those assets due to a reduction in expected future financial performance for the Sanctura ^® franchise resulting from lower than anticipated acceptance by patients, physicians and payors. As a result, in the third quarter of 2010, the Company recorded an aggregate charge of $ 369.1 million ($ 228.6 million after-tax) related to the impairment of the Sanctura ^® Assets and related costs, which includes a pre-tax charge of $ 343.2 million for the impairment of the Sanctura ^® intangible assets. In the second quarter of 2011, the Company recorded additional related costs of $3.3 million . In the fourth quarter of 2012, the Company recorded an additional impairment charge of $5.3 million related to the prepaid royalty asset associated with the Sanctura ^® franchise due to the launch of a competitive generic version of Sanctura XR ^® .

The following table provides amortization expense by major categories of intangible assets for the years ended December 31, 2012, 2011 and 2010, respectively:



	2012		2011		2010
	(in millions)
Developed technology	$	89.0	$	89.6	$	97.4
Customer relationships	1.1		—		0.3
Licensing	20.4		20.4		22.1
Trademarks	0.4		1.4		4.4
Core technology	12.0		12.3		12.4
Other	8.4		3.9		1.4
	$	131.3	$	127.6	$	138.0

Amortization expense related to intangible assets generally benefits multiple business functions within the Company, such as the Company’s ability to sell, manufacture, research, market and distribute products, compounds and intellectual property. The amount of amortization expense excluded from cost of sales consists primarily of amounts amortized with respect to developed technology and licensing intangible assets.

Estimated amortization expense is $ 145.6 million for 2013, $ 138.5 million for 2014, $ 124.9 million for 2015, $ 103.0 million for 2016 and $ 82.3 million for 2017.

Goodwill

Changes in the carrying amount of goodwill by operating segment for the years ended December 31, 2012 and 2011 were as follows:



	Specialty Pharmaceuticals			Medical Devices			Total
	(in millions)
Balance at December 31, 2010	$	106.4		$	1,932.2		$	2,038.6
Vicept acquisition	49.4			—			49.4
Precision Light acquisition	—			6.8			6.8
Purchase of distributor’s business in South Africa	1.6			—			1.6
Alacer acquisition	—			2.3			2.3
Foreign exchange translation effects	(7.3		)	(3.0		)	(10.3		)
Balance at December 31, 2011	150.1			1,938.3			2,088.4
SkinMedica acquisition	142.7			—			142.7
Purchase of distributor’s business in Russia	3.8			—			3.8
Foreign exchange translation effects and other	3.2			1.4			4.6
Balance at December 31, 2012	$	299.8		$	1,939.7		$	2,239.5

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 6: Notes Payable and Long-Term Debt



	2012 Average Effective Interest Rate		December 31, 2012		2011 Average Effective Interest Rate		December 31, 2011
			(in millions)				(in millions)
Bank loans	6.06	%	$	48.8	10.05	%	$	58.9
Medium term notes; matured in 2012	—		—		7.47	%	25.0
Real estate mortgage; maturing 2017	5.65	%	20.0		5.65	%	20.0
Senior notes due 2016	3.94	%	843.9		5.79	%	799.0
Senior notes due 2020	3.41	%	648.5		3.41	%	648.3
Interest rate swap fair value adjustment			—				48.1
			1,561.2				1,599.3
Less current maturities			48.8				83.9
Total long-term debt			$	1,512.4			$	1,515.4

At December 31, 2012, the Company had a committed long-term credit facility, a commercial paper program, a shelf registration statement that allows the Company to issue additional securities, including debt securities, in one or more offerings from time to time, a real estate mortgage and various foreign bank facilities. The committed long-term credit facility will expire in October 2016. The termination date can be further extended from time to time upon the Company’s request and acceptance by the issuer of the facility for a period of one year from the last scheduled termination date for each request accepted. The committed long-term credit facility allows for borrowings of up to $800.0 million . The commercial paper program also provides for up to $800.0 million in borrowings. However, the combined borrowings under the committed long-term credit facility and the commercial paper program may not exceed $800.0 million in the aggregate. Borrowings under the committed long-term credit facility are subject to certain financial and operating covenants that include, among other provisions, maximum leverage ratios. Certain covenants also limit subsidiary debt. The Company was in compliance with these covenants at December 31, 2012. As of December 31, 2012, the Company had no borrowings under its committed long-term credit facility, $20.0 million in borrowings outstanding under the real estate mortgage, $48.8 million in borrowings outstanding under various foreign bank facilities and no borrowings under the commercial paper program. Commercial paper, when outstanding, is issued at current short-term interest rates. Additionally, any future borrowings that are outstanding under the long-term credit facility may be subject to a floating interest rate. The Company may from time to time seek to retire or purchase its outstanding debt.

On September 14, 2010 , the Company issued its 3.375% Senior Notes due 2020 (2020 Notes) in a registered offering for an aggregate principal amount of $650.0 million . The 2020 Notes, which were sold at 99.697% of par value with an effective interest rate of 3.41%, are unsecured and pay interest semi-annually on the principal amount of the notes at a rate of 3.375% per annum, and are redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. The aggregate outstanding principal amount of the 2020 Notes will be due and payable on September 15, 2020 , unless earlier redeemed by the Company. The original discount of approximately $2.0 million and the deferred debt issuance costs associated with the 2020 Notes are being amortized using the effective interest method over the stated term of 10 years .

On April 12, 2006 , the Company completed the private placement of its 5.75% Senior Notes due 2016 (2016 Notes) for an aggregate principal amount of $800.0 million . The 2016 Notes, which were sold at 99.717% of par value with an effective interest rate of 5.79%, are unsecured and pay interest semi-annually on the principal amount of the notes at a rate of 5.75% per annum, and are redeemable at any time at the Company’s option, subject to a make-whole provision based on the present value of remaining interest payments at the time of the redemption. The aggregate outstanding principal amount of the 2016 Notes will be due and payable on April 1, 2016 , unless earlier redeemed by the Company. The original discount of approximately $2.3 million and the deferred debt issuance costs associated with the 2016 Notes are being amortized using the effective interest method over the stated term of 10 years .

On January 31, 2007 , the Company entered into a nine-year, two month interest rate swap with a $300.0 million notional amount with semi-annual settlements and quarterly interest rate reset dates. The swap received interest at a fixed rate of 5.75% and paid interest at a variable interest rate equal to 3-month LIBOR plus 0.368% , and effectively converted $300.0 million of the 2016 Notes to a variable interest rate. Based on the structure of the hedging relationship, the hedge met the criteria for using

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

the short-cut method for a fair value hedge. The investment in the derivative and the related long-term debt were recorded at fair value. The differential to be paid or received as interest rates change was accrued and recognized as an adjustment to interest expense related to the 2016 Notes. In September 2012, the Company terminated the interest rate swap and received $54.7 million , which included accrued interest of $3.7 million . Upon termination of the interest rate swap, the Company added the net fair value received of $51.0 million to the carrying value of the 2016 Notes. The amount received for the termination of the interest rate swap will be amortized as a reduction to interest expense over the remaining life of the debt, which effectively fixes the interest rate for the remaining term of the 2016 Notes at 3.94%. As of December 31, 2012, the unamortized amount of the terminated interest rate swap included in the carrying value of the 2016 Notes was $44.6 million . At December 31, 2011, the Company recognized in its consolidated balance sheet an asset reported in “Investments and other assets” and a corresponding increase in “Long-term debt” associated with the fair value of the derivative of $48.1 million . During 2012, 2011 and 2010, the Company recognized $13.8 million , $15.0 million and $15.1 million , respectively, as a reduction of interest expense due to the effect of the interest rate swap.

In February 2006, the Company entered into interest rate swap contracts based on 3-month LIBOR with an aggregate notional amount of $800.0 million , a swap period of 10 years and a starting swap rate of 5.198% . The Company entered into these swap contracts as a cash flow hedge to effectively fix the future interest rate for the 2016 Notes. In April 2006, the Company terminated the interest rate swap contracts and received approximately $13.0 million . The total gain was recorded to accumulated other comprehensive loss and is being amortized as a reduction to interest expense over a 10 year period to match the term of the 2016 Notes. During 2012, 2011 and 2010, the Company recognized $1.3 million , respectively, as a reduction of interest expense due to the amortization of deferred holding gains on derivatives designated as cash flow hedges. These amounts were reclassified from accumulated other comprehensive loss. As of December 31, 2012, the remaining unrecognized gain of $4.3 million ( $2.6 million , net of tax) is recorded as a component of accumulated other comprehensive loss. The Company expects to reclassify an estimated pre-tax amount of $1.3 million from accumulated other comprehensive loss as a reduction in interest expense during fiscal year 2013 due to the amortization of deferred holding gains on derivatives designated as cash flow hedges.

No portion of amounts recognized from contracts designated as cash flow hedges was considered to be ineffective during 2012, 2011 and 2010, respectively.

The aggregate maturities of total debt obligations, excluding the unamortized amount related to the terminated interest rate swap of $44.6 million, for each of the next five years and thereafter are as follows: $48.8 million in 2013; zero in 2014 and 2015, $799.3 million in 2016, $20.0 million in 2017 and $648.5 million thereafter. Interest incurred of $0.9 million in 2012, $1.0 million in 2011 and $0.5 million in 2010 has been capitalized and included in property, plant and equipment.

Note 7: Income Taxes

The components of earnings before income taxes were:



	Year Ended December 31,
	2012		2011		2010
	(in millions)
U.S.	$	829.2	$	690.0	$	103.3
Non-U.S.	704.1		609.7		67.5
Total	$	1,533.3	$	1,299.7	$	170.8

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The provision for income taxes consists of the following:



	Year Ended December 31,
	2012			2011			2010
	(in millions)
Current
U.S. federal	$	388.5		$	307.7		$	287.9
U.S. state	20.4			32.7			32.8
Non-U.S.	110.2			90.1			94.3
Total current	519.1			430.5			415.0

Deferred
U.S. federal	(88.6		)	(59.8		)	(244.2		)
U.S. state	0.1			(18.2		)	13.9
Non-U.S.	0.2			9.1			(18.8		)
Total deferred	(88.3		)	(68.9		)	(249.1		)

Total	$	430.8		$	361.6		$	165.9

The current provision for income taxes does not reflect the tax benefit of $ 45.7 million , $ 37.7 million and $ 27.1 million for the years ended December 31, 2012, 2011 and 2010, respectively, related to excess tax benefits from share-based compensation recorded directly to “Additional paid-in capital” in the consolidated balance sheets.

The Company recorded total pre-tax charges of $609.2 million in 2010 related to the global settlement with the U.S. Department of Justice (DOJ). The charges were allocated between the United States and certain non-U.S. jurisdictions, in accordance with the Company’s established transfer pricing policies. The Company recorded a tax benefit of $21.4 million in the fourth quarter of 2010 in connection with the total fiscal year 2010 pre-tax charges of $609.2 million.

The reconciliations of the U.S. federal statutory tax rate to the combined effective tax rate follow:



	2012		2011		2010
Statutory rate of tax expense	35.0	%	35.0	%	35.0	%
State taxes, net of U.S. tax benefit	1.1		1.6		20.4
Tax differential on foreign earnings	(8.8	)	(9.1	)	28.4
Other credits (R&D)	(0.9	)	(2.0	)	(15.9	)
Tax audit settlements/adjustments	1.3		1.5		6.0
Legal settlement	—		—		18.8
Other	0.4		0.8		4.4
Effective tax rate	28.1	%	27.8	%	97.1	%

On January 2, 2013, the President of the United States signed into law The American Taxpayer Relief Act of 2012. Under prior U.S. law, a taxpayer was entitled to a research tax credit for qualifying amounts paid or incurred on or before December 31, 2011. The 2012 Taxpayer Relief Act extends the research tax credit for two years to December 31, 2013. The extension of the research tax credit is retroactive to January 1, 2012 and includes amounts paid or incurred after December 31, 2011. As a result of the retroactive extension, the Company expects to recognize an estimated tax benefit of approximately $17.3 million for qualifying amounts incurred in 2012. The tax benefit for the 2012 period will be recognized in the period the law was enacted, which is the first quarter of 2013.

Withholding and U.S. taxes have not been provided on approximately $ 3,083.5 million of unremitted earnings of certain non-U.S. subsidiaries because the Company has currently reinvested these earnings indefinitely in such operations, or the U.S. taxes on such earnings will be offset by appropriate credits for foreign income taxes paid. Such earnings would become taxable upon the sale or liquidation of these non-U.S. subsidiaries or upon the remittance of dividends. It is not practicable to

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

estimate the amount of the deferred tax liability on such unremitted earnings. Upon remittance, certain foreign countries impose withholding taxes that are then available, subject to certain limitations, for use as credits against the Company’s U.S. tax liability, if any.

The Company and its domestic subsidiaries file a consolidated U.S. federal income tax return. During the second quarter of 2010, the Company partially settled its federal income tax audit with the U.S. Internal Revenue Service (IRS) for tax years 2005 and 2006 which resulted in a total settlement amount of $ 33.5 million , all of which was paid in 2009 as an advanced payment. The Company disagreed with certain positions taken by the IRS in the partially settled audit. The Company proceeded to the IRS administrative Appeals process where resolution was reached and a final determination was received during the third quarter of 2012 resulting in a total settlement of $1.5 million . The audit remains open for Competent Authority proceedings between the IRS and Canadian Revenue .

Additionally, during the second quarter of 2010 the Company partially settled its U.S. federal income tax audit with the IRS for tax years 2003 to 2006 for the Company’s acquired subsidiary, Inamed, which resulted in a total settlement amount of $ 1.2 million . The Company disagreed with certain positions taken by the IRS in the partially settled audit. The Company proceeded to the IRS administrative Appeals process where final settlement was reached in the second quarter of 2012 for tax years 2003, 2004 and 2006 and partial settlement was reached for tax year 2005 resulting in a total settlement of $1.1 million .

The Company and its consolidated subsidiaries are currently under examination by the IRS for tax years 2007 and 2008. The Company believes that it has provided adequate accruals for any tax deficiencies or reductions in tax benefits that could result from all open audit years.

At December 31, 2012, the Company has net operating loss carryforwards in certain non-U.S. subsidiaries, with various expiration dates, of approximately $ 67.5 million . The Company has U.S. federal and California net operating loss carryforwards of approximately $ 235.1 million which are subject to limitation under section 382 of the Internal Revenue Code. If not utilized, the U.S. federal and California net operating loss carryforwards will begin to expire in 2027.

The Company has a subsidiary in Costa Rica operating under a tax incentive grant, which provides that the subsidiary will be exempt from local income tax until the current tax incentive grant expires during 2014. The Company is currently in the process of evaluating requirements for an extension of the incentive.

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Temporary differences and carryforwards/carrybacks which give rise to a significant portion of deferred tax assets and liabilities at December 31, 2012 and 2011 are as follows:



	2012			2011
	(in millions)
Deferred tax assets
Net operating loss carryforwards/carrybacks	$	66.6		$	44.7
Accrued expenses	114.4			105.6
Capitalized expenses	182.3			136.2
Deferred compensation	41.7			35.7
Medicare, Medicaid and other accrued health care rebates	85.0			69.0
Postretirement medical benefits	17.8			16.1
Capitalized intangible assets	45.0			49.9
Deferred revenue	22.3			17.2
Inventory reserves and adjustments	18.7			14.2
Share-based compensation awards	90.2			86.6
Unbilled costs	23.0			25.5
Pension plans	66.5			67.7
All other	42.8			50.0
	816.3			718.4
Less: valuation allowance	(22.6		)	(14.9		)
Total deferred tax assets	793.7			703.5

Deferred tax liabilities
Depreciation	9.6			15.5
Developed and core technology intangible assets	227.3			188.3
In-process R&D	100.8			107.6
Total deferred tax liabilities	337.7			311.4
Net deferred tax assets	$	456.0		$	392.1

The balances of net current deferred tax assets and net non-current deferred tax assets at December 31, 2012 were $ 249.1 million and $ 206.9 million , respectively. The balances of net current deferred tax assets and net non-current deferred tax assets at December 31, 2011 were $ 239.5 million and $ 152.6 million , respectively. Net current deferred tax assets are included in “Other current assets” in the Company’s consolidated balance sheets.

The increase in the amount of valuation allowance at December 31, 2012 compared to December 31, 2011 is primarily due to a change in the estimated amount of California R&D credit the Company will be able to utilize in future years and a valuation allowance related to a net operating loss carryforward acquired in the SkinMedica acquisition.

Based on the Company's historical pre-tax earnings, management believes it is more likely than not that the Company will realize the benefit of the existing total deferred tax assets at December 31, 2012. Management believes the existing net deductible temporary differences will reverse during periods in which the Company generates net taxable income; however, there can be no assurance that the Company will generate any earnings or any specific level of continuing earnings in future years. Certain tax planning or other strategies could be implemented, if necessary, to supplement income from operations to fully realize recorded tax benefits.

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Disclosures for Uncertainty in Income Taxes

The Company classifies interest expense related to uncertainty in income taxes in the consolidated statements of earnings as interest expense. Income tax penalties are recorded in income tax expense, and are not material.

A tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of 2012, 2011 and 2010 is as follows:



	2012			2011			2010
	(in millions)
Balance, beginning of year	$	53.0		$	32.5		$	39.3
Gross increase as a result of positions taken in a prior year	20.9			21.8			15.0
Gross decrease as a result of positions taken in a prior year	(12.7		)	(8.5		)	(13.4		)
Gross increase as a result of positions taken in current year	3.4			16.9			10.5
Gross decrease as a result of positions taken in current year	—			(6.0		)	(4.3		)
Decreases related to settlements	(2.7		)	(3.7		)	(14.6		)
Balance, end of year	$	61.9		$	53.0		$	32.5

The total amount of unrecognized tax benefits at December 31, 2012, 2011 and 2010 that, if recognized, would affect the effective tax rate is $ 55.2 million , $ 44.5 million and $27.5 million , respectively.

The total amount of interest expense (income) related to uncertainty in income taxes recognized in the Company’s consolidated statements of earnings is $ 2.2 million , $ 0.5 million and $(0.7) million for the years ended December 31, 2012, 2011 and 2010, respectively. The total amount of accrued interest expense related to uncertainty in income taxes included in the Company’s consolidated balance sheets is $10.0 million and $8.1 million at December 31, 2012 and 2011, respectively.

The Company expects that during the next 12 months it is reasonably possible that unrecognized tax benefit liabilities related to various audit issues will decrease by approximately $ 1.0 million to $ 2.0 million primarily due to settlements of income tax audits and Competent Authority negotiations.

The following tax years remain subject to examination:



Major Jurisdictions	Open Years
U.S. Federal	2005 - 2011
California	2000 - 2011
Brazil	2007 - 2011
Canada	2004 - 2011
France	2010 - 2011
Germany	2006 - 2011
Italy	2007 - 2011
Ireland	2005 - 2011
Spain	2008 - 2011
United Kingdom	2010 - 2011

Note 8: Employee Retirement and Other Benefit Plans

Pension and Postretirement Benefit Plans

The Company sponsors various qualified defined benefit pension plans covering a substantial portion of its employees. In addition, the Company sponsors two supplemental nonqualified plans covering certain management employees and officers. U.S. pension benefits are based on years of service and compensation during the five highest consecutive earnings years. Foreign pension benefits are based on various formulas that consider years of service, average or highest earnings during specified periods of employment and other criteria.

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company also has one retiree health plan that covers U.S. retirees and dependents. Retiree contributions are required depending on the year of retirement and the number of years of service at the time of retirement. Disbursements exceed retiree contributions and the plan currently has no assets. The accounting for the retiree health care plan anticipates future cost-sharing changes to the written plan that are consistent with the Company’s past practice and management’s intent to manage plan costs. The Company’s history of retiree medical plan modifications indicates a consistent approach to increasing the cost sharing provisions of the plan.

Accounting for Defined Benefit Pension and Other Postretirement Plans

The Company recognizes on its balance sheet an asset or liability equal to the over- or under-funded benefit obligation of each defined benefit pension and other postretirement plan. Actuarial gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost are recognized, net of tax, as a component of other comprehensive income.

Included in accumulated other comprehensive loss as of December 31, 2012 and 2011 are unrecognized actuarial losses of $ 330.0 million and $ 321.5 million , respectively, related to the Company’s pension plans. Of the December 31, 2012 amount, the Company expects to recognize approximately $31.0 million in net periodic benefit cost during 2013. Also included in accumulated other comprehensive loss at December 31, 2012 and 2011 are unrecognized prior service credits of $ 19.7 million and $ 22.4 million , respectively, and unrecognized actuarial losses of $ 19.0 million and $ 17.7 million , respectively, related to the Company’s retiree health plan. Of the December 31, 2012 amounts, the Company expects to recognize $2.7 million of the unrecognized prior service credits and $1.5 million of the unrecognized actuarial losses in net periodic benefit cost during 2013.

Components of net periodic benefit cost, change in projected benefit obligation, change in plan assets, funded status, funding policy, fair value of plan assets, assumptions used to determine net periodic benefit cost and estimated future benefit payments are summarized below for the Company’s U.S. and major non-U.S. pension plans and retiree health plan.

Net Periodic Benefit Cost

Components of net periodic benefit cost for the years ended 2012, 2011 and 2010 were as follows:



	Pension Benefits									Other Postretirement Benefits
	2012			2011			2010			2012			2011			2010
	(in millions)
Service cost	$	25.7		$	23.7		$	20.2		$	1.7		$	1.9		$	2.2
Interest cost	43.8			42.6			38.6			1.9			2.6			3.3
Expected return on plan assets	(43.4		)	(44.3		)	(46.0		)	—			—			—
Amortization of prior service costs (credits)	—			0.1			0.1			(2.7		)	(1.6		)	(0.3		)
Recognized net actuarial losses	27.0			17.3			10.2			1.3			1.1			1.1
Net periodic benefit cost	$	53.1		$	39.4		$	23.1		$	2.2		$	4.0		$	6.3

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Benefit Obligation, Change in Plan Assets and Funded Status

The table below presents components of the change in projected benefit obligation, change in plan assets and funded status at December 31, 2012 and 2011.



	Pension Benefits						Other Postretirement Benefits
	2012			2011			2012			2011
	(in millions)
Change in Projected Benefit Obligation
Projected benefit obligation, beginning of year	$	933.2		$	774.0		$	42.5		$	57.9
Service cost	25.7			23.7			1.7			1.9
Interest cost	43.8			42.6			1.9			2.6
Participant contributions	1.5			1.6			—			—
Plan changes	(1.6		)	—			—			(22.6		)
Actuarial losses	93.3			113.2			2.5			3.8
Benefits paid	(17.9		)	(16.1		)	(0.7		)	(1.1		)
Impact of foreign currency translation	6.6			(5.8		)	—			—
Projected benefit obligation, end of year	1,084.6			933.2			47.9			42.5

Change in Plan Assets
Fair value of plan assets, beginning of year	729.9			627.2			—			—
Actual return on plan assets	103.0			74.2			—			—
Company contributions	47.1			48.7			0.7			1.1
Participant contributions	1.5			1.6			—			—
Benefits paid	(17.9		)	(16.1		)	(0.7		)	(1.1		)
Impact of foreign currency translation	5.7			(5.7		)	—			—
Fair value of plan assets, end of year	869.3			729.9			—			—
Funded status of plans	$	(215.3	)	$	(203.3	)	$	(47.9	)	$	(42.5	)

In June 2011, the Company made certain changes to its U.S. retiree health plan to incorporate health reimbursement arrangement accounts, transition plan participants to individual plans and cap future medical premium subsidies. In connection with the changes, the Company remeasured its retiree health plan liability resulting in a net reduction of accrued benefit costs associated with the plan of $20.5 million , including the impact of plan changes and a change in actuarial assumptions, a decrease in related deferred tax assets of $7.4 million , and an increase in net other comprehensive income of $13.1 million .

Net accrued benefit costs for pension plans and other postretirement benefits are reported in the following components of the Company’s consolidated balance sheet at December 31, 2012 and 2011:



	Pension Benefits						Other Postretirement Benefits
	2012			2011			2012			2011
	(in millions)
Investments and other assets	$	5.7		$	3.5		$	—		$	—
Accrued compensation	(2.7		)	(2.4		)	(1.3		)	(1.2		)
Other liabilities	(218.3		)	(204.4		)	(46.6		)	(41.3		)
Net accrued benefit costs	$	(215.3	)	$	(203.3	)	$	(47.9	)	$	(42.5	)

The accumulated benefit obligation for the Company’s U.S. and major non-U.S. pension plans was $ 987.3 million and $ 851.0 million at December 31, 2012 and 2011, respectively.

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of the fair value of plan assets and pension plans with accumulated benefit obligations in excess of the fair value of plan assets at December 31, 2012 and 2011 were as follows:



	Projected Benefit Obligation Exceeds the Fair Value of Plan Assets				Accumulated Benefit Obligation Exceeds the Fair Value of Plan Assets
	2012		2011		2012		2011
	(in millions)
Projected benefit obligation	$	1,061.6	$	914.2	$	980.9	$	726.0
Accumulated benefit obligation	965.8		833.1		900.7		674.0
Fair value of plan assets	840.6		707.3		762.7		537.6

The Company’s funding policy for its funded pension plans is based upon the greater of: (i) annual service cost, administrative expenses and a seven year amortization of any funded deficit or surplus relative to the projected pension benefit obligations or (ii) local statutory requirements. The Company’s funding policy is subject to certain statutory regulations with respect to annual minimum and maximum company contributions. Plan benefits for the nonqualified plans are paid as they come due. In 2013, the Company expects to pay contributions of between $ 40.0 million and $ 50.0 million for its U.S. and non-U.S. pension plans and between $ 1.0 million and $ 2.0 million for its other postretirement plan (unaudited).

Fair Value of Plan Assets

The Company measures the fair value of plan assets based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy described in Note 11, “Fair Value Measurements.”

The table below presents total plan assets by investment category as of December 31, 2012 and the classification of each investment category within the fair value hierarchy with respect to the inputs used to measure fair value:



	Total		Level 1		Level 2		Level 3
	(in millions)
Cash and Equivalents	$	16.2	$	—	$	16.2	$	—
Equity Securities
U.S. small-cap growth	26.5		26.5		—		—
U.S. large-cap index	74.0		74.0		—		—
International equities	201.4		201.4		—		—
Fixed Income Securities
U.S. Treasury bonds	87.3		—		87.3		—
Global corporate bonds	345.4		—		345.4		—
International bond funds	82.6		—		82.6		—
Global corporate bond funds	14.6		14.6		—		—
International government bond funds	21.3		21.3		—		—
	$	869.3	$	337.8	$	531.5	$	—

The Company’s target asset allocation for both its U.S. and non-U.S. pension plans’ assets is 30% equity securities and 70% fixed income securities. Risk tolerance on invested pension plan assets is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. Investment risk is measured and monitored on an ongoing basis through annual liability measures, periodic asset/liability studies and quarterly investment portfolio reviews.

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Assumptions

The weighted-average assumptions used to determine net periodic benefit cost and projected benefit obligation were as follows:



	Pension Benefits						Other Postretirement Benefits
	2012		2011		2010		2012		2011		2010
For Determining Net Periodic Benefit Cost
U.S. Plans:
Discount rate	4.63	%	5.51	%	6.04	%	4.60	%	5.56	%	6.09	%
Expected return on plan assets	6.75	%	7.25	%	8.25	%	—		—		—
Rate of compensation increase	4.00	%	4.00	%	4.25	%	—		—		—
Non-U.S. Pension Plans:
Discount rate	5.14	%	5.57	%	6.16	%
Expected return on plan assets	4.80	%	5.70	%	5.85	%
Rate of compensation increase	3.04	%	3.10	%	3.25	%

For Determining Projected Benefit Obligation
U.S. Plans:
Discount rate	4.23	%	4.63	%			4.21	%	4.60	%
Rate of compensation increase	4.00	%	4.00	%			—		—
Non-U.S. Pension Plans:
Discount rate	4.55	%	5.14	%
Rate of compensation increase	2.89	%	3.04	%

Under the current terms of the U.S. retiree health plan, the annual increase in the Company's subsidy to each retiree is capped at the lesser of 3.0% or the rate of medical inflation. The assumed annual increase in medical inflation is 3.0% for the duration of the plan. A one percentage point decrease in the assumed medical inflation rate would result in a $6.3 million reduction in postretirement benefit obligation and a $0.5 million reduction in service and interest cost components of the net periodic benefit cost for postretirement benefits.

For the U.S. qualified pension plan and the non-U.S. funded pension plans, the expected return on plan assets was determined using a building block approach that considers diversification and rebalancing for a long-term portfolio of invested assets. Historical market returns are studied and long-term historical relationships between equities and fixed income are preserved in a manner consistent with the widely-accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are also evaluated before long-term capital market assumptions are determined. The Company’s pension plan assets are managed by outside investment managers using a total return investment approach whereby a mix of equities and debt securities investments are used to maximize the long-term rate of return on plan assets, and the Company utilizes a liability driven investment strategy to reduce financial volatility in the funded pension plans over time. The Company’s overall expected long-term rate of return on assets for 2013 is 6.25% for its U.S. funded pension plan and 4.36% for its non-U.S. funded pension plans.

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Estimated Future Benefit Payments

Estimated benefit payments over the next 10 years for the Company’s U.S. and major non-U.S. pension plans and retiree health plan are as follows:



	Pension Benefits		Other Postretirement Benefits
	(in millions)
2013	$	24.7	$	1.3
2014	27.1		1.6
2015	29.9		1.8
2016	33.1		2.0
2017	36.8		2.3
2018 – 2022	237.1		15.0
	$	388.7	$	24.0

Savings and Investment Plan

The Company has a Savings and Investment Plan, which allows all U.S. employees to become participants upon employment. In 2012, 2011 and 2010, participants’ contributions, up to 4% of compensation, generally qualified for a 100% Company match. Effective January 1, 2010, the 100% Company match was up to 3% of compensation. Effective August 13, 2010, the Company increased the 100% Company match to up to 4% of compensation. Company contributions are used to purchase various investment funds at the participants’ discretion. The Company’s cost of the plan was $ 19.9 million , $ 18.7 million and $ 17.5 million in 2012, 2011 and 2010, respectively.

In addition, the Company has a Company sponsored retirement contribution program under the Savings and Investment Plan, which provides all U.S. employees hired after September 30, 2002 with at least six months of service and certain other employees who previously elected to participate in the Company sponsored retirement contribution program under the Savings and Investment Plan, a Company provided retirement contribution of 5% of annual pay if they are employed on the last day of each calendar year. Participating employees who receive the 5% Company retirement contribution do not accrue benefits under the Company’s defined benefit pension plan. The Company’s cost of the retirement contribution program under the Savings and Investment Plan was $ 23.0 million , $ 19.6 million and $ 18.9 million in 2012, 2011 and 2010, respectively.

Note 9: Employee Stock Plans

The Company has an incentive award plan that provides for the granting of non-qualified stock options, incentive stock options, stock appreciation rights, performance shares, restricted stock and restricted stock units to officers, key employees and non-employee directors.

Stock option grants to officers and key employees under the incentive award plan are generally granted at an exercise price equal to the fair market value at the date of grant, generally expire ten years after their original date of grant and generally become vested and exercisable at a rate of 25% per year beginning twelve months after the date of grant. Restricted share awards to officers and key employees generally become fully vested and free of restrictions four years from the date of grant, except for restricted stock grants pursuant to the Company’s executive bonus plan, which generally become fully vested and free of restrictions two years from the date of grant.

Restricted share awards to non-employee directors generally vest and become free of restrictions twelve months after the date of grant.

At December 31, 2012, the aggregate number of shares available for future grant under the incentive award plan for stock options and restricted share awards was approximately 23.3 million shares.

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Share-Based Award Activity and Balances

The following table summarizes the Company’s stock option activity:



	2012				2011				2010
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
	(in thousands, except option exercise price and fair value data)
Outstanding, beginning of year	22,651		$	57.47	23,856		$	51.50	24,897		$	47.99
Options granted	4,372		88.01		5,007		75.95		5,084		59.54
Options exercised	(4,928	)	50.02		(5,496	)	48.01		(5,383	)	43.12
Options cancelled	(528	)	72.39		(716	)	60.35		(742	)	49.70
Outstanding, end of year	21,567		65.00		22,651		57.47		23,856		51.50

Exercisable, end of year	10,906		56.25		12,414		53.05		14,485		51.30

Weighted average per share fair value of options granted during the year			$	22.45			$	23.30			$	18.86

The aggregate intrinsic value of stock options exercised in 2012, 2011 and 2010 was $202.4 million , $172.5 million and $135.0 million , respectively.

As of December 31, 2012, the weighted average remaining contractual life of options outstanding and options exercisable are 6.6 years and 5.1 years, respectively, and based on the Company’s closing year-end stock price of $91.73 at December 31, 2012, the aggregate intrinsic value of options outstanding and options exercisable are $576.6 million and $386.9 million , respectively. Upon exercise of stock options, the Company generally issues shares from treasury.

The following table summarizes the Company’s restricted share activity:



	2012				2011				2010
	Number of Shares		Weighted Average Grant-Date Fair Value		Number of Shares		Weighted Average Grant-Date Fair Value		Number of Shares		Weighted Average Grant-Date Fair Value
	(in thousands, except fair value data)
Restricted share awards, beginning of year	1,035		$	57.38	886		$	51.20	814		$	48.99
Shares granted	360		88.75		277		76.52		352		60.53
Shares vested	(198	)	57.22		(87	)	56.12		(212	)	58.97
Shares cancelled	(32	)	59.87		(41	)	54.45		(68	)	48.70
Restricted share awards, end of year	1,165		67.08		1,035		57.38		886		51.20

Restricted share awards granted in 2012 include a grant to the Company's Chief Executive Officer of restricted stock units that have both market-based and service-based vesting conditions. The terms of the award allow for up to 165,000 shares of the Company's common stock to be earned if the Company's stock price meets certain thresholds and the Chief Executive Officer remains employed with the Company for five years from the date of grant.

The total fair value of restricted shares that vested was $17.9 million in 2012, $6.9 million in 2011 and $12.8 million in 2010, respectively.

Valuation and Expense Recognition of Share-Based Awards

The Company accounts for the measurement and recognition of compensation expense for all share-based awards made to the Company’s employees and directors based on the estimated fair value of the awards.

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes share-based compensation expense by award type for the years ended December 31, 2012, 2011 and 2010, respectively:



	2012			2011			2010
	(in millions)
Employee and director stock options	$	83.6		$	65.6		$	56.9
Employee and director restricted share awards	19.4			15.0			12.5
Stock contributed to employee benefit plans	6.1			5.7			4.5
Pre-tax share-based compensation expense	109.1			86.3			73.9
Income tax benefit	(35.4		)	(28.5		)	(23.2		)
Net share-based compensation expense	$	73.7		$	57.8		$	50.7

The following table summarizes pre-tax share-based compensation expense by expense category for the years ended December 31, 2012, 2011 and 2010, respectively:



	2012		2011		2010
	(in millions)
Cost of sales	$	9.0	$	7.8	$	7.6
Selling, general and administrative	72.1		56.3		49.7
Research and development	28.0		22.2		16.6
Pre-tax share-based compensation expense	$	109.1	$	86.3	$	73.9

The fair value of stock option awards that vest based solely on a service condition is estimated using the Black-Scholes option-pricing model. The fair value of share-based awards that contain a market condition is generally estimated using a Monte Carlo simulation model, and the fair value of modifications to share-based awards is generally estimated using a lattice model.

The determination of fair value using the Black-Scholes, Monte Carlo simulation and lattice models is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors. Stock options granted during 2012, 2011 and 2010 were valued using the Black-Scholes option-pricing model with the following weighted-average assumptions:



	2012		2011		2010
Expected volatility	25.65	%	27.82	%	29.10	%
Risk-free interest rate	1.07	%	2.54	%	2.73	%
Expected dividend yield	0.26	%	0.32	%	0.37	%
Expected option life (in years)	5.73		5.85		5.79

The Company estimates its stock price volatility based on an equal weighting of the Company’s historical stock price volatility and the average implied volatility of at-the-money options traded in the open market. The risk-free interest rate assumption is based on observed interest rates for the appropriate term of the Company’s stock options. The Company does not target a specific dividend yield for its dividend payments but is required to assume a dividend yield as an input to the Black-Scholes option-pricing model. The dividend yield assumption is based on the Company’s history and an expectation of future dividend amounts. The expected option life assumption is estimated based on actual historical exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options.

Share-based compensation expense is recognized only for those awards that are ultimately expected to vest. An estimated forfeiture rate has been applied to unvested awards for the purpose of calculating compensation cost. Forfeitures were estimated based on historical experience. These estimates are revised, if necessary, in future periods if actual forfeitures differ from the estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs. Compensation expense for share-based awards based on a service condition is recognized over the vesting period using the straight-line single option method.

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

As of December 31, 2012, total compensation cost related to non-vested stock options and restricted stock not yet recognized was approximately $ 180.8 million , which is expected to be recognized over the next 50 months ( 30 months on a weighted-average basis). The Company has not capitalized as part of inventory any share-based compensation costs because such costs were negligible as of December 31, 2012, 2011 and 2010.

Note 10: Financial Instruments

In the normal course of business, operations of the Company are exposed to risks associated with fluctuations in interest rates and foreign currency exchange rates. The Company addresses these risks through controlled risk management that includes the use of derivative financial instruments to economically hedge or reduce these exposures. The Company does not enter into derivative financial instruments for trading or speculative purposes.

The Company has not experienced any losses to date on its derivative financial instruments due to counterparty credit risk.

To ensure the adequacy and effectiveness of its interest rate and foreign exchange hedge positions, the Company continually monitors its interest rate swap positions and foreign exchange forward and option positions both on a stand-alone basis and in conjunction with its underlying interest rate and foreign currency exposures, from an accounting and economic perspective.

However, given the inherent limitations of forecasting and the anticipatory nature of the exposures intended to be hedged, the Company cannot assure that such programs will offset more than a portion of the adverse financial impact resulting from unfavorable movements in either interest or foreign exchange rates. In addition, the timing of the accounting for recognition of gains and losses related to mark-to-market instruments for any given period may not coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely affect the Company’s consolidated operating results and financial position.

Interest Rate Risk Management

The Company’s interest income and expense are more sensitive to fluctuations in the general level of U.S. interest rates than to changes in rates in other markets. Changes in U.S. interest rates affect the interest earned on cash and equivalents and short-term investments and interest expense on debt, as well as costs associated with foreign currency contracts. For a discussion of the Company’s interest rate swap activities, see Note 6, “Notes Payable and Long-Term Debt.”

Foreign Exchange Risk Management

Overall, the Company is a net recipient of currencies other than the U.S. dollar and, as such, benefits from a weaker dollar and is adversely affected by a stronger dollar relative to major currencies worldwide. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may negatively affect the Company’s consolidated revenues or operating costs and expenses as expressed in U.S. dollars.

From time to time, the Company enters into foreign currency option and forward contracts to reduce earnings and cash flow volatility associated with foreign exchange rate changes to allow management to focus its attention on its core business issues. Accordingly, the Company enters into various contracts which change in value as foreign exchange rates change to economically offset the effect of changes in the value of foreign currency assets and liabilities, commitments and anticipated foreign currency denominated sales and operating expenses. The Company enters into foreign currency option and forward contracts in amounts between minimum and maximum anticipated foreign exchange exposures, generally for periods not to exceed 18 months. The Company does not designate these derivative instruments as accounting hedges.

The Company uses foreign currency option contracts, which provide for the sale or purchase of foreign currencies to economically hedge the currency exchange risks associated with probable but not firmly committed transactions that arise in the normal course of the Company’s business. Probable but not firmly committed transactions are comprised primarily of sales of products and purchases of raw material in currencies other than the U.S. dollar. The foreign currency option contracts are entered into to reduce the volatility of earnings generated in currencies other than the U.S. dollar. While these instruments are subject to fluctuations in value, such fluctuations are anticipated to offset changes in the value of the underlying exposures.

Changes in the fair value of open foreign currency option contracts and any realized gains (losses) on settled contracts are recorded through earnings as “Other, net” in the accompanying consolidated statements of earnings. During 2012, 2011 and 2010, the Company recognized realized gains on settled foreign currency option contracts of $14.2 million , $2.2 million and $15.1 million , respectively, and net unrealized (losses) gains on open foreign currency option contracts of $(15.3) million , $11.1

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

million and $(7.6) million , respectively. The premium costs of purchased foreign exchange option contracts are recorded in “Other current assets” and amortized to “Other, net” over the life of the options.

All of the Company’s outstanding foreign exchange forward contracts are entered into to offset the change in value of certain intercompany receivables or payables that are subject to fluctuations in foreign currency exchange rates. The realized and unrealized gains and losses from foreign currency forward contracts and the revaluation of the foreign denominated intercompany receivables or payables are recorded through “Other, net” in the accompanying consolidated statements of earnings. During 2012, 2011 and 2010, the Company recognized total realized and unrealized (losses) gains from foreign exchange forward contracts of $(0.9) million , $(2.5) million and $1.1 million , respectively.

The fair value of outstanding foreign exchange option and forward contracts, collectively referred to as foreign currency derivative financial instruments, are recorded in “Other current assets” and “Accounts payable.” At December 31, 2012 and 2011, foreign currency derivative assets associated with the foreign exchange option contracts of $9.9 million and $26.3 million , respectively, were included in “Other current assets.” At December 31, 2012, net foreign currency derivative assets associated with the foreign exchange forward contracts of $0.3 million were included in “Other current assets.” At December 31, 2011, net foreign currency derivative liabilities associated with the foreign exchange forward contracts of $0.7 million were included in “Accounts payable.”

At December 31, 2012 and 2011, the notional principal and fair value of the Company’s outstanding foreign currency derivative financial instruments were as follows:



	2012				2011
	Notional Principal		Fair Value		Notional Principal		Fair Value
	(in millions)
Foreign currency forward exchange contracts (Receive U.S. dollar/pay foreign currency)	$	44.6	$	0.3	$	35.4	$	(0.4	)
Foreign currency forward exchange contracts (Pay U.S. dollar/receive foreign currency)	39.6		—		39.1		(0.3		)
Foreign currency sold — put options	501.6		9.9		404.7		26.3

The notional principal amounts provide one measure of the transaction volume outstanding as of December 31, 2012 and 2011, and do not represent the amount of the Company’s exposure to market loss. The estimates of fair value are based on applicable and commonly used pricing models using prevailing financial market information as of December 31, 2012 and 2011. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.

Other Financial Instruments

At December 31, 2012 and 2011, the Company’s other financial instruments included cash and equivalents, short-term investments, trade receivables, non-marketable equity investments, accounts payable and borrowings. The carrying amount of cash and equivalents, short-term investments, trade receivables and accounts payable approximates fair value due to the short-term maturities of these instruments. The fair value of non-marketable equity investments, which represent investments in start-up technology companies, are estimated based on information provided by these companies. The fair value of notes payable and long-term debt are estimated based on quoted market prices and interest rates.

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ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The carrying amount and estimated fair value of the Company’s other financial instruments at December 31, 2012 and 2011 were as follows:



	2012				2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in millions)
Cash and equivalents	$	2,701.8	$	2,701.8	$	2,406.1	$	2,406.1
Short-term investments	260.6		260.6		179.9		179.9
Non-current non-marketable equity investments	9.0		9.0		9.0		9.0
Notes payable	48.8		48.8		83.9		84.3
Long-term debt	1,512.4		1,673.0		1,515.4		1,689.9

In 2011, the Company recorded an impairment charge of $3.2 million included in SG&A expenses due to the other than temporary decline in value of a non-marketable equity investment.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk principally consist of trade receivables. Wholesale distributors, major retail chains and managed care organizations account for a substantial portion of trade receivables. This risk is limited due to the number of customers comprising the Company’s customer base, and their geographic dispersion. At December 31, 2012, no single customer represented more than 10% of trade receivables, net. Ongoing credit evaluations of customers’ financial condition are performed and, generally, no collateral is required. The Company has purchased an insurance policy intended to reduce the Company’s exposure to potential credit risks associated with certain U.S. customers. To date, no claims have been made against the insurance policy. The Company maintains reserves for potential credit losses and such losses, in the aggregate, have not historically exceeded management’s estimates.

Note 11: Fair Value Measurements

The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of December 31, 2012 and 2011, the Company has certain assets and liabilities that are required to be measured at fair value on a recurring basis. These include cash equivalents, short-term investments, foreign exchange derivatives, deferred executive compensation investments and liabilities and contingent consideration liabilities. As of December 31, 2011, the Company also had a $300.0 million notional amount interest rate swap that was required to be measured at fair value. In September 2012, the Company terminated the interest rate swap. These assets and liabilities are classified in the table below in one of the three categories of the fair value hierarchy described above.

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	December 31, 2012
	Total		Level 1		Level 2		Level 3
	(in millions)
Assets
Commercial paper	$	1,709.0	$	—	$	1,709.0	$	—
Foreign time deposits	341.7		—		341.7		—
Other cash equivalents	685.0		—		685.0		—
Foreign exchange derivative assets	10.2		—		10.2		—
Deferred executive compensation investments	81.7		66.8		14.9		—
	$	2,827.6	$	66.8	$	2,760.8	$	—
Liabilities
Deferred executive compensation liabilities	$	73.5	$	58.6	$	14.9	$	—
Contingent consideration liabilities	224.3		—		—		224.3
	$	297.8	$	58.6	$	14.9	$	224.3



	December 31, 2011
	Total		Level 1		Level 2		Level 3
	(in millions)
Assets
Commercial paper	$	1,171.9	$	—	$	1,171.9	$	—
Foreign time deposits	189.1		—		189.1		—
Other cash equivalents	1,078.9		—		1,078.9		—
Foreign exchange derivative assets	26.3		—		26.3		—
Interest rate swap derivative asset	48.1		—		48.1		—
Deferred executive compensation investments	70.9		58.0		12.9		—
	$	2,585.2	$	58.0	$	2,527.2	$	—
Liabilities
Foreign exchange derivative liabilities	$	0.7	$	—	$	0.7	$	—
Interest rate swap derivative liability	48.1		—		48.1		—
Deferred executive compensation liabilities	62.3		49.4		12.9		—
Contingent consideration liabilities	214.6		—		—		214.6
	$	325.7	$	49.4	$	61.7	$	214.6

Cash equivalents consist of commercial paper, foreign time deposits and other cash equivalents. Other cash equivalents consist primarily of money-market fund investments. Short-term investments consist of commercial paper. Cash equivalents and short-term investments are valued at cost, which approximates fair value due to the short-term maturities of these instruments. Foreign currency derivative assets and liabilities are valued using quoted forward foreign exchange prices and option volatility at the reporting date. The interest rate swap derivative asset and liability were valued using LIBOR yield curves at December 31, 2011. The Company believes the fair values assigned to its derivative instruments as of December 31, 2012 and 2011 are based upon reasonable estimates and assumptions. Assets and liabilities related to deferred executive compensation consist of actively traded mutual funds classified as Level 1 and money-market funds classified as Level 2.

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The Company estimates the fair value of the contingent consideration liabilities related to sales performance using the income approach, which involves forecasting estimated future net cash flows and discounting the net cash flows to their present value using a risk-adjusted rate of return. The Company estimates the fair value of the contingent consideration liabilities related to the achievement of future development and regulatory milestones by assigning an achievement probability to each potential milestone and discounting the associated cash payment to its present value using a risk-adjusted rate of return. The Company estimates the fair value of the contingent consideration liabilities associated with sales milestones by employing Monte Carlo simulations to estimate the volatility and systematic relative risk of revenues subject to sales milestone payments and discounting the associated cash payment amounts to their present values using a credit-risk-adjusted interest rate. The fair value of other contractual performance conditions is measured by assigning an achievement probability to each payment and discounting the payment to its present value using the Company's estimated cost of borrowing. The unobservable inputs to the valuation models that have the most significant effect on the fair value of the Company's contingent consideration liabilities are the probabilities that certain in-process development projects will meet specified development milestones, including ultimate approval by the FDA. The Company currently estimates that the probabilities of success in meeting the specified development milestones are between 40% and 75% .

The following table provides a reconciliation of the change in the contingent consideration liabilities for the years ended December 31, 2012 and 2011:



	2012			2011
	(in million)
Balance, beginning of year	$	214.6		$	44.5
Additions during the period related to business combinations	6.9			169.2
Change in the estimated fair value of the contingent consideration liabilities	5.4			11.9
Payments made during the period	(5.1		)	(3.0		)
Foreign exchange translation effects	2.5			(8.0		)
Balance, end of year	$	224.3		$	214.6

Note 12: Commitments and Contingencies

Legal Proceedings

In the ordinary course of business, the Company is involved in various legal actions, government investigations and environmental proceedings, and we anticipate that additional actions will be brought against us in the future. The most significant of these actions, proceedings and investigations are described below.

The Company's legal proceedings range from cases brought by a single plaintiff to a class action with thousands of putative class members. These legal proceedings, as well as other matters, involve various aspects of the Company's business and a variety of claims (including but not limited to patent infringement, marketing, product liability, pricing and trade practices and securities law), some of which present novel factual allegations and/or unique legal theories. Complex legal proceedings frequently extend for several years, and a number of the matters pending against the Company are at very early stages of the legal process. As a result, some pending matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable the Company to determine whether the proceeding is material to the Company or to estimate a range of possible loss, if any. While it is not possible to accurately predict or determine the eventual outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on the Company's consolidated results of operations, financial position or cash flows.

Stockholder Derivative Litigation

Botox ^® Settlement-Related Actions

Delaware Action. The Louisiana Municipal Police Employees' Retirement System and U.F.C.W. Local 1776 & Participating Employers Pension Fund have filed a stockholder derivative complaint against the Company's then-current Board of Directors as of September 2010 and Allergan, Inc. in the Court of Chancery of the State of Delaware alleging breaches of fiduciary duties relating to the Company's alleged sales and marketing practices in connection with Botox ^® and seeks to shift the costs of the September 2010 settlement with the U.S. Department of Justice to the defendants. In 2011, the Company and the individual defendants filed a motion to dismiss the second amended complaint, which was denied. In 2012, the Company

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and the individual defendants filed an application for certification of interlocutory appeal to the Supreme Court of the State of Delaware and a motion to stay proceedings pending the application for and resolution of the interlocutory appeal, both of which were granted. The Supreme Court of the State of Delaware heard oral arguments, en banc, on February 5, 2013 and took the matter under submission.

Federal Action. In 2010, Daniel Himmel, Willa Rosenbloom, the Pompano Beach Police & Firefighters' Retirement System and the Western Washington Laborers-Employers Pension Trust separately filed stockholder derivative complaints against the Company's then-current Board of Directors as of September 2010 and Allergan, Inc. in the U.S. District Court for the Central District of California alleging violations of federal securities laws, breaches of fiduciary duties, abuse of control, gross mismanagement, and corporate waste and seeks, among other things, damages, corporate governance reforms, attorneys' fees and costs. The actions were subsequently consolidated. In 2012, the U.S. District Court entered an order granting the Company's and the individual defendants' motion to dismiss the first amended verified consolidated complaint and dismissed the consolidated action with prejudice. The plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit and their opening appellate brief. The Company and the individual defendants have filed an answering appellate brief.

2011 Incentive Award Plan Action

The New Jersey Building Laborers Pension Fund filed a stockholder derivative complaint against members of the Company's Board, three current officers of Allergan, Inc., one former officer of Allergan, Inc., and Allergan, Inc. in the U.S. District Court for the District of Delaware alleging claims for breach of fiduciary duty, waste of corporate assets, unjust enrichment, and wrongful acts and omissions under federal securities laws and seeks, among other things, an order voiding the stockholders' vote and Allergan, Inc.'s 2011 Incentive Award Plan, damages, attorneys' fees and costs. Plaintiff dismissed its claims against the former officer of Allergan, Inc. In June 2012, the U.S. District Court heard oral argument on the motions to dismiss filed by the Company and the individual defendants and took the matter under submission.

Government Investigations

In May 2012, the Company received service of process of a Subpoena Duces Tecum from the Department of Health and Human Services, Office of the Inspector General. The subpoena requests the production of documents relating to Lap-Band ^® .

Patent Litigation

We are involved in patent litigation matters, including certain paragraph 4 invalidity and non-infringement claims brought under the Hatch-Waxman Act in the United States described below.

Zymar ^® . In 2007, after Apotex Inc. (Apotex) filed an ANDA with the FDA seeking approval to market a generic version of Zymar ^® , the Company received a paragraph 4 invalidity and noninfringement certification from Apotex, contending that U.S. Patent Numbers 6,333,045 ('045 Patent) and 5,880,283 ('283 patent) are invalid or not infringed by the proposed generic product. The Company, with Senju Pharmaceutical Co., Ltd. (Senju) and Kyorin Pharmaceutical Co., Ltd. (Kyorin), filed a complaint against Apotex in the U.S. District Court for the District of Delaware alleging infringement of the '045 Patent. In 2012, the U.S. Court of Appeals for the Federal Circuit affirmed the U.S. District Court for the District of Delaware's entry of judgment in favor of Apotex, which ruled that the '045 patent was invalid.

In 2011, the Company, Senju and Kyorin filed a complaint in the U.S. District Court in Delaware alleging that Apotex's product infringes on the '045 Patent pursuant to a U.S. Patent and Trademark Office reexamination certificate. In 2012, the U.S. District Court granted Apotex's motion to dismiss the Company's complaint. In October 2012, the Company, Senju and Kyorin filed a Notice of Appeal to the U.S. Court of Appeals for the Federal Circuit.

In 2011, after Lupin Limited (Lupin) and Hi-Tech Pharmacal Co., Inc. (Hi-Tech) each filed an ANDA with the FDA seeking approval to market a generic version of Zymar ^® , the Company received paragraph 4 invalidity and noninfringement certifications from Lupin and Hi-Tech, contending that the '045 Patent and the '283 Patent are invalid or not infringed by the proposed generic products. The Company, with Senju and Kyorin, filed a complaint against each of Lupin and Hi-Tech in the U.S. District Court for the District of Delaware alleging infringement of the '045 Patent and the '283 Patent. The Company, Senju and Kyorin dismissed the claims related to the '283 Patent. In January 2013, a bench trial was held and the U.S. District Court took the matter under submission.

Zymaxid ^® . In 2011, after Lupin and Hi-Tech each filed an ANDA with the FDA seeking approval to market a generic version of Zymaxid ^® , the Company received paragraph 4 invalidity and noninfringement certifications from Lupin and Hi-Tech, contending that the '045 Patent and the '283 patent are invalid or not infringed by the proposed generic products. The Company,

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with Senju and Kyorin, filed a complaint against Lupin and Hi-Tech in the U.S. District Court for the District of Delaware alleging infringement of the '045 Patent and the '283 Patent. The U.S. District Court consolidated the Lupin Zymar ^® and Lupin Zymaxid ^® cases. The Company, Senju and Kyorin dismissed the claims related to the '283 Patent. In January 2013, a bench trial was held and the U.S. District Court took the matter under submission.

In 2012, after Apotex filed an ANDA with the FDA seeking approval to market a generic version of Zymaxid ^® , the Company received a paragraph 4 invalidity and noninfringement certification from Apotex, contending that the '045 Patent and the '283 Patent are invalid or not infringed by the proposed generic product. The Company, with Senju and Kyorin, filed a complaint against Apotex in the U.S. District Court for the District of Delaware alleging infringement of the '045 and '283 Patents. The Company, Senju and Kyorin dismissed the claims related to the '283 Patent. The U.S. District Court has set a bench trial for January 2014.

Combigan ^® . After Sandoz, Inc. (Sandoz), Alcon Research, Ltd. (Alcon), Hi-Tech, Apotex, Watson Pharma, Inc. and Watson Pharmaceuticals, Inc. (Watson) each filed an ANDA seeking approval of generic forms of Combigan ^® , a brimonidine tartrate 0.2%, timolol 0.5% ophthalmic solution, the Company received paragraph 4 invalidity and noninfringement certifications from Sandoz, Alcon, Hi-Tech, Apotex and Watson, contending that U.S. Patent Numbers 7,030,149, 7,320,976, 7,323,463 and 7,642,258 (the Combigan Patents) are invalid or not infringed by the proposed generic products. The Company filed a complaint against Sandoz, Alcon, Apotex, Hi-Tech and Watson in the U.S. District Court for the Eastern District of Texas, Marshall Division, alleging infringement of the Combigan Patents. Before trial, the Company settled with Hi-Tech. In 2011, the U.S. District Court held a bench trial and issued its opinion holding that the Combigan Patents are not invalid and are infringed by defendants' proposed products, and entered a final judgment and injunction in the Company's favor. In 2012, the U.S. Court of Appeals for the Federal Circuit heard oral argument regarding the U.S. District Court's decision.

In 2012, the Company filed a complaint against Sandoz, Alcon, Apotex and Watson in the U.S. District Court for the Eastern District of Texas, Marshall Division, alleging that their proposed products infringe U.S. Patent Number 8,133,890 ('890 Patent). Sandoz, Apotex and Watson filed a motion to stay proceedings pending the resolution of the appeal pending in the U.S. Court of Appeals for the Federal Circuit related to the Combigan Patents. In 2013, the Company filed a motion for preliminary injunction against Sandoz. The U.S. District Court set jury selection for January 2014.

Latisse ^® . After Apotex, Sandoz, Hi-Tech and Watson each filed an ANDA seeking approval of a generic form of Latisse ^® 0.03% bimatoprost ophthalmic solution, the Company received paragraph 4 invalidity and noninfringement certifications from Apotex, Sandoz, Hi-Tech and Watson contending that U.S. Patent Numbers 7,351,404 ('404 Patent), 7,388,029 ('029 Patent), 8,038,988 ('988 Patent) and 8,101,161 ('161 Patent) are invalid or not infringed by the proposed generic products. The Company, with Duke University, filed complaints against Sandoz, Alcon, Apotex and Watson in the U.S. District Court for the Middle District of North Carolina alleging that their proposed products infringe the '404, '029, '988 and '161 Patents.

In 2012, the U.S. District Court commenced a bench trial on the '404 and '029 Patents in the Apotex, Sandoz, and Hi-Tech actions. In January 2013, the U.S. District Court issued its opinion holding that the '404 and '029 Patents are not invalid and are infringed by Apotex, Sandoz, and Hi-Tech's proposed products and entered a final judgment in the Company's favor and against these defendants. In February 2013, the U.S. District Court issued judgment for the Company and Duke University against Watson, finding that the '404 and '029 patents are not invalid and are infringed by Watson's proposed product. In February 2013, the Company and Duke filed motions for permanent injunction as to Apotex, Sandoz, Hi-Tech and Watson. In February 2013, Apotex, Sandoz and Hi-Tech filed a Notice of Appeal. The U.S. District Court has not yet set a trial date for the actions on the '988 and '161 patents.

In January 2013, the Company filed a complaint against Apotex, Sandoz, Hi-Tech and Watson in the U.S. District Court for the Middle District of North Carolina alleging that the defendants' proposed products infringe U.S. Patent Number 8,263,054. No trial date has been set.

Lumigan ^® 0.03% . After Barr Laboratories, Inc. (Barr) and Sandoz each filed an ANDA seeking approval of a generic form of Lumigan ^® 0.03% bimatoprost ophthalmic solution, the Company received paragraph 4 invalidity and noninfringement certifications from Barr and Sandoz contending that U.S. Patent Numbers 5,688,819 ('819 Patent) and 6,403,649 ('649 Patent) are invalid or not infringed by the proposed products. The Company filed a complaint against Barr, Sandoz and Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries Ltd. (Teva) upon the belief that Barr is a wholly-owned subsidiary of Teva, in the U.S. District Court for the District of Delaware alleging that their proposed products infringe the '819 Patent and the '649 Patent. In 2011, the U.S. District Court issued its opinion holding that the Lumigan Patents are not invalid, and are enforceable and infringed by defendants' proposed products and entered a final judgment and injunction in the Company's favor

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and against all defendants. In January 2013, the U.S. Court of Appeals for the Federal Circuit affirmed the ruling of the U.S. District Court finding that the '819 Patent is not invalid and is infringed by the proposed generic products.

Lumigan ^® 0.01% . After Sandoz, Lupin, Hi-Tech and Watson each filed an ANDA seeking approval of a generic form of Lumigan ^® 0.01% bimatoprost ophthalmic solution, the Company received paragraph 4 invalidity and noninfringement certifications contending that U.S. Patent Numbers 7,851,504 and 5,688,819 (Lumigan 0.01% Patents) are invalid or not infringed by the proposed generic products. The Company filed complaints against Sandoz, Lupin, Hi-Tech and Watson in the U.S. District Court for the Eastern District of Texas alleging that their proposed products infringe the Lumigan 0.01% Patents. In January 2013, the Company filed an amended complaint against Sandoz, Lupin, Hi-Tech, and Watson alleging that, in addition to the Lumigan 0.01% Patents, the defendants' proposed generic products infringe U.S. Patent Numbers 8,278,353, 8,299,118, 8,309,605, and 8,338,479. In January 2013, the U.S. District Court scheduled trial for July 15, 2013.

Other Litigation

Allergan, Inc. v. Cayman Chemical Company, et al. The Company, with Duke University (Duke) and Murray A. Johnstone, M,D. (Johnstone), filed complaints against several defendants, including Athena Cosmetics, Inc. (Athena), Cosmetic Alchemy, LLC (Cosmetic Alchemy), LifeTech Resources, LLC (LifeTech), and Rocasuba, Inc. (Rocasuba), in the U.S. District Court for the Central District of California alleging that the defendants are in violation of the California unfair competition statute and infringing the '404 Patent and U.S. Patent Numbers 6,262,105 ('105 Patent) and 7,388,029 ( '029 Patent). In 2012, the U.S. District Court granted the Company's motion for partial summary judgment on our unfair competition claim against Athena, Cosmetic Alchemy, LifeTech and Rocasuba. In 2012, the U.S. District Court granted the motion by the Company and Duke to dismiss the claims on the '029 patent. The U.S. District Court set trial on the patent claims for May 7, 2013. In January 2013, Athena filed a motion for summary judgment of invalidity of the '404 Patent, the Company filed a motion for permanent injunction against Athena, Cosmetic Alchemy, LifeTech and Rocasuba, and the Company and Johnstone filed a motion for partial summary judgment against Cosmetic Alchemy on their patent infringement and contributory infringement claims regarding the '105 Patent. In 2013, the Company reached a settlement with LifeTech and Rocasuba and they were dismissed from the case.

Contingencies

In 2009, the Company established a reserve for a contingent liability associated with regulation changes resulting from a final rule issued by the U.S. Department of Defense (DoD) that placed retroactive and prospective pricing limits on certain branded pharmaceuticals under the TRICARE Retail Pharmacy Program, even though such branded pharmaceuticals have not historically been subject to a contract with the Company. As of December 31, 2012, the reserve for the contingent liability is $21.7 million and is included in “Other accrued expenses.” In January 2013, the United States Court of Appeals for the District of Columbia Circuit affirmed an earlier decision by the United States District Court for the District of Columbia in favor of the DoD, and the Company subsequently paid all outstanding contingent TRICARE Retail Pharmacy Program claims.

In the third quarter of 2009, the Company entered into a co-promotion agreement with Quintiles Transnational Corp. (Quintiles), under which Quintiles co-promoted Sanctura XR ^® , Latisse ^® and Aczone ^® , generally targeting primary care physicians. Due to significantly lower than anticipated performance under the agreement, the Company terminated this co-promotion agreement in the third quarter of 2010 and established a reserve for the contingent liability. In the second quarter of 2011, the Company settled all outstanding obligations with Quintiles and recorded additional costs of $3.3 million related to the settlement. The aggregate settlement amount, including such related costs, was within the previously disclosed estimated liability range.

As of June 1, 2012 the Company is largely self-insured for future product liability losses related to all of its products. Future product liability losses are, by their nature, uncertain and are based upon complex judgments and probabilities. The Company accrues for certain potential product liability losses estimated to be incurred, but not reported, to the extent they can be reasonably estimated. The Company estimates these accruals for potential losses based primarily on historical claims experience and data regarding product usage. The total value of self-insured product liability claims settled in 2012, 2011 and 2010, respectively, and the value of known and reasonably estimable incurred but unreported self-insured product liability claims pending as of December 31, 2012 are not material.

The Company has provided reserves for contingencies related to various lawsuits, claims and contractual disputes that management believes are probable and reasonably estimable. The amounts reserved for these contingencies as of December 31, 2012 and 2011 are not material.

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Operating Lease Obligations

The Company leases certain facilities, office equipment and automobiles and provides for payment of taxes, insurance and other charges on certain of these leases. Rental expense was $67.0 million in 2012, $58.1 million in 2011 and $53.5 million in 2010.

Future minimum rental payments under non-cancelable operating lease commitments with a term of more than one year as of December 31, 2012 are as follows: $66.2 million in 2013, $51.1 million in 2014, $32.0 million in 2015, $20.0 million in 2016, $13.1 million in 2017 and $63.0 million thereafter.

Note 13: Guarantees

The Company’s Amended and Restated Certificate of Incorporation provides that the Company will indemnify, to the fullest extent permitted by the Delaware General Corporation Law, each person that is involved in or is, or is threatened to be, made a party to any action, suit or proceeding by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Company or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise. The Company has also entered into contractual indemnity agreements with each of its directors and executive officers pursuant to which, among other things, the Company has agreed to indemnify such directors and executive officers against any payments they are required to make as a result of a claim brought against such executive officer or director in such capacity, excluding claims (i) relating to the action or inaction of a director or executive officer that resulted in such director or executive officer gaining illegal personal profit or advantage, (ii) for an accounting of profits made from the purchase or sale of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any state law or (iii) that are based upon or arise out of such director’s or executive officer’s knowingly fraudulent, deliberately dishonest or willful misconduct. The maximum potential amount of future payments that the Company could be required to make under these indemnification provisions is unlimited. However, the Company has purchased directors’ and officers’ liability insurance policies intended to reduce the Company’s monetary exposure and to enable the Company to recover a portion of any future amounts paid. The Company has not previously paid any material amounts to defend lawsuits or settle claims as a result of these indemnification provisions, but makes no assurance that such amounts will not be paid in the future. The Company currently believes the estimated fair value of these indemnification arrangements is minimal.

The Company customarily agrees in the ordinary course of its business to indemnification provisions in agreements with clinical trials investigators in its drug, biologics and medical device development programs, in sponsored research agreements with academic and not-for-profit institutions, in various comparable agreements involving parties performing services for the Company in the ordinary course of business, and in its real estate leases. The Company also customarily agrees to certain indemnification provisions in its acquisition agreements and discovery and development collaboration agreements. With respect to the Company’s clinical trials and sponsored research agreements, these indemnification provisions typically apply to any claim asserted against the investigator or the investigator’s institution relating to personal injury or property damage, violations of law or certain breaches of the Company’s contractual obligations arising out of the research or clinical testing of the Company’s products, compounds or drug candidates. With respect to real estate lease agreements, the indemnification provisions typically apply to claims asserted against the landlord relating to personal injury or property damage caused by the Company, to violations of law by the Company or to certain breaches of the Company’s contractual obligations. The indemnification provisions appearing in the Company’s acquisition agreements and collaboration agreements are similar, but in addition often provide indemnification for the collaborator in the event of third party claims alleging infringement of intellectual property rights. In each of the above cases, the terms of these indemnification provisions generally survive the termination of the agreement. The maximum potential amount of future payments that the Company could be required to make under these provisions is generally unlimited. The Company has purchased insurance policies covering personal injury, property damage and general liability intended to reduce the Company’s exposure for indemnification and to enable the Company to recover a portion of any future amounts paid. The Company has not previously paid any material amounts to defend lawsuits or settle claims as a result of these indemnification provisions. As a result, the Company believes the estimated fair value of these indemnification arrangements is minimal.

Note 14: Product Warranties

The Company provides warranty programs for breast implant sales primarily in the United States, Europe and certain other countries. Management estimates the amount of potential future claims from these warranty programs based on actuarial analyses. Expected future obligations are determined based on the history of product shipments and claims and are discounted to a current value. The liability is included in both current and long-term liabilities in the Company’s consolidated balance

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sheets. The U.S. programs include the ConfidencePlus ^® and ConfidencePlus ^® Premier warranty programs. The ConfidencePlus ^® program currently provides lifetime product replacement, $1,200 of financial assistance for surgical procedures within ten years of implantation and contralateral implant replacement. The ConfidencePlus ^® Premier program, which normally requires a low additional enrollment fee, generally provides lifetime product replacement, $2,400 of financial assistance for saline breast implants and $3,500 of financial assistance for silicone gel breast implants for surgical procedures within ten years of implantation and contralateral implant replacement. The enrollment fee is deferred and recognized as income over the ten year warranty period for financial assistance. The warranty programs in non-U.S. markets have similar terms and conditions to the U.S. programs. The Company does not warrant any level of aesthetic result and, as required by government regulation, makes extensive disclosures concerning the risks of the use of its products and breast implant surgery. Changes to actual warranty claims incurred and interest rates could have a material impact on the actuarial analysis and the Company’s estimated liabilities. A large majority of the product warranty liability arises from the U.S. warranty programs. The Company does not currently offer any similar warranty program on any other product.

The following table provides a reconciliation of the change in estimated product warranty liabilities for the years ended December 31, 2012 and 2011:



	2012			2011
	(in millions)
Balance, beginning of year	$	32.6		$	30.1
Provision for warranties issued during the year	9.9			8.6
Settlements made during the year	(8.1		)	(6.8		)
Increases in warranty estimates	—			0.7
Balance, end of year	$	34.4		$	32.6

Current portion	$	6.7		$	6.5
Non-current portion	27.7			26.1
Total	$	34.4		$	32.6

Note 15: Business Segment Information

The Company operates its business on the basis of two reportable segments — specialty pharmaceuticals and medical devices. The specialty pharmaceuticals segment produces a broad range of pharmaceutical products, including: ophthalmic products for dry eye, glaucoma, inflammation, infection, allergy and retinal disease; Botox ^® for certain therapeutic and aesthetic indications; skin care products for acne, psoriasis, eyelash growth and other prescription and over-the-counter skin care products; and urologics products. The medical devices segment produces a broad range of medical devices, including: breast implants for augmentation, revision and reconstructive surgery and tissue expanders; obesity intervention products; and facial aesthetics products. The Company provides global marketing strategy teams to ensure development and execution of a consistent marketing strategy for its products in all geographic regions that share similar distribution channels and customers.

The Company evaluates segment performance on a product net sales and operating income basis exclusive of general and administrative expenses and other indirect costs, legal settlement expenses, impairment of intangible assets and related costs, restructuring charges, amortization of certain identifiable intangible assets related to business combinations and asset acquisitions and related capitalized licensing costs and certain other adjustments, which are not allocated to the Company’s segments for performance assessment by the Company’s chief operating decision maker. Other adjustments excluded from the Company’s segments for performance assessment represent income or expenses that do not reflect, according to established Company-defined criteria, operating income or expenses associated with the Company’s core business activities. Because operating segments are generally defined by the products they design and sell, they do not make sales to each other. The Company does not discretely allocate assets to its operating segments, nor does the Company’s chief operating decision maker evaluate operating segments using discrete asset information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Operating Segments



	2012		2011		2010
	(in millions)
Product net sales:
Specialty pharmaceuticals	$	4,784.6	$	4,432.0	$	3,973.4
Medical devices	924.2		915.1		846.2
Total product net sales	5,708.8		5,347.1		4,819.6
Other revenues	97.3		72.0		99.8
Total revenues	$	5,806.1	$	5,419.1	$	4,919.4

Operating income:
Specialty pharmaceuticals	$	1,997.7	$	1,763.3	$	1,501.9
Medical devices	278.8		286.0		284.7
Total segments	2,276.5		2,049.3		1,786.6
General and administrative expenses, other indirect costs and other adjustments	527.4		551.9		434.9
Amortization of intangible assets (a)	107.8		104.0		114.5
Legal settlement	—		—		609.2
Impairment of intangible assets and related costs	22.3		23.7		369.1
Restructuring charges	5.7		4.6		0.3
Total operating income	$	1,613.3	$	1,365.1	$	258.6

——————————


(a)	Represents amortization of certain identifiable intangible assets related to business combinations and asset acquisitions and related capitalized licensing costs, as applicable.

Product net sales for the Company’s various global product portfolios are presented below. The Company’s principal geographic markets are the United States, Europe, Latin America and Asia Pacific. The U.S. information is presented separately as it is the Company’s headquarters country. U.S. sales represented 60.9% , 60.2% and 62.6% of the Company’s total consolidated product net sales in 2012, 2011 and 2010, respectively.

Sales to two customers in the Company’s specialty pharmaceuticals segment each generated over 10% of the Company’s total consolidated product net sales. Sales to Cardinal Health, Inc. for the years ended December 31, 2012, 2011 and 2010 were 14.3% , 14.1% and 13.1% , respectively, of the Company’s total consolidated product net sales. Sales to McKesson Drug Company for the years ended December 31, 2012, 2011 and 2010 were 14.2% , 12.6% and 12.1% , respectively, of the Company’s total consolidated product net sales. No other country or single customer generates over 10% of the Company’s total consolidated product net sales. Net sales for the Europe region also include sales to customers in Africa and the Middle East, and net sales in the Asia Pacific region include sales to customers in Australia and New Zealand.

F- 45

Table of Contents

ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Product Net Sales by Product Line



	2012		2011		2010
	(in millions)
Specialty Pharmaceuticals:
Eye Care Pharmaceuticals	$	2,692.2	$	2,520.2	$	2,262.0
Botox ^® /Neuromodulators	1,766.3		1,594.9		1,419.4
Skin Care	298.4		260.1		229.5
Urologics	27.7		56.8		62.5
Total Specialty Pharmaceuticals	4,784.6		4,432.0		3,973.4

Medical Devices:
Breast Aesthetics	377.1		349.3		319.1
Obesity Intervention	159.5		203.1		243.3
Facial Aesthetics	387.6		362.7		283.8
Total Medical Devices	924.2		915.1		846.2

Total product net sales	$	5,708.8	$	5,347.1	$	4,819.6

Geographic Information



	Product Net Sales
	2012		2011		2010
	(in millions)
United States	$	3,478.4	$	3,221.6	$	3,017.0
Europe	1,121.4		1,086.6		931.6
Latin America	399.2		390.7		323.7
Asia Pacific	448.9		408.7		333.8
Other	260.9		239.5		213.5
Total product net sales	$	5,708.8	$	5,347.1	$	4,819.6



	Long-lived Assets				Depreciation and Amortization						Capital Expenditures
	2012		2011		2012		2011		2010		2012		2011		2010
	(in millions)
United States	$	3,718.6	$	3,500.9	$	194.7	$	187.9	$	202.2	$	75.7	$	63.6	$	62.8
Europe	538.6		502.0		48.1		50.3		42.0		59.5		46.3		29.3
Latin America	55.6		59.4		8.4		9.8		8.3		6.0		6.6		6.7
Asia Pacific	53.8		53.3		4.6		4.5		3.8		2.0		2.1		3.9
Other	2.2		2.8		0.8		0.9		0.8		0.1		—		0.1
Total	$	4,368.8	$	4,118.4	$	256.6	$	253.4	$	257.1	$	143.3	$	118.6	$	102.8

The increase in long-lived assets located in the United States at December 31, 2012 compared to December 31, 2011 is primarily due to an increase in intangible assets and goodwill related to the acquisition of SkinMedica completed in the fourth quarter of 2012.

F- 46

Table of Contents

ALLERGAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 16: Earnings Per Share

The table below presents the computation of basic and diluted earnings per share:



	Year Ended December 31,
	2012		2011		2010
	(in millions, except per share amounts)

Net earnings attributable to Allergan, Inc.	$	1,098.8	$	934.5	$	0.6

Weighted average number of shares outstanding	301.5		304.4		303.4
Net shares assumed issued using the treasury stock method for options and non-vested equity shares and share units outstanding during each period based on average market price	5.6		5.5		4.3
Dilutive effect of assumed conversion of convertible notes outstanding	—		0.3		0.3
Diluted shares	307.1		310.2		308.0

Earnings per share attributable to Allergan, Inc. stockholders:
Basic	$	3.64	$	3.07	$	0.00
Diluted	$	3.58	$	3.01	$	0.00

For the year ended December 31, 2012, options to purchase 5.5 million shares of common stock at exercise prices ranging from $75.58 to $92.90 per share were outstanding but were not included in the computation of diluted earnings per share because the effect from the assumed exercise of these options calculated under the treasury stock method would be anti-dilutive.

For the year ended December 31, 2011, options to purchase 4.8 million shares of common stock at exercise prices ranging from $62.71 to $84.40 per share were outstanding but were not included in the computation of diluted earnings per share because the effect from the assumed exercise of these options calculated under the treasury stock method would be anti-dilutive.

For the year ended December 31, 2010, options to purchase 8.5 million shares of common stock at exercise prices ranging from $47.10 to $73.04 per share were outstanding but were not included in the computation of diluted earnings per share because the effect from the assumed exercise of these options calculated under the treasury stock method would be anti-dilutive.

Note 17: Subsequent Events

On January 22, 2013 , the Company announced that it has entered into a definitive merger agreement with MAP Pharmaceuticals, Inc. (MAP) whereby the Company expects to acquire 100% of the shares of MAP for a price of $25.00 per share. The transaction would be accomplished pursuant to a cash tender offer followed by a second step merger. The per share cash offer price represents a total equity value of approximately $958 million , on a fully-diluted basis. The acquisition is expected to close late in the first quarter or in the second quarter of 2013. MAP is a biopharmaceutical company focused on developing and commercializing new therapies in Neurology, including Levadex ^® , an orally inhaled drug for the potential acute treatment of migraine in adults. Levadex ^® is currently under review with the FDA.

On February 1, 2013, the Company completed its previously announced review of strategic options for maximizing the value of its obesity intervention business, and has formally committed to pursue a sale of that business unit. The Company currently expects to execute a signed agreement in the first half of 2013. As a result of the Company's approved plan to sell its obesity intervention business unit, beginning in the first quarter of 2013, the Company expects to report the financial results from that business unit in discontinued operations in its statement of earnings and balance sheet, and intends to retrospectively adjust its prior period statements of earnings and its balance sheet as of December 31, 2012 to reflect the classification of assets and liabilities held for sale as discontinued operations. In the first quarter of 2013, the Company expects to report income from discontinued operations and a separate expected disposal loss from the write-down to fair value of the net assets held for sale. The Company is currently unable to estimate the range of the expected disposal loss.

F- 47

Table of Contents

ALLERGAN, INC.

QUARTERLY RESULTS (UNAUDITED)



	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total Year
	(in millions, except per share data)
2012
Product net sales	$	1,365.7	$	1,467.4	$	1,391.1	$	1,484.6	$	5,708.8
Total revenues	1,391.9		1,491.4		1,413.9		1,508.9		5,806.1
Operating income	354.4		438.9		354.0		466.0		1,613.3
Earnings before income taxes (a)	324.8		428.4		330.8		449.3		1,533.3
Net earnings	230.3		296.4		250.6		325.2		1,102.5
Net earnings attributable to Allergan, Inc.	229.8		295.4		249.4		324.2		1,098.8
Basic earnings per share attributable to Allergan, Inc. stockholders	0.76		0.98		0.83		1.08		3.64
Diluted earnings per share attributable to Allergan, Inc. stockholders	0.74		0.96		0.82		1.06		3.58

2011
Product net sales	$	1,252.8	$	1,400.4	$	1,311.1	$	1,382.8	$	5,347.1
Total revenues	1,271.2		1,417.2		1,328.4		1,402.3		5,419.1
Operating income	247.5		363.2		344.4		410.0		1,365.1
Earnings before income taxes (b)	215.2		344.0		356.8		383.7		1,299.7
Net earnings	158.8		248.6		251.0		279.7		938.1
Net earnings attributable to Allergan, Inc.	158.3		246.6		249.8		279.8		934.5
Basic earnings per share attributable to Allergan, Inc. stockholders	0.52		0.81		0.82		0.92		3.07
Diluted earnings per share attributable to Allergan, Inc. stockholders	0.51		0.79		0.81		0.90		3.01

——————————

(a) Includes 2012 pre-tax charges for the following items:



	Quarter
	First		Second			Third		Fourth			Total
	(in millions)
Amortization of intangible assets	$	31.6	$	33.3		$	33.2	$	33.2		$	131.3
Aggregate charges (reversal) for external costs for stockholder derivative and tax litigation associated with the U.S. Department of Justice (DOJ) settlement and other legal contingency expenses	9.4		(1.0		)	0.5		0.8			9.7
Expenses (income) from changes in fair value of contingent consideration	0.6		12.8			2.4		(10.4		)	5.4
Upfront payments for technologies that have not achieved regulatory approval	—		—			62.5		—			62.5
Impairment of an in-process research and development asset and a prepaid royalty asset	—		—			—		22.3			22.3
Restructuring charges	—		0.9			3.8		1.0			5.7
Unrealized loss (gain) on derivative instruments, net	12.5		(4.4		)	7.1		0.1			15.3

——————————

F- 48

Table of Contents

ALLERGAN, INC.

QUARTERLY RESULTS (UNAUDITED) - (Continued)

(b) Includes 2011 pre-tax charges for the following items:



	Quarter
	First		Second			Third			Fourth		Total
	(in millions)
Amortization of intangible assets	$	32.5	$	31.2		$	31.9		$	32.0	$	127.6
External costs for stockholder derivative litigation associated with the DOJ settlement	1.6		0.7			0.8			0.3		3.4
Expenses from changes in fair value of contingent consideration	—		2.3			—			9.6		11.9
Impairment of an in-process research and development asset	—		—			4.3			—		4.3
Upfront and milestone payments for technologies that have not achieved regulatory approval	60.0		45.0			20.0			—		125.0
Additional costs for the termination of a third-party agreement related to the promotion of Sanctura XR ^®	—		3.3			—			—		3.3
Cumulative net expense resulting from the discontinued development of the Easyband ^™ Remote Adjustable Gastric Band System	9.0		(0.1		)	—			—		8.9
Restructuring charges (reversal)	4.6		0.1			(0.1		)	—		4.6
Non-cash interest expense associated with amortization of convertible debt discount	6.5		0.8			—			—		7.3
Unrealized loss (gain) on derivative instruments, net	6.9		(2.1		)	(16.8		)	0.9		(11.1		)

F- 49

Table of Contents

SCHEDULE II

ALLERGAN, INC.

VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2012, 2011 and 2010



Allowance for Doubtful Accounts Deducted from Trade Receivables	Balance at Beginning of Year		Additions (a)		Deductions (b)			Balance at End of Year
	(in millions)
2012	$	31.9	$	1.0	$	(4.6	)	$	28.3
2011	29.0		7.2		(4.3		)	31.9
2010	30.3		5.3		(6.6		)	29.0

——————————


(a)	Provision charged to earnings.


(b)	Accounts written off, net of recoveries.

F- 50

EXHIBIT 10.15

FINAL

ALLERGAN, INC.

PENSION PLAN

RESTATEMENT
January 1, 2013

TABLE OF CONTENTS



		Page



ARTICLE I	INTRODUCTION		1
	1.1	Plan Name	1
	1.2	Plan Purpose	1
	1.3	Effective Date of 2013 Restated Plan	1
	1.4	Amendments to Plan	1
	1.5	Plan Qualification	3
ARTICLE II	DEFINITIONS		4
	2.1	Accrued Benefit	4
	2.2	Active Participant	4
	2.3	Actuarial Equivalent	4
	2.4	Affiliated Company	4
	2.5	Age	4
	2.6	Annuity Starting Date	4
	2.7	Average Earnings	4
	2.8	Beneficiary	5
	2.9	Benefit Year	5
	2.10	Board of Directors	5
	2.11	Code	5
	2.12	Committee	5
	2.13	Company	5
	2.14	Earnings	5
	2.15	Effective Date	7
	2.16	Eligibility Computation Period	7
	2.17	Eligible Employee	7
	2.18	Eligible Retirement Plan	8
	2.19	Eligible Rollover Distribution	8
	2.20	Employee	9
	2.21	Employment Commencement Date	9
	2.22	ERISA	9
	2.23	Fund	9
	2.24	Highly Compensated Employee	10
	2.25	Hour of Service	11
	2.26	Investment Manager	11
	2.27	Leased Employee	11
	2.28	Normal Retirement Date	11
	2.29	Participant	11
	2.30	Period of Severance	11
	2.31	Plan	11
	2.32	Plan Administrator	11
	2.33	Plan Year	12

TABLE OF CONTENTS

(continued)



		Page



	2.34	Primary Social Security Benefit	12
	2.35	Qualified Joint and Survivor Annuity	12
	2.36	Reemployment Commencement Date	12
	2.37	Severance	12
	2.38	Severance Date	13
	2.39	Single Life Annuity	13
	2.40	SKB Plan	13
	2.41	Special Retirement Eligibility Date	13
	2.42	Spin-Off Date	13
	2.43	Sponsor	14
	2.44	Trust	14
	2.45	Trustee	14
	2.46	Vesting Year	14
ARTICLE III	PARTICIPATION		15
	3.1	Participation for the 2003 Plan Year and thereafter	15
	3.2	Participation for the 2002 Plan Year	15
	3.3	Participation prior to the 2002 Plan Year	15
ARTICLE IV	ACCRUAL OF BENEFITS		16
	4.1	Accrued Benefit Formula	16
	4.2	Minimum Accrued Benefit	16
	4.3	Accrued Benefit for Participants with Earnings in excess of $150,000 prior to January 1, 1994	16
	4.4	Accrued Benefit for Participants participating in the Voluntary Early Retirement Incentive Program (“VERI”)	17
	4.5	Temporary Supplemental Monthly Benefit for Participants participating in the Voluntary Early Retirement Incentive Program	17
ARTICLE V	BENEFITS		19
	5.1	Normal Retirement	19
	5.2	Postponed Retirement	19
	5.3	Early Retirement	19
	5.4	Termination of Employment	22
	5.5	Consent to Pension Payments	22
	5.6	Maximum Pension	23
	5.7	Defined Benefit Fraction and Defined Contribution Fraction	27
	5.8	Mandatory Commencement of Benefits	28
	5.9	Reemployment	29
	5.10	Other Disabled Participants	30
	5.11	Nonforfeitable Interest	30
	5.12	Compensation for Maximum Pension	31
ARTICLE VI	FORM OF PENSIONS		32
	6.1	Unmarried Participants	32

TABLE OF CONTENTS

(continued)



		Page



	6.2	Married Participants	32
	6.3	Election of Optional Form of Benefit	32
	6.4	Optional Forms of Benefit	33
	6.5	Cash-Outs	35
	6.6	Retroactive Annuity Starting Dates	35
ARTICLE VII	PRE-RETIREMENT DEATH BENEFITS		37
	7.1	Eligibility	37
	7.2	Spousal Benefit	37
	7.3	Alternate Death Benefit	38
	7.4	Children’s Survivor Benefit	38
	7.5	Waiver of Spousal Benefit	39
ARTICLE VIII	CONTRIBUTIONS		40
	8.1	Company Contributions	40
	8.2	Source of Benefits	40
	8.3	Irrevocability	40
	8.4	Funding-Based Limits on Benefits and Benefit Accruals	42
ARTICLE IX	ADMINISTRATION		47
	9.1	Appointment of Committee	47
	9.2	Appointment of Subcommittee	47
	9.3	Transaction of Business	47
	9.4	Voting	48
	9.5	Responsibility of Committees	48
	9.6	Committee Powers	48
	9.7	Additional Powers of Committee	49
	9.8	Subcommittee Powers	49
	9.9	Periodic Review of Funding Policy	50
	9.10	Claims Procedures	51
	9.11	Appeals Procedures	51
	9.12	Limitation on Liability	52
	9.13	Indemnification and Insurance	52
	9.14	Compensation of Committee and Plan Expenses	52
	9.15	Resignation	53
	9.16	Reliance Upon Documents and Opinions	53
	9.17	Appointment of Investment Manager	53
ARTICLE X	AMENDMENT AND ADOPTION OF PLAN		55
	10.1	Right to Amend Plan	55
	10.2	Adoption of Plan by Affiliated Companies	55
ARTICLE XI	TERMINATION AND MERGER		56
	11.1	Right to Terminate Plan	56
	11.2	Merger Restriction	56

TABLE OF CONTENTS

(continued)



		Page



	11.3	Effect on Trustee and Committee	56
	11.4	Effect of Reorganization, Transfer of Assets or Change in Control	56
	11.5	Termination Restrictions	58
ARTICLE XII	TOP-HEAVY RULES		60
	12.1	Applicability	60
	12.2	Definitions	60
	12.3	Top-Heavy Status	61
	12.4	Minimum Benefit	62
	12.5	Maximum Benefit	63
	12.6	Minimum Vesting Rules	65
	12.7	Noneligible Employees	65
ARTICLE XIII	RESTRICTION ON ASSIGNMENT OR OTHER ALIENATION OF PLAN BENEFITS		66
	13.1	General Restrictions Against Alienation	66
	13.2	Qualified Domestic Relations Orders	66
ARTICLE XIV	MISCELLANEOUS		69
	14.1	No Right of Employment Hereunder	69
	14.2	Effect of Article Headings	69
	14.3	Limitation on Company Liability	69
	14.4	Interpretation	69
	14.5	Withholding For Taxes	69
	14.6	California Law Controlling	69
	14.7	Plan and Trust as One Instrument	69
	14.8	Invalid Provisions	69
	14.9	Counterparts	69
	14.10	Forfeitures	70
	14.11	Facility of Payment	70
	14.12	Lapsed Benefits	70
	14.13	Correction of Errors	70
APPENDIX A			1
APPENDIX B			1
APPENDIX C			1

ALLERGAN, INC.
PENSION PLAN

ARTICLE I

INTRODUCTION

1.1 Plan Name . This document, made and entered into by Allergan, Inc., a Delaware corporation (“Allergan”) amends and restates in its entirety the “Allergan, Inc. Pension Plan (Restated 2011)” and shall be known hereafter as the “Allergan, Inc. Pension Plan (Restated 2013).”

1.2 Plan Purpose . The purpose of the Allergan, Inc. Pension Plan (Restated 2013), hereinafter referred to as the “Plan,” is to provide additional retirement income to Eligible Employees of Allergan, and any Affiliated Companies that are authorized by the Board of Directors of Allergan to participate in the Plan for their future economic security. The Plan is fully funded through Company contributions and the assets of the Plan shall be administered, distributed, forfeited and otherwise governed by the provisions of the Plan, which is to be administered by the Committee for the exclusive benefit of Participants in the Plan and their Beneficiaries.

1.3 Effective Date of 2013 Restated Plan . The Effective Date of this amended and restated Plan shall be January 1, 2013 unless otherwise specified in the Plan. The provisions of this Plan document apply to Eligible Employees who have completed at least one (1) Hour of Service for Allergan or any Affiliated Companies on or after January 1, 2013 and the rights and benefits, if any, of Eligible Employees or Participants whose employment with Allergan or any Affiliated Companies terminated prior to January 1, 2013 shall be determined in accordance with the provisions of the Plan then in effect unless otherwise provided herein and subject to any modification provided herein that may affect the payment of benefits under the Plan.

1.4 Amendments to Plan . The Plan has been amended from time to time since its Original Effective Date of July 26, 1989 to reflect changes in the Plan’s operations and applicable law including, but not limited to, the following:

(a) This Plan document for the Allergan, Inc. Pension Plan (Restated 2013) which restates the Plan to incorporate the provisions of the First and Second Amendments to the Allergan, Inc. Pension Plan (Restated 2011), which amended the Plan to reflect changes made by the Internal Revenue Code for a New Puerto Rico, revise the definition of “Earnings” to remove amounts deferred under the Executive Deferred Compensation Plan, incorporate certain provisions enacted under the Worker, Retiree, and Employer Recovery Act of 2008, and to comply with the changes to the qualification requirements listed on the “2011 Cumulative List of Changes in Plan Qualification Requirements” as set forth in Notice 2011-97.

(b) The Plan document for the Allergan, Inc. Pension Plan (Restated 2011), that incorporated the provisions of the First, Second, and Third Amendments to the Allergan, Inc. Pension Plan (Restated 2008) and amended the Plan: (i) to comply with certain changes

made by the Pension Protection Act (including authorizing rollovers to Roth IRAs, adding funding-based limitations under Code section 436 and reflecting new actuarial assumptions applicable under Code sections 417(e)(3) and 415) and the Heroes Earnings and Assistance Relief Tax Act of 2008, conformed Plan language with the updated Treasury Regulations issued under Code section 415, revised the definition of Compensation for Code section 415 purposes to include payments made to an Employee for services rendered during the course of employment and paid within two and a half months of Severance, changed the normal form of qualified joint and survivor annuity from 50% to 100%, and clarified that the children’s survivor benefit will equal the amount that would be paid to a spouse as a 50% joint and survivor annuity; and (ii) amended the Plan to change the “stability period” and “lookback month” used for interest rate assumptions under Code section 417(e)(3) for Annuity Starting Dates on and after January 1, 2011.

(c) The Plan document for the Allergan, Inc. Pension Plan (Restated 2008) that incorporated the provisions of the First and Second Amendments to the Allergan, Inc. Pension Plan (Restated 2005) and amended the Plan: (i) to comply with all changes made by the Economic Growth and Tax Relief Reconciliation Act of 2001 (with technical corrections made by the Job Creation and Worker Assistance Act of 2002), the Pension Funding Equity Act of 2004, the American Jobs Creation Act of 2004, and the Gulf Opportunity Zone Act of 2005 as well as the changes to the qualification requirements listed on the “2006 Cumulative List of Changes in Plan Qualification Requirements” as set forth in Notice 2007-3, (ii) to comply with certain changes made by the Pension Protection Act of 2006 by (1) adding a 75% contingent beneficiary payment option, (2) extending the distribution election period from 90 days to up to 180 days and providing that distribution elections will include an explanation of a Participant’s right to defer and the effect of deferring benefit payment, and (3) permitting non-spouse beneficiaries to elect direct rollovers of lump sum distributions, and (iii) to clarify certain operational provisions regarding, including but not limited to, the pension amount paid for benefit commencement dates after age 65.

(d) The Plan document for the Allergan, Inc. Pension Plan (Restated 2005) that incorporated the provisions of the amendments made under the First and Second Amendments to the Allergan, Inc. Pension Plan (Restated 2003) and amended the Plan to eliminate the mandatory cash-out of Accrued Benefits that do not exceed $5,000 effective March 28, 2005.

(e) Amendments to the Plan that (i) limited participation in the Plan to those Employees who were Eligible Employees (as defined in Section 2.17(b)) on September 30, 2002 who made a one-time irrevocable election to continue active participation in the Plan for Plan Years beginning on and after January 1, 2003 until their participation is terminated under the terms of the Plan in lieu of ceasing active participation in the Plan and participating in the Retirement Contribution feature of the Allergan, Inc. Savings and Investment Plan as provided under and subject to the terms of that plan and (ii) provided further that those Employees who elected to cease active participation in the Plan: (1) shall not be credited with Benefit Years after December 31, 2002 but shall continue to be credited with Vesting Years as provided under the terms of the Plan and (2) shall be entitled to a monthly pension

upon completing five (5) Vesting Years or upon reaching the Special Retirement Eligibility Date and completing one (1) Vesting Year, the amount of which shall be equal to their Accrued Benefit determined as of December 31, 2002, at such times and in such forms as permitted under the Plan.

(f) Amendments to the Plan that in connection with the distribution of the stock of Advanced Medical Optics, Inc. (“AMO”) by Allergan to its stockholders on June 29, 2002, provided that (i) AMO Employees (as defined in Section 2.20) shall cease to be eligible to participate in the Plan and shall cease to be credited with Benefit Years and Vesting Years under the Plan, (ii) AMO Employees shall have a nonforfeitable interest in their Accrued Benefits notwithstanding Section 5.11, and (iii) the assets attributable to, and the liabilities relating to, arising out of, or resulting from the Accrued Benefits of AMO Employees shall remain with the Pension Plan and shall be payable from the Plan to AMO Employees at such times and in such forms as permitted under the Plan.

(g) Amendments to the Plan that in connection with the closure of the Allergan, Inc. Medical Plastics facility in Santa Ana, California (“Medical Plastics”), provided that (i) Participants whose employment is terminated as a result of the closure of Medical Plastics, as determined by the payroll records of the Sponsor or any Affiliated Company shall have a nonforfeitable interest in their Accrued Benefits notwithstanding Section 5.11 effective as of their termination dates, and (ii) the Accrued Benefits of such Participants shall be payable from the Plan to such Participants at such times and in such forms as permitted under the Plan.

1.5 Plan Qualification . The Plan is an employee benefit plan that is intended to qualify under Code Section 401(a) as a qualified pension plan so as to assure that the trust created under the Plan is tax exempt pursuant to Code Section 501(a). The Plan’s last determination letter was issued by the Internal Revenue Service on September 22, 2010 with respect to the Allergan, Inc. Pension Plan (Restated 2008). This Plan document is intended to reflect all law changes made by the Pension Protection Act of 2006, the Heroes Earnings Assistance and Relief Tax Act of 2008 (the “HEART Act”), the Worker, Retiree and Employer Recovery Act of 2008 (“WRERA”), as well as the changes to the qualification requirements listed on the “2011 Cumulative List of Changes in Plan Qualification Requirements” as set forth in Notice 2011-97.

ARTICLE II

DEFINITIONS

2.1 Accrued Benefit . “Accrued Benefit” shall mean, for each Participant, the amount of pension accrued by him or her under Article IV as of the date of reference. An Accrued Benefit shall only be payable in accordance with Articles V and VII.

2.2 Active Participant . “Active Participant” shall mean a Participant who is an Eligible Employee.

2.3 Actuarial Equivalent . “Actuarial Equivalent” shall mean a benefit of equal actuarial value under the assumptions set forth in Appendix A.

2.4 Affiliated Company . “Affiliated Company” shall mean (i) any corporation, other than the Sponsor, which is included in a controlled group of corporations (within the meaning of Code Section 414(b)) of which the Sponsor is a member, (ii) any trade or business, other than the Sponsor, which is under common control (within the meaning of Code Section 414(c)) with the Sponsor, (iii) any entity or organization, other than the Sponsor, which is a member of an affiliated service group (within the meaning of Code Section 414(m)) of which the Sponsor is a member, and (iv) any entity or organization, other than the Sponsor, which is affiliated with the Sponsor under Code Section 414(o). An entity shall be an Affiliated Company pursuant to this Section only during the period of time in which such entity has the required relationship with the Sponsor under clauses (i), (ii), (iii) or (iv) of this Section after the Original Effective Date of the Plan.

Notwithstanding any provision of the Plan to the contrary, effective as of January 1, 2011, for purposes of determining the entities considered “Affiliated Companies” under the Puerto Rico Code, the rules of Section 1081.01(a)(14) shall be followed to the extent adherence to such rules does not conflict with the Code.

2.5 Age . “Age” shall mean a Participant’s age at his or her most recent birthday.

2.6 Annuity Starting Date . “Annuity Starting Date” shall mean the first day of the first period for which a Participant’s pension is paid as an annuity or as any other optional form of benefit.

2.7 Average Earnings . “Average Earnings” shall mean, for each Participant, 12 times the monthly average of his or her Earnings for the 60 consecutive months that yield the highest average. For purposes of this Section, (i) nonconsecutive months interrupted only by months in which a Participant has no Earnings shall be treated as consecutive and (ii) unless the Sponsor expressly determines otherwise, and except as is expressly provided otherwise in the Plan or in resolutions of the Board of Directors, amounts paid to a Participant by a domestic Affiliated Company prior to the effective date on which it became an Affiliated Company (that would have been Earnings if paid by the Company) before he or she became a Participant shall be treated as Earnings but only to the extent such Earnings when added to the Earnings actually paid by the Company do not result in more than 60 consecutive months of Earnings. If a Participant does not

have Earnings for 60 consecutive months, his or her Average Earnings shall be 12 times the monthly average of his or her Earnings. For periods beginning on or after April 1, 2000, a partial month of employment shall be taken into account only if doing so yields a higher monthly average.

2.8 Beneficiary . “Beneficiary” or “Beneficiaries” shall mean the person or persons last designated by the Participant to receive the interest of a deceased Participant.

2.9 Benefit Year . “Benefit Year” shall mean a credit used to measure a Participant’s service in calculating his or her Accrued Benefit. Each Participant shall be credited with a number of Benefit Years equal to 1/365th of (i) the aggregate number of days between his or her Employment Commencement Date (or Reemployment Commencement Date) of the Employee and the Severance Date which immediately follows that Employment Commencement Date (or Reemployment Commencement Date) and (ii) the aggregate number of days during a Period of Severance of less than 30 days, but in each case, disregarding any day such Participant is not an Active Participant and, for periods beginning on or after January 1, 2003, any day such Participant is on an “Extended Leave of Absence” as such term is defined in the Allergan, Inc. Welfare Benefits Plan.

2.10 Board of Directors . “Board of Directors” shall mean the Board of Directors of the Sponsor (or its delegate) as it may from time to time be constituted.

2.11 Code . “Code” shall mean the United States Internal Revenue Code of 1986 and the regulations thereunder. Effective January 1, 2011, “Puerto Rico Code” shall mean the Internal Revenue Code for a New Puerto Rico and the regulations thereunder. Reference to a specific United States Internal Revenue Code Section or Internal Revenue Code for a New Puerto Rico Section shall be deemed also to refer to any applicable regulations under that Section, and shall also include any comparable provisions of future legislation that amend, supplement or supersede that specific Section.

2.12 Committee . “Committee” shall mean the committee (or its delegate) appointed under the provisions of Section 9.1 to administer the Plan.

2.13 Company . “Company” shall mean collectively the Sponsor and each Affiliated Company that adopts the Plan in accordance with Section 10.2.

2.14 Earnings . “Earnings” shall mean the following:

(a) Earnings shall include 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), shift differential and premium, sickness/accident related pay, vacation pay, vacation shift premium, and bonus amounts paid under the (i) Sales Bonus Program, (ii) Management Bonus Plan or Executive Bonus Plan, either in cash or in restricted stock, and (iii) group performance sharing payments, such as the “Partners for Success.”

(b) Effective January 1, 2011, Earnings shall include amounts of salary reduction elected by the Employee under a Code Section 401(k) cash or deferred arrangement or a Code Section 125 cafeteria plan or a Puerto Rico Code Section 1081.01(d) cash or deferred arrangement, amounts paid to an Employee pursuant to a “split pay arrangement” between the Company and an Affiliated Company, and amounts deferred under the Executive Deferred Compensation Plan, that were otherwise payable in respect of services rendered on or before December 31, 2011.

(c) Earnings shall not include 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 (including Puerto Rico), 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; long-term incentive awards, bonuses or payments; “Impact Award” payments; “Employee of the Year” payments; “Awards for Excellence” payments; special group incentive payments and 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) and/or Puerto Rico Code Section 1081.01(d) (other than contributions constituting salary reduction amounts elected by the Employee under a Code Section 401(k) cash or deferred arrangement or a Puerto Rico Code Section 1081.01(d) 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.

(d) For purposes of this Section and notwithstanding paragraph (a) above, (i) for periods on or after January 1, 2005, Earnings shall not include lump sum amounts paid to Employees under the Company’s vacation buy-back policy, (ii) for periods beginning on or after January 1, 2003, if a Participant is not an Active Participant at any time during the month, he or she shall be deemed to have no Earnings for that month, (iii) for the period beginning on April 1, 2001 and ending on December 31, 2002, if a Participant is an Employee at any time during a month, Earnings for that month shall be the Earnings actually paid to the Participant during such month, and (iv) for periods prior to April 1, 2001, if a Participant is not an Employee for the entire month, he or she shall be deemed to have no Earnings for that month. For purposes of this Section and notwithstanding paragraphs (a) or (b) above, Earnings shall not include amounts deferred under the Executive Deferral Compensation Plan that were otherwise payable in respect of services rendered on or after January 1, 2012.

(e) Earnings shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with Code Section 401(a)(17)(B), for purposes of determining all benefits provided under the Plan. Any cost-of-living adjustments in effect for a calendar year shall apply to the Plan Year beginning with or within such calendar year. For purposes of

determining benefits provided under the Plan in a Plan Year beginning on or after January 1, 2002, Earnings for any prior Plan Year shall not exceed $200,000.

2.15 Effective Date . “Effective Date” of this restated Plan shall mean January 1, 2013 except as provided herein or as otherwise required for the Plan to continue to maintain its qualified status under Code Section 401(a). The “Original Effective Date” of the Plan shall mean July 26, 1989.

2.16 Eligibility Computation Period . “Eligibility Computation Period” shall mean a 365 day period used for determining whether an Employee is eligible to participate in the Plan. Each Employee shall be credited with (i) the aggregate number of days between each Employment Commencement Date (or Reemployment Commencement Date) of the Employee and the Severance Date which immediately follows that Employment Commencement Date (or Reemployment Commencement Date) and (ii) the aggregate number of days during a Period of Severance of less than twelve months.

2.17 Eligible Employee . “Eligible Employee” shall mean:

(a) For Plan Years beginning on or after January 1, 2003 and subject to paragraph (d) below, an Eligible Employee is any “Election Eligible Employee” who makes a one-time irrevocable election under procedures established by the Sponsor to continue as an Active Participant for Plan Years beginning on or after January 1, 2003 and who did not incur a Severance on or after October 1, 2002. An “Election Eligible Employee” is any Employee who is an Eligible Employee (as defined in paragraph (b) below) on September 30, 2002. The classification of an Employee as an Eligible Employee for Plan Years beginning on or after January 1, 2003 shall be determined solely from the records obtained during the election period established by the Sponsor.

(b) For the 2002 Plan Year only and subject to paragraph (d) below, an Eligible Employee is any Employee who is employed by the Company but not by a joint venture in which the Company is a joint venturer and whose Employment Commencement Date or most recent Reemployment Commencement Date is prior to October 1, 2002; provided, however, if a former Employee is rehired on or after October 1, 2002 but prior to January 1, 2003 and would be an Eligible Employee but for his or her Reemployment Commencement Date, he or she shall be an Eligible Employee commencing on his or her Reemployment Commencement Date but shall cease to be an Eligible Employee as of January 1, 2003. Notwithstanding the foregoing, a Leased Employee or an Employee of the Company who, as of October 1, 2002, is neither a United States citizen nor a United States resident shall not be an Eligible Employee.

(c) For Plan Years beginning prior to January 1, 2002 and subject to paragraph (d) below, an Eligible Employee is any Employee who is employed by the Company but not by a joint venture in which the Company is a joint venturer; provided, however, a Leased Employee or an Employee of the Company who is neither a United States citizen nor a United States resident shall not be an Eligible Employee.

(d) Notwithstanding paragraphs (a), (b), and (c) above, (i) an Employee with respect to whom retirement benefits have been the subject of good faith collective bargaining shall be an Eligible Employee to the extent a collective bargaining agreement relating to him or her so provides and (ii) a temporary employee classified as such by the Sponsor or an Affiliated Company shall not be an Eligible Employee for Plan Years beginning prior to January 1, 1996.

2.18 Eligible Retirement Plan . “Eligible Retirement Plan” shall mean (i) an individual retirement account or annuity described in Code Section 408(a) or 408(b) or a Roth IRA described in Code Section 408A(b), (ii) a qualified retirement plan described in Code Section 401(a) or 403(a) that accepts Eligible Rollover Distributions, (iii) an annuity contract described in Code Section 403(b) that accepts Eligible Rollover Distributions, and (iv) an eligible plan described in Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. Notwithstanding the foregoing, “Eligible Retirement Plan” shall refer only to (i) with respect to a Participant or Beneficiary who is a resident of Puerto Rico, a qualified retirement plan described in Code Section 401(a) or 403(a) that accepts Eligible Rollover Distributions and that is also a qualified plan under Puerto Rico Code Section 1081.01 and (ii) with respect to a non-spouse Beneficiary, an individual retirement account or annuity described in Code Section 408(a) or 408(b) or a Roth IRA described in Code Section 408A(b).

2.19 Eligible Rollover Distribution . “Eligible Rollover Distribution” shall mean any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution shall not include:

(a) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s designated beneficiary, or for a specified period of ten years or more;

(b) any distribution to the extent such distribution is required under Code Section 401(a)(9);

(c) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and

(d) any other distribution that is reasonably expected to total less than $200 during the year.

For purposes of this Section, ‘Distributee’ shall mean any Employee or former Employee receiving a distribution from the Plan. A Distributee also includes the Employee or former Employee’s Beneficiary and the Employee or former Employee’s spouse or former spouse who is the Alternate Payee under a Qualified Domestic Relations Order (as defined in Article XIII) with regard to the interest of the spouse or former spouse. For purposes of the Puerto Rico Code, any

distribution to a Distributee who is a resident of Puerto Rico shall be an Eligible Rollover Distribution.

2.20 Employee . “Employee” shall mean, for purposes of the Plan, any individual who is employed by the Sponsor or an Affiliated Company, any portion of whose income is subject to withholding of income tax and/or for whom Social Security contributions are made by the Sponsor or an Affiliated Company; provided, however, that such term shall not include:

(a) Any individual who performs services for the Sponsor or an Affiliated Company and who is classified or paid as an independent contractor as determined by the payroll records of the Sponsor or an Affiliated Company even if a court or administrative agency determines that such individual is a common-law employee and not an independent contractor;

(b) 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; and

(c) Any individual whose employment is transferred from the Sponsor or an Affiliated Company to Advanced Medical Optics, Inc. (“AMO”) in connection with the distribution of the stock of AMO by the Sponsor to its stockholders, effective as of the day following such transfer, hereinafter referred to as an “AMO Employee.” An individual is an AMO Employee if classified or identified as such in the payroll records of the Sponsor or an Affiliated Company or in the Employee Matters Agreement entered into between the Sponsor and AMO.

Effective January 1, 2009, solely to the extent required by Code Section 414(u)(12), the term “Employee” shall include an individual receiving differential wage payments (within the meaning of Code Section 414(u)(12)(D)) from the Sponsor or an Affiliated Company.

2.21 Employment Commencement Date . “Employment Commencement Date” shall mean the date on which an Employee is first credited with an Hour of Service for the Sponsor or an Affiliated Company. An Employee shall not, for the purpose of determining his or her Employment Commencement Date, be deemed to have commenced employment with an Affiliated Company prior to the effective date on which the entity became an Affiliated Company unless the Sponsor expressly determines otherwise, and except as is expressly provided otherwise in the Plan, in Appendix C to the Plan, or in resolutions of the Board of Directors.

2.22 ERISA . “ERISA” shall mean the Employee Retirement Income Security Act of 1974 and the regulations thereunder. Reference to a specific ERISA Section shall be deemed also to refer to any applicable regulations under that Section, and shall also include any comparable provisions of future legislation that amend, supplement or supersede that specific Section.

2.23 Fund . “Fund” shall mean the assets accumulated for purposes of the Plan.

2.24 Highly Compensated Employee . “Highly Compensated Employee” shall mean:

(a) An Employee who performed services for the Company during the Plan Year or preceding Plan Year and is a member of one or more of the following groups:

(i) Employees who at any time during the Plan Year or preceding Plan Year are or were Five Percent Owners (as defined in Section 12.2).

(ii) Employees who received Compensation during the preceding Plan Year from the Company in excess of $80,000 (as adjusted in such manner as permitted under Code Section 414(q)(1)).

(b) The term “Highly Compensated Employee” includes a Former Highly Compensated Employee. A Former Highly Compensated Employee is any Employee who was (i) a Highly Compensated Employee when he or she terminated employment with the Company 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 Five Percent Owner (as defined in Section 12.2).

(c) For the purpose of this Section, the term “Compensation” means compensation as defined in Code Section 415(c)(3), as set forth in Section 5.12.

(d) For the purpose of this Section, the term “Company” shall mean the Sponsor and any Affiliated Company.

(e) Effective January 1, 2011, an Employee is a Highly Compensated Employee under the Puerto Rico Code if such Employee performed services for the Company during the Plan Year and meets one or more of the following criteria:

(i) such Employee is an officer of the Company at any time during the Plan Year;

(ii) such Employee is, at any time during the Plan Year, an owner of more than 5% of stock with voting rights or of the value of all classes of stock of the Company. For purposes of this Subsection (ii), the controlled group rules of Section 1010.04 of the Puerto Rico Code, the affiliated entity rules of Section 1010.05 of the Puerto Rico Code and the affiliated service group rules of Section 1081.01(a)(14) of the Puerto Rico Code shall be used in computing the ownership percentage; and

(iii) such Employee received Compensation during the preceding Plan Year from the Company in excess of the limit under Code Section 414(q)(1)(B).

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 applicable regulations to the extent permitted thereunder.

2.25 Hour of Service . “Hour of Service” shall mean an hour for which an Employee is paid or entitled to payment for the performance of duties for the Sponsor and any Affiliated Company.

2.26 Investment Manager . “Investment Manager” shall mean the one or more Investment Managers, if any, that are appointed pursuant to the provisions of Section 9.15 and who constitute investment managers under Section 3(38) of ERISA.

2.27 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 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 to a Leased Employee by a 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.

2.28 Normal Retirement Date . “Normal Retirement Date” shall mean the date a Participant attains age 65.

2.29 Participant . “Participant” shall mean: (i) an Active Participant, or (ii) a former Active Participant who is eligible for an immediate or deferred benefit under Article V.

2.30 Period of Severance . “Period of Severance” shall mean the period of time commencing on an Employee’s Severance Date and ending on the Employee’s subsequent Reemployment Commencement Date, if any.

2.31 Plan . “Plan” shall mean the Allergan, Inc. Pension Plan described herein and as amended from time to time.

2.32 Plan Administrator . “Plan Administrator” shall mean the administrator of the Plan within the meaning of Section 3(16)(A) of ERISA. The Plan Administrator shall be the Allergan Executive Committee whose members are appointed by the Board of Directors pursuant to the provisions of Section 9.1 to administer the Plan.

2.33 Plan Year . “Plan Year” shall mean the calendar year. The Plan Year shall be the limitation year for purposes of computing limitations on contributions, benefits and allocations.

2.34 Primary Social Security Benefit . “Primary Social Security Benefit” shall mean for purposes of determining a Participant’s Accrued Benefit:

(a) for an Employee whose Severance occurs on or after the date he or she attains Age 62, the immediate benefit that is or would have been payable to him or her at Age 65 or his or her actual retirement, if earlier, under the Social Security Act (or foreign equivalent) as then in effect; or

(b) for an Employee whose Severance occurs prior to Age 62, the benefit that would be payable to him or her at Age 62 under the Social Security Act (or foreign equivalent) as in effect when he or she incurs a Severance, without adjustments for cost of living, projected on the assumption that for each month before Age 60, he or she continues to receive wages for Social Security purposes equal to one-twelfth of his or her Earnings for the calendar year preceding the year in which his or her Severance occurs, and that he or she shall receive no further wages for Social Security purposes after the later of Age 60 or his or her actual Severance.

2.35 Qualified Joint and Survivor Annuity . “Qualified Joint and Survivor Annuity” shall mean the form of pension benefit described in this Section. Under a Qualified Joint and Survivor Annuity, monthly payments to the Participant shall begin on the date provided in Article V and continue until the last day of the month in which the Participant’s death occurs. On the first day of the following month, monthly payments in an amount equal to 100% of the monthly payment to the Participant which is attributable to his or her Accrued Benefit shall begin to his or her surviving spouse but only if the spouse was married to the Participant on the date as of which payments to the Participant began. Payments to a surviving spouse under a Qualified Joint and Survivor Annuity shall end on the last day of the month in which the spouse’s death occurs. The anticipated payments under a Qualified Joint and Survivor Annuity shall be the actuarial equivalent of a pension in the form of a Single Life Annuity in the amount set forth in Article V.

2.36 Reemployment Commencement Date . “Reemployment Commencement Date” shall mean, in the case of an Employee who incurs a Severance and who is subsequently reemployed by the Sponsor or an Affiliated Company, the first day following the Severance on which the Employee is credited with an Hour of Service for the Sponsor or an Affiliated Company with respect to which he or she is compensated or entitled to compensation by the Sponsor or an Affiliated Company. An Employee shall not, for the purpose of determining his or her Reemployment Commencement Date, be deemed to have commenced employment with an Affiliated Company prior to the effective date on which the entity became an Affiliated Company unless the Sponsor shall expressly determine otherwise, and except as is expressly provided otherwise in the Plan or in resolutions of the Board of Directors.

2.37 Severance . “Severance” shall mean the termination of an Employee’s employment with the Sponsor or an Affiliated Company by reason of such Employee’s death, retirement,

resignation or discharge, or otherwise. For purposes of determining a Participant’s Vesting Years and Benefit Years, such Participant shall not incur a Severance by reason of the following:

(a) absence due to service in the Armed Forces of the United States, if: (i) the Employee makes application to the Company for resumption of work with the Company, following discharge, within the time specified by then applicable law or absence due to qualified military service if so required by Code Section 414(u); or (ii) solely for the purpose of determining Vesting Years, the Participant dies on or after January 1, 2007 while performing “qualified military service,” as defined in Code Section 414(u)(5);

(b) absence resulting from temporary disability on account of illness or accident;

(c) absence while covered by a long term disability plan maintained by the Company that is prior to the earlier of (i) a Participant’s Normal Retirement Date (or, if later, such date the Participant is no longer classified as an Eligible Employee as determined by the payroll records of the Sponsor or Affiliated Company or (ii) the date his or her pension under the Plan commences, provided that the Participant has at least five (5) Vesting Years as of the first date of such absence; or

(d) such other types of absence as the Company may determine by uniform policy.

2.38 Severance Date . “Severance Date” shall mean, in the case of any Employee who incurs a Severance, the day on which such Employee is deemed to have incurred such Severance as determined in accordance with the provisions of Section 2.37. In the case of any Employee who incurs a Severance as provided under Section 2.37 and who is entitled to a subsequent payment of compensation for reasons other than future services (e.g., as back pay for past services rendered or as payments in the nature of severance pay), the Severance Date of such Employee shall be as of the effective date of the Severance event (e.g., the date of his or her death, effective date of a resignation or discharge, etc.), and the subsequent payment of the aforementioned type of post-Severance compensation shall not operate to postpone the timing of the Severance Date for purposes of the Plan except as provided in Section 2.37.

2.39 Single Life Annuity . “Single Life Annuity” shall mean the form of pension benefit described in this Section. Under a Single Life Annuity, monthly payments to the Participant shall begin on the date provided in Article V and continue until the last day of the month in which the Participant’s death occurs.

2.40 SKB Plan . “SKB Plan” shall mean the Retirement Plan for Employees of SmithKline Beckman Corporation.

2.41 Special Retirement Eligibility Date . “Special Retirement Eligibility Date” shall mean the date a Participant attains age 62.

2.42 Spin-Off Date . “Spin-Off Date” shall mean on or about July 26, 1989, SmithKline Beckman Corporation distributed the stock of the Sponsor to its shareholders, rendering Eligible

Employees of the Company ineligible to participate in the SKB Plan. The liability for the accrued benefits of Eligible Employees under the SKB Plan and assets sufficient to satisfy applicable legal requirements were transferred to the Plan in November of 1989. The benefits which were previously provided by the SKB Plan for former employees of Company who terminated prior to the Spin-Off Date shall be paid under the Plan.

2.43 Sponsor . “Sponsor” shall mean Allergan, Inc., a Delaware corporation, and any successor corporation or entity.

2.44 Trust . “Trust” or” Trust Fund” shall mean the one or more trusts created for funding purposes under the Plan.

2.45 Trustee . “Trustee” shall mean the individual or entity acting as a trustee of the Trust Fund.

2.46 Vesting Year . “Vesting Year” shall mean a credit awarded as follows:

(a) In the case of any Employee who was employed by the Sponsor or an Affiliated Company at any time prior to the Original Effective Date, for the period prior to the Original Effective Date, such Employee shall be credited with that number of Vesting Years under this Plan equal to the number of Vesting Years (as that term is defined in the SKB Plan) credited to such Employee under the SKB Plan as of the Original Effective Date.

(b) In the case of any Employee who is employed by the Sponsor or an Affiliated Company on or after the Original Effective Date, an Employee shall be credited with a number of Vesting Years equal to 1/365th of (i) the aggregate number of days between each Employment Commencement Date (or Reemployment Commencement Date) of the Employee and the Severance Date which immediately follows that Employment Commencement Date (or Reemployment Commencement Date) and (ii) the aggregate number of days for any Period of Severance of less than twelve months. Solely for the purpose of determining an Employee’s Vesting Years under this paragraph (b), in the case of an Employee who is employed by the Sponsor or an Affiliated Company on the Original Effective Date, that date shall be deemed to be an Employment Commencement Date of the Employee (with Vesting Years for the period prior to the Original Effective Date determined under paragraph (a) above).

(c) In the case of any Employee who is employed under Departments 120 through 130 at the Allergan Medical Optics - Lenoir facility, such Employee shall be credited with a number of Vesting Years equal to 1/365th of (i) the aggregate number of days between each Employment Commencement Date (or Reemployment Commencement Date) of the Employee and the Severance Date which immediately follows that Employment Commencement Date (or Reemployment Commencement Date) and (ii) the aggregate number of days for any Period of Severance of less than twelve months. Solely for the purpose of determining an Employee’s Vesting Years under this paragraph (c), an Employee’s Employment Commencement Date or Reemployment Commencement Date shall include dates prior to Allergan Medical Optics - Lenoir facility becoming an Affiliated Company.

ARTICLE III

PARTICIPATION

3.1 Participation for the 2003 Plan Year and thereafter . For Plan Years beginning on or after January 1, 2003, participation in the Plan shall be determined as follows:

(a) Each Employee or former Employee who is a Participant in the Plan as of December 31, 2002 shall continue as a Participant and each Participant who is an Active Participant in the Plan as of December 31, 2002 shall continue as an Active Participant so long as he or she is an Eligible Employee (as defined in Section 2.17(a)). Any other Employee shall not be eligible to become a Participant in the Plan and any Participant who is not an Active Participant on January 1, 2003 shall not be eligible to become an Active Participant in the Plan.

(b) If an Active Participant incurs a Severance after January 1, 2003 and is subsequently reemployed, he or she shall not be reinstated as an Active Participant but shall continue to be credited with Vesting Service in accordance with Section 2.46 and shall be entitled to a monthly pension upon completing five (5) Vesting Years or reaching the Special Retirement Eligibility Date and completing one (1) Vesting Year, the amount of which shall be equal to his or her Accrued Benefit determined as of his or her first Severance Date following January 1, 2003, at such times and in such forms as permitted under Article V.

3.2 Participation for the 2002 Plan Year . For the 2002 Plan Year, each Employee or former Employee who is a Participant in the Plan as of December 31, 2001 shall continue as a Participant and each Participant who is an Active Participant in the Plan as of December 31, 2001 shall continue as an Active Participant so long as he or she is an Eligible Employee (as defined in Section 2.17(b)). Any other Eligible Employee (as defined in Section 2.17(b)) shall become a Participant in the Plan on the later of: (i) the date the Eligible Employee completes his or her Eligibility Computation Period, or December 31, 2002, if earlier, or (ii) the date the Employee becomes an Eligible Employee, and shall continue as an Active Participant so long as he or she is an Eligible Employee.

3.3 Participation prior to the 2002 Plan Year . For Plan Years prior to January 1, 2002, each Eligible Employee (as defined in Section 2.17(c)) became a Participant in the Plan on the later of: (i) the date the Employee completed his or her Eligibility Computation Period or (ii) the date the Employee became an Eligible Employee, and continued as an Active Participant so long as he or she was an Eligible Employee.

ARTICLE IV

ACCRUAL OF BENEFITS

4.1 Accrued Benefit Formula . Each Participant shall have an Accrued Benefit equal to one-twelfth (1/12) of the sum of:

(a) 1.23% of his or her Average Earnings not in excess of Covered Compensation multiplied by the number of his or her Benefit Years to a maximum of 35 Benefit Years; plus

(b) 1.73% of his or her Average Earnings in excess of Covered Compensation multiplied by the number of his or her Benefit Years to a maximum of 35 Benefit Years; plus

(c) .50% of his or her Average Earnings multiplied by the number of his or her Benefit Years in excess of 35 Benefit Years.

For purposes of this Section, “Covered Compensation” is the average (without indexing) of the social security wage bases in effect for each calendar year during the 35-year period ending with the calendar year in which the Participant attains (or will attain) the social security retirement age as defined in Code Section 415(b)(8). In determining a Participant’s Covered Compensation for a Plan Year, it is assumed that the social security wage base in effect at the beginning of the Plan Year will remain the same for all future calendar years.”

4.2 Minimum Accrued Benefit . Notwithstanding any other provision of the Plan, under no circumstances shall any Participant’s Accrued Benefit under the Plan be less than the amount of his or her accrued benefit under the SKB Plan as of the Spin-Off Date under the terms of the SKB Plan in effect as of that date, including any amendments made to the SKB Plan which are effective on the Spin-Off Date, notwithstanding the fact that they may have been adopted after such date.

4.3 Accrued Benefit for Participants with Earnings in excess of $150,000 prior to January 1, 1994 . The Accrued Benefit of a “Section 401(a)(17) Employee” shall be the greater of:

(a) The Section 401(a)(17) Employee’s Accrued Benefit determined under the benefit formula in effect on or after January 1, 1994 taking into account all Benefit Years of the Section 401(a)(17) Employee; or

(b) The sum of:

(i) the Section 401(a)(17) Employee’s Accrued Benefit determined as of December 31, 1993 frozen in accordance with Section 1.401(a)(4)-13 of the Treasury Regulations; and

(ii) the Section 401(a)(17) Employee’s Accrued Benefit determined under the benefit formula applicable for Plan Years beginning on or after January 1,

1994 taking into account only those Benefit Years of the Section 401(a)(17) Employee credited on or after January 1, 1994; or

(i) the Employee’s Accrued Benefit determined as of December 31, 1988 under the SKB Plan and frozen in accordance with Section 1.401(a)(4)-13 of the Treasury Regulations; and

(ii) the Section 401(a)(17) Employee’s Accrued Benefit determined under the benefit formula applicable for Plan Years beginning on or after January 1, 1989 taking into account only those Benefit Years of the Section 401(a)(17) Employee credited on or after January 1, 1989 and before January 1, 1994; and

(iii) the Section 401(a)(17) Employee’s Accrued Benefit determined under the benefit formula applicable for Plan Years beginning on or after January 1, 1994 taking into account only those Benefit Years of the Section 401(a)(17) Employee credited on or after January 1, 1994.

For purposes of this Section, a “Section 401(a)(17) Employee” means a Participant whose current Accrued Benefit as of January 1, 1994 is based on Earnings in excess of $150,000.

4.4 Accrued Benefit for Participants participating in the Voluntary Early Retirement Incentive Program (“VERI”). The Accrued Benefit of a “VERI Employee” shall be determined as follows:

(a) For the purpose of calculating the Accrued Benefit of a VERI Employee under Section 4.1, a VERI Employee shall be credited with five (5) Benefit Years in addition to the number of Benefit Years credited under Section 2.9.

(b) The early retirement reduction factors of Sections 5.3(a) and 5.3(b) shall not apply to reduce the monthly pension derived from the Accrued Benefit of a VERI Employee.

For purposes of this Section 4.4 and Section 4.5 below, a “VERI Employee” means a Participant who has elected by August 31, 1998 (or such later date as approved by the Sponsor but in no event later than September 30, 1998) to participate in the Voluntary Early Retirement Incentive program offered by the Sponsor.

4.5 Temporary Supplemental Monthly Benefit for Participants participating in the Voluntary Early Retirement Incentive Program . In addition to his or her Accrued Benefit, a VERI Employee shall receive a temporary supplemental monthly pension determined as follows:

(a) A VERI Employee who is unmarried when his or her monthly pension payments begin shall receive a temporary supplemental monthly pension following the month in which his or her retirement occurs and continuing until the earlier of (i) the month in which the VERI Employee attains age 62 or (ii) the month in which the VERI Employee

dies. The amount of the temporary supplemental monthly pension shall be determined in accordance with the following Table:



Age at	Amount of
December 31, 1998	Supplemental Monthly Pension
60-61	$500.00
55-59	$400.00
50-54	$300.00

(b) A VERI Employee who is married when his or her monthly pension payments begin shall receive a temporary supplemental monthly pension following the month in which his or her retirement occurs and continuing until the earlier of (i) the month in which the VERI Employee attain age 62 or (ii) the month in which the VERI Employee dies unless the VERI Employee elects to receive his or her monthly pension in the form of (i) a contingent beneficiary option, (ii) a guaranteed payment option, or (iii) a level income option as described in Section 6.4. In such case, if the married VERI Employee dies before reaching age 62, his or her temporary supplemental monthly pension shall be paid to his or her spouse, if living, and shall continue until the month in which the VERI Employee would have attained age 62. The amount of the temporary supplemental monthly pension shall be determined in accordance with the Table set forth in subsection (a) above.

ARTICLE V

BENEFITS

5.1 Normal Retirement . If a Participant incurs a Severance on account of retirement on or between the Special Retirement Eligibility Date and the Normal Retirement Date, he or she shall be entitled to a monthly pension that begins as of the first day of the month coincident with or next following his or her Severance Date which is equal to his or her Accrued Benefit.

5.2 Postponed Retirement . If a Participant incurs a Severance on account of retirement after attaining the Normal Retirement Date, he or she shall be entitled to a monthly pension that begins as of the first day of the month coincident with or next following his or her Severance Date which is equal to his or her Accrued Benefit determined as of the Normal Retirement Date increased by the greater of (i) any additional benefit accruals provided under Article IV after the Normal Retirement Date, or (ii) an actuarial adjustment to take into account a delay in the payment of the Participant’s Accrued Benefit using the actuarial assumptions set forth in Appendix A for determining actuarial equivalence. The foregoing provisions of this Section 5.2 shall be interpreted and applied in accordance with the provisions of Proposed Treasury Regulation Section 1.411(b)-2(b)(4)(iii) or the corresponding provision of any subsequently adopted final regulations.

5.3 Early Retirement . A Participant shall be eligible for Early Retirement as set forth below:

(a) If a Participant who has at least five (5) Vesting Years and whose age is at least 55 incurs a Severance on account of retirement, he or she shall be eligible for Early Retirement as set forth in this paragraph (a):

(i) Such Participant shall be entitled to a monthly pension that begins as of the first day of the month coincident with or next following his or her Severance Date or, at his or her election, a monthly pension that begins as of the first day of any subsequent month not later than the Normal Retirement Date.

(ii) Such Participant’s monthly pension shall be equal to his or her Accrued Benefit but reduced in accordance with the following Table, with the percentage for a fractional part of a year of age being prorated on the basis of a number of full months.



Age When	% of Normal Pension	Age When	% of Normal Pension
Payments	Computed Under	Payments	Computed Under
Begin	Article IV	Begin	Article IV
61	94	57	70
60	88	56	64
59	82	55	58
58	76

(iii) A Participant who is an AMO Employee (as defined in Section 2.20) shall be treated as having not less than five (5) Vesting Years as of the day following his or her transfer to Advanced Medical Optics, Inc. for purposes of this paragraph (a).

(b) If a Participant who was a Participant on June 26, 1990, and who has at least five (5) Vesting Years, and whose age plus Benefit Years sum to at least 55 incurs a Severance on account of retirement, he or she shall be eligible for Early Retirement as set forth in this paragraph (b):

(ii) Such Participant’s monthly pension shall be equal to his or her Accrued Benefit determined as of June 26, 1990, as set forth under the formula contained in Appendix B, but reduced in accordance with the following Table, with the percentage for a fractional part of a year of age being prorated on the basis of a number of full months.



Age When Payments Begin	% of Normal Pension Computed Under Article IV	Age When Payments Begin	% of Normal Pension Computed Under Article IV
61	94	48	36
60	88	47	34
59	82	46	32
58	76	45	30
57	70	44	28
56	64	43	27
55	58	42	26
54	52	41	25
53	46	40	24
52	44	39	23
51	42	38	22
50	40	37	21
49	38

Provided, that the above percentages shall be increased by 1% to a maximum of 10% for each of the Participant’s Benefit Years in excess of 20, with the percentage for a fractional part of a Benefit Year being prorated on the basis of the number of full months. In no event, however, shall a percentage be increased above 100%.

(iii) Notwithstanding subparagraph (ii) above, (1) if the Participant is age 55 or older when payments begin, the Participant shall receive a total monthly pension which is the greater of the amount determined under paragraph (a)(ii) or paragraph (b)(ii) above, and (2) if the Participant is less than age 55 when benefit payments begin, the Participant shall receive a monthly pension which is determined under paragraph (b)(ii) plus an additional monthly pension commencing at age 55 which is actuarially equivalent to the excess, if any, of the actuarial equivalent value of the monthly pension under paragraph (a)(ii) determined at age 55 over the actuarial equivalent value of the monthly pension under paragraph (b)(ii) determined at age 55.

(c) A Participant who has elected by August 31, 1998 (or such later date as approved by the Sponsor but in no event later than September 30, 1998) to participate in the Voluntary Early Retirement Incentive program offered by the Sponsor shall be entitled to a monthly pension that begins as of the first day of the month coincident with or next following his or her Severance Date or, at his or her election, a monthly pension that begins as of the first day of any subsequent month not later than the Normal Retirement Date.

(d) If a Participant incurs a Severance and retires under this Section, and his or her monthly pension begins after the first day of the month coincident with or next following the Special Retirement Eligibility Date, such Participant shall be entitled to the monthly pension payments he or she would have received had his or her pension began as of the first day of the month following the Special Retirement Eligibility Date.

5.4 Termination of Employment .

(a) If a Participant who has at least five (5) Vesting Years incurs a Severance for any reason other than death and is not eligible to retire under Section 5.3, he or she shall be entitled to a monthly pension that begins on the first day of the month coincident with or next following the date he or she attains age 55, or at his or her election, a monthly pension that begins as of the first day of any subsequent month not later than the Normal Retirement Date. In the event a Participant elects that his or her monthly pension begin prior to the Special Retirement Eligibility Date, the amount of his or her monthly pension shall be determined as provided in Section 5.3(a).

(b) If a Participant who has at least five (5) Vesting Years incurs a Severance for any reason other than death and is not eligible to retire under Section 5.3 but was a Participant on June 26, 1990, he or she shall be entitled to a monthly pension that begins on the first day of the month coincident with or next following the date his or her Age and Benefit Years total 55 years, or at his or her election, a monthly pension that begins as of the first day of any subsequent month not later than the Normal Retirement Date. In the event a Participant elects that his or her monthly pension begin prior to the Special Retirement Eligibility Date, the amount of his or her monthly pension shall be determined as provided in Section 5.3(b).

(c) If a Participant incurs a Severance and is entitled to a monthly pension under this Section, and his or her monthly pension begins after the first day of the month coincident with or next following the Special Retirement Eligibility Date, such Participant shall be entitled to the monthly pension payments he or she would have received had his or her pension began as of the first day of the month following the Special Retirement Eligibility Date. If a Participant incurs a Severance and is entitled to a monthly pension under this Section, and his or her monthly pension begins after the first day of the month coincident with or next following the Normal Retirement Date, such Participant shall be entitled to the monthly pension payments he or she would have received had his or her pension began as of the first day of the month following the Special Retirement Eligibility Date (or, if later, his or Severance Date) or, in lieu thereof, a monthly pension which is equal to his or her Accrued Benefit determined as of the Special Retirement Eligibility increased by an actuarial adjustment to take into account a delay in the payment of the Participant’s Accrued Benefit using the actuarial assumptions set forth in Appendix A for determining actuarial equivalence.

5.5 Consent to Pension Payments . The Participant and, if applicable, the Participant’s spouse must consent to the payment or commencement of the Participant’s pension prior to the Normal Retirement Date in accordance with the following rules:

(a) The consent of the Participant shall be obtained in writing within the election period established by the Committee which shall commence no more than 180 days prior to the Participant’s Annuity Starting Date. No such consent shall be effective with respect to a married Participant unless the Participant’s spouse consents thereto in writing. Spousal consent shall not be required if a married Participant elects a joint and survivor option providing for payment of at least 50% of his or her annuity to his or her surviving spouse

or the Sponsor determines there is no spouse or the spouse cannot be located. Neither the consent of the Participant nor the Participant’s spouse shall be required to the extent the payment or commencement of the Participant’s pension is required to begin under Section 5.8.

(b) Each Participant shall receive in written nontechnical language, a notice which shall include a general description of the material features, and an explanation of the relative values of, the available optional forms of benefit. Such notice shall be furnished to the Participant no less than 30 days and no more than 180 days prior to the Participant’s Annuity Starting Date; provided, however, the Participant’s pension may be paid or commence less than 30 days after such notice is furnished if the notice clearly informs the Participant that he or she has at least 30 days after receiving the notice to consider the decision of whether or not to elect the commencement of his or her pension (and, if applicable, an optional form of benefit), and the Participant, after receiving the notice, affirmatively elects to commence his or her pension.

5.6 Maximum Pension . The largest aggregate annual pension that may be paid to any Participant in any Plan Year under the Plan shall be determined as follows:

(a) Subject to paragraphs (b) through (d), the largest aggregate annual pension that may be paid to any Participant in any Plan Year, when added to the pension under any other qualified defined benefit plan maintained by the Sponsor or any Affiliated Company, shall not exceed the lesser of:

(i) The Defined Benefit Dollar Limitation of $160,000 ($90,000 for Plan Years prior to the 2002 Limitation Year), multiplied by a fraction the numerator of which is the number of the Participant’s years of participation (or a part thereof) in the Plan or, up to the Spin-Off Date in the SKB Plan or in the Beckman Instruments, Inc. Pension Plan, not in excess of ten, and the denominator of which is ten; or

(ii) The Defined Benefit Compensation Limitation of 100% of the Participant’s average annual total cash remuneration from the Company in the thirty-six consecutive months which yield the highest average, multiplied by a fraction the numerator of which is the number of the Participant’s Vesting Years (or a part thereof) not in excess of ten and the denominator of which is ten.

Benefit increases resulting from the increase in the Defined Benefit Dollar Limitation and the Defined Benefit Compensation Limitation under the Economic Growth and Tax Relief Reconciliation Act of 2001 shall apply to all Employees participating in the Plan who have one (1) Hour of Service on or after January 1, 2002. Notwithstanding anything in this Section to the contrary, in accordance with Code Section 415(b)(4) and the Treasury Regulations thereunder, the provisions of which are incorporated by reference, the annual pension paid to any Participant shall be deemed not to exceed limitations of this paragraph if the benefit payable for a Limitation Year under any form of benefit with respect to such Participant under this Plan and any other qualified defined benefit plan (without regard to whether a plan has been terminated) ever maintained by the Sponsor or any Affiliated

Company does not exceed $10,000 multiplied by a fraction the numerator of which is the number of the Participant’s Vesting Years (or a part thereof) not in excess of ten and the denominator of which is ten; provided, that the Sponsor or any Affiliated Company (or a predecessor) has not at any time maintained a defined contribution plan in which the Participant participated.

(b) The limitations set forth in this Section 5.6 shall be determined as provided below:

(i) The Defined Benefit Dollar Limitation shall automatically be adjusted annually for increases in the cost of living as provided in Code Section 415(d). The adjusted limitation shall be effective as of January 1st of each calendar year and shall be applicable to Limitation Years ending with or within that calendar year. Such new limitation is incorporated herein by this reference and shall be substituted for the Defined Benefit Dollar Limitation set forth in paragraph (a) above.

(ii) “Cash remuneration” shall mean “compensation” as defined in Section 5.12.

(iii) For purposes of this Section, a Participant’s pension shall be measured as a Single Life Annuity or Qualified Joint and Survivor Annuity. A pension benefit shall be treated as a Qualified Joint and Survivor Annuity if it meets all of the requirements as defined in Section 2.35 except that the periodic payments to the spouse may be equal to or greater than 50%, but not more than 100%, of those to the Participant.

(iv) A benefit payable in a form other than a Single Life Annuity or Qualified Joint and Survivor Annuity described in subparagraph (iii) above shall be adjusted to the Actuarial Equivalent of a Straight Life Annuity before applying the limitations of this Section. Effective for Limitation Years commencing on or after January 1, 1995, Actuarial Equivalent for the form of benefit shall be determined using (1) the interest rate and mortality table specified in Appendix A or (2) 5% interest rate (or for lump sums or other benefits subject to Code Section 417(e)(3), the applicable interest rate under Code Section 415(b)(2)(E)(ii) as determined as provided in Appendix A) and the applicable mortality table under Code Section 415(b)(2)(E)(v), whichever produces the greater Actuarial Equivalent value. Notwithstanding the foregoing sentence, if a benefit is payable in a form other than a Single Life Annuity and the benefit is subject to Code Section 417(e)(3), the benefit shall be adjusted to the Actuarial Equivalent of a Straight Life Annuity as follows:

(A) If the Annuity Starting Date is in a Limitation Year beginning after 2005, the benefit shall be adjusted to the annual amount of the Single Life Annuity commencing at the same Annuity Starting Date that has the same actuarial present value as the Participant’s form of benefit using whichever of the following produces the greatest annual amount: (1) the interest rate and mortality table or other tabular factor specified in the Plan

for adjusting benefits in the same form, (2) A 5.5% interest and the applicable mortality table specified in Appendix A, and (3) the applicable interest rate under Code Section 417(e)(3) and the applicable mortality table specified in Appendix A divided by 1.05.

(B) If the Annuity Starting Date is in the 2004 and 2005 Limitation Year, the benefit shall be adjusted to the annual amount of the Single Life Annuity commencing at the same Annuity Starting Date that has the same actuarial present value as the Participant’s form of benefit using whichever of the following produces the greatest annual amount: (1) the interest rate and mortality table or other tabular factor specified in the Plan for adjusting benefits in the same form and (2) a 5.5% interest and the applicable mortality table specified in Appendix A.

Effective for Limitation Years commencing on or after January 1, 2006, the Actuarial Equivalent for any form of benefit not subject to Code Section 417(e)(3) shall be equal to the greater of (1) the annual amount of the Straight Life Annuity commencing at the same annuity starting date that has the same actuarial present value as the form of benefit payable to the Participant, computed using a 5% interest rate and the mortality table specified in Appendix A.2(a)(i) or (2) the annual amount of the Straight Life Annuity payable under the Plan commencing at the same annuity starting date as the form of benefit payable to the Participant.

(v) In addition to other limitations set forth in the Plan and notwithstanding any other provisions of the Plan, the accrued benefit, including the right to any optional benefits provided in the Plan (and all other defined benefit plans required to be aggregated with this Plan under the provisions of Code Section 415) shall not increase to an amount in excess of the amount permitted under Code Section 415 at any time.

(c) For limitation years beginning on or after January 1, 2002 and before January 1, 2008, the Defined Benefit Dollar Limitation for any Participant shall be adjusted as follows:

(i) If a Participant’s pension begins prior to age 62, the Defined Benefit Dollar Limitation applicable to the Participant at such earlier age is an annual benefit payable in the form of a straight life annuity beginning at the earlier age that is the actuarial equivalent of the Defined Benefit Dollar Limitation applicable to the Participant at age 62 (as adjusted under paragraph (a) above, if required). The Defined Benefit Dollar Limitation applicable at an age prior to age 62 is determined as the lesser of (1) the Actuarial Equivalent (at such age) of the Defined Benefit Dollar Limitation computed using the factors specified in Section 5.3 or (2) the actuarial equivalent (at such age) of the Defined Benefit Dollar Limitation computed using a 5 percent interest rate and the applicable mortality table specified in Appendix A to the Plan. Any decrease in the Defined Benefit Dollar Limitation determined in accordance with this paragraph (c) shall not reflect a mortality decrement if benefits

are not forfeited upon the death of the Participant. If any benefits are forfeited upon death, the full mortality decrement is taken into account.

(ii) If a Participant’s pension begins after age 65, the Defined Benefit Dollar Limitation applicable to the Participant at such later age is the annual benefit payable in the form of a straight life annuity beginning at the later age that is actuarially equivalent to the defined benefit dollar limitation applicable to the Participant at age 65 (as adjusted under paragraph (a) above, if required). The Defined Benefit Dollar Limitation applicable at an age after age 65 is determined as the lesser of (1) the Actuarial Equivalent (at such age) of the Defined Benefit Dollar Limitation computed using the interest rate and mortality table specified in Appendix A to the Plan or (2) the actuarial equivalent (at such age) of the Defined Benefit Dollar Limitation computed using a 5 percent interest rate assumption and the applicable mortality table specified in Appendix A to the Plan. For these purposes, mortality between age 65 and the age at which benefits commence shall be ignored.

(d) For Limitation Years beginning prior to January 1, 2002, the Defined Benefit Dollar Limitation for any Participant shall be adjusted if a Participant’s pension begins before or after he or she attains his or her Social Security Retirement Age. In such case, the Defined Benefit Dollar Limitation shall be adjusted to its Actuarial Equivalent beginning at the Participant’s Social Security Retirement Age; except that if his or her pension begins before he or she attains his or her Social Security Retirement Age, but after he or she attains age 62, the Defined Benefit Dollar Limitation shall be reduced by 5/9 of 1% for each of the first 36 months and 5/12 of 1% for each additional month by which the Participant’s benefit commencement date precedes his or her Social Security Retirement Age. The Defined Benefit Dollar Limitation applicable at an age prior to age 62 is determined as the lesser of (1) the Actuarial Equivalent (at such age) of the Defined Benefit Dollar Limitation computed using the factors specified in Section 5.3 or (2) the actuarial equivalent (at such age) of the Defined Benefit Dollar Limitation computed using a 5 percent interest rate and the applicable mortality table specified in Appendix A to the Plan. The interest rate used to determine the Actuarial Equivalent shall be the rate stated in the Plan, but shall be 5% if the pension begins after the Social Security Retirement Age. For purposes of this Section and Section 5.7, “Social Security Retirement Age” means (i) for any Participant born before January 1, 1938, Age 65, (ii) for any Participant born after December 31, 1937 but before January 1, 1955, Age 66, or (iii) for any other Participant, Age 67. A Participant’s pension shall be measured as a Single Life Annuity beginning at his or her Social Security Retirement Age.

(e) For Limitation Years beginning on or after January 1, 2008,

(i) if a Participant’s pension begins prior to age 62, the determination of whether the limitation set forth in Subsection (a) of this Section 5.6 (the “Dollar Limit”) has been satisfied shall be made, in accordance with regulations prescribed by the Secretary of the Treasury, by reducing the Dollar Limit so that the Dollar Limit (as so reduced) is equal to an annual benefit payable in the form of a Straight Life Annuity, commencing when such benefit under the Plan commences, which is

actuarially equivalent to a benefit in the amount of the Dollar Limit commencing at age 62; provided, however, if the Plan has an immediately commencing Straight Life Annuity commencing both at age 62 and the age of benefit commencement, then the Dollar Limit (as so reduced) shall equal the lesser of (1) the amount determined under Subsection (e)(i) without regard to this proviso or (2) the Dollar Limit multiplied by a fraction the numerator of which is the annual amount of the immediately commencing Straight Life Annuity under the Plan and the denominator of which is the annual amount of the Straight Life Annuity under the Plan, commencing at age 62, with both numerator and denominator determined in accordance with regulations prescribed by the Secretary of the Treasury; and

(ii) if a Participant’s pension begins after age 65, the determination of whether the Dollar Limit has been satisfied shall be made, in accordance with regulations prescribed by the Secretary of the Treasury, by increasing the Dollar Limit so that the Dollar Limit (as so increased) is equal to an annual benefit payable in the form of a Straight Life Annuity, commencing when the benefit under the Plan commences, which is actuarially equivalent to a benefit in the amount of the Dollar Limit commencing at age 65; provided, however, if the Plan has an immediately commencing Straight Life Annuity commencing both at age 65 and the age of benefit commencement, the Dollar Limit (as so increased) shall equal the lesser of (i) the amount determined under this Subsection (e)(ii) without regard to this proviso or (ii) the Dollar Limit multiplied by a fraction the numerator of which is the annual amount of the immediately commencing Straight Life Annuity under the Plan and the denominator of which is the annual amount of the immediately commencing Straight Life Annuity under the Plan, commencing at age 65, with both numerator and denominator determined in accordance with regulations prescribed by the Secretary of the Treasury.

5.7 Defined Benefit Fraction and Defined Contribution Fraction . For Plan Years beginning prior to the 2000 Plan Year, the largest aggregate annual pension that may be paid to any Participant in any Plan Year under the Plan shall not, when added to the pension under any other qualified defined benefit plan maintained by the Sponsor or any Affiliated Company, exceed the lesser of the dollar limitation described in Section 5.6 or the amount that would cause the sum of a Participant’s Defined Benefit Fraction and Defined Contribution Fraction for the Plan Year in which the Participant’s Severance occurs to equal 1.0. To the extent the sum of a Participant’s Defined Benefit Fraction and Defined Contribution Fraction exceeds 1.0, adjustments shall be made first by reducing the Participant’s benefit under any defined benefit plan maintained by the Sponsor or an Affiliated Company.

(a) A Participant’s Defined Benefit Fraction for a given Plan Year is a fraction, the numerator of which is his or her projected annual benefit for the Plan Year and the denominator of which is the lesser of (i) 1.25 multiplied by $90,000, adjusted to reflect commencement before or after Social Security Retirement Age, or (ii) 1.4 multiplied by 100% of his or her average annual total cash remuneration from the Sponsor or any Affiliated Company in the thirty-six consecutive months which yield the highest average.

(b) A Participant’s Defined Contribution Fraction for a given Plan Year is a fraction, the numerator of which is the sum of his or her annual additions for all calendar years and the denominator of which is the sum of his or her maximum aggregate amounts for all calendar years in which he or she is an Employee. A Participant’s maximum aggregate amounts for any Plan Year shall equal the lesser of 1.25 multiplied by the dollar limitation for such Plan Year or 1.4 multiplied by the percentage limitation for such Plan Year.

(c) The annual addition to a Participant’s account for any year is the sum, determined with respect to all defined contribution plans maintained by the Sponsor or an Affiliated Company (including any voluntary contributions feature of any defined benefit plan thereof), of:

(i) Company contributions and forfeitures allocated to the Participant’s account;

(ii) For Plan Years beginning after December 31, 1986, the amount of the Participant’s contributions; for Plan Years beginning before January 1, 1987, the lesser of:

(A) 50% of his or her contributions; or

(B) For each calendar year after 1975 the amount by which the Participant’s contributions exceed 6% of his or her cash remuneration; for each calendar year before 1976 during which he or she was a Participant, the excess of the aggregate amount of his or her contributions for all such years over 10% of his or her aggregate cash remuneration from the Sponsor or an Affiliated Company for all such years, multiplied by a fraction the numerator of which is one and the denominator of which is the number of such years.

(iii) Amounts allocated after March 31, 1984 to an individual medical account (as defined in Code Section 415(l)(2)) that is part of a pension or annuity plan maintained by the Sponsor or an Affiliated Company;

(iv) Amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, that are attributable to post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code Section 419A(d)(3)) under a welfare benefit fund (as defined in Code Section 419(e)) maintained by the Sponsor or an Affiliated Company; and

(v) allocations under a simplified employee pension.

5.8 Mandatory Commencement of Benefits .

(a) A Participant’s pension shall begin no later than sixty days after the close of the Plan Year in which falls the later of his or her attainment of the Normal Retirement Date or the date he or she incurs a Severance.

(b) In the case of a Participant, payment shall begin no later than a Participant’s required beginning date determined under the rules of subparagraphs (i) or (ii) below:

(i) Active Participants attaining age 70-1/2 prior to 1999: The required beginning date of an Active Participant who attains age 70-1/2 prior to 1999 shall be April 1 of the calendar year immediately following the year in which the Active Participant attains age 70-1/2; provided, however, that an Active Participant, other than an Active Participant who is a Five Percent Owner (as defined in Section 12.2), who attains age 70-1/2 in 1996, 1997, or 1998 may elect to defer the required beginning date until the first day of the month coincident with or next following his or her Severance Date.

(ii) Participants attaining age 70-1/2 after 1998: The required beginning date of a Participant who attains age 70-1/2 after 1998 shall be the first day of the month coincident with or next following his or her Severance Date; provided, however, if such Participant is a Five Percent Owner (as defined in Section 12.2) with respect to the Plan Year ending in the calendar year in which such Participant attains age 70-1/2, the required beginning date shall be April 1 of the calendar year immediately following the year in which such Participant attains age 70-1/2.

(c) Notwithstanding anything in the Plan to the contrary, the distribution of a Participant’s pension including amounts paid in the form of a pre-retirement death benefit shall be made in accordance with Code Section 401(a)(9), including the incidental death benefit requirement of Code Section 401(a)(9)(G), and Treasury Regulations Sections 1.401(a)(9)-0 through 1.401(a)(9)-9, the provisions of which are hereby incorporated by reference and shall override any distribution option in the Plan inconsistent with Code Section 401(a)(9).

5.9 Reemployment . If a Participant who is receiving benefits again becomes an Employee, his or her pension shall be subject to the following rules:

(a) A Participant’s pension shall not be suspended if he or she is subsequently reemployed on or after October 1, 2002.

(b) A Participant’s pension shall be suspended if he or she was subsequently reemployed as an Eligible Employee prior to October 1, 2002 as follows:

(i) The Participant’s pension shall be suspended and recomputed upon his or her Severance Date if he or she has not reached the Normal Retirement Date.

(ii) The Participant’s pension shall be suspended for each calendar month or for each four or five week payroll period ending in a calendar month during which the Participant either completes 40 or more Hours of Service (counting each day of employment in a position designated by the Company as full time as five (5) Hours of Service), or receives payment for any such Hours of Service performed on each of eight or more days or separate work shifts in such month or payroll period if the

Participant has reached the Normal Retirement Date. No adjustment to the Participant’s pension shall be made on account of such non-payment. No payment shall be withheld pursuant to this subparagraph (ii) until the Participant is notified by personal delivery or first class mail during the first calendar month or payroll period in which payments are suspended that his benefits are suspended. Such notification shall contain a description of the specific reasons why benefit payments are being suspended, a general description of the Plan provisions relating to the suspension of payments, a copy of such provisions, and a statement to the effect that applicable Department of Labor regulations may be found in § 2530.203-3 of the Code of Federal Regulations. In addition, the suspension notification shall inform the Participant of the Plan’s procedures for affording a review of the suspension of benefits.

(iii) A Participant described in subparagraphs (i) or (ii) above, shall be eligible to receive credit for additional Benefit Years for any period of reemployment (as an Eligible Employee). The pension of such Participant shall be reduced by the Actuarial Equivalent of any payment received by the Participant under the Plan prior to his or her attainment of the Special Retirement Eligibility Date, or, if earlier, the first day on which he or she would have been entitled to 100% of his or her Accrued Benefit under Section 5.3(b) (if on his or her prior Severance Date he or she had deferred his or her benefit until that date).

5.10 Other Disabled Participants . A former Active Participant who is covered under a long term disability plan maintained by the Company, who has at least five (5) Vesting Years, and who becomes eligible for benefits under such plan, shall be eligible to accrue Benefit Years pursuant to this Section for the duration of his or her disability until the earlier of (i) the later of his or her Normal Retirement Date or Severance Date or (ii) the date he or she commences to receive a pension under the Plan. The following rules shall apply to benefit accruals under this Section:

(a) The Employee’s Average Earnings during his or her disability shall be deemed to be his or her Average Earnings calculated at the time his or her disability commenced.

(b) The Employee’s Primary Social Security Benefit shall be as defined in and the Employee’s Covered Compensation as defined in Section 4.1 shall be determined as of the year for which he or she is credited with his or her final Benefit Year.

(c) In addition, a former Active Participant described in this Section shall be treated as an Employee for purposes of the survivor income benefits described in Section 7.1 while he or she is eligible to accrue Benefit Years pursuant to this Section.

5.11 Nonforfeitable Interest . Notwithstanding any other provision in the Plan to the contrary, a Participant shall have a nonforfeitable interest in his or her Accrued Benefit upon reaching the Normal Retirement Date, or if earlier, upon being credited with five (5) or more Vesting Years. In addition, a Participant shall have a nonforfeitable interest in his or her Accrued Benefit upon

reaching the Special Retirement Eligibility Date or if later, upon being credited with one (1) Vesting Year.

5.12 Compensation for Maximum Pension . For purposes of Sections 5.6 and 5.7, Compensation shall mean an Employee’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 in accordance with Treasury Regulation Section 1.415(c)-2, the provisions of which are incorporated herein by reference unless otherwise set forth 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 Treasury Regulation Section 1.62-2(c)).

(b) Compensation shall include (i) any elective deferral as defined in Code Section 402(g)(3) or Puerto Rico Code Section 1081.01(d), any amount which is contributed or deferred by the Company at the election of the Employee that is excludable from an Employee’s gross income under Code Sections 125 or 457, (ii) for Plan Years beginning on or after January 1, 1998, any elective amount that is excludable from an Employee’s gross income under Code Section 132(f)(4), (iii) for Plan Years beginning on or after January 1, 2008, amounts paid after an Employee’s Severance Date, provided that such amounts (1) represent payment for regular compensation for services during the Employee’s regular working hours, or compensation for services outside the employee’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments and would have been paid to the Employee prior to his or her Severance Date if the Employee had continued in employment with the Company and (2) are paid by the later of 2 ½ months after the Employee’s Severance Date or the end of the Plan Year that includes the Employee’s Severance Date, and (iv) effective January 1, 2009, differential wage payments within the meaning of Code Section 414(u)(12)(D).

(c) Compensation shall not include those items listed in Treasury Regulation Section 1.415(c)-2(c), the provisions of which are incorporated under this paragraph (c) by this reference.

(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.

(e) Notwithstanding the definition of Compensation contained in subsections (a), (b), (c) and (d), for the purposes of this Article V and Section 2.24, for Plan Years and Limitation Years (as applicable) beginning on and after January 1, 2000, Compensation shall mean wages within the meaning of Code Section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer’s trade or business) for which the Employer is required to furnish the Employee a written statement

under Code Sections 6041(d), 6051(a)(3), and 6052. Compensation must be determined without regard to any rules under Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2)). Compensation paid or made available during each such Plan Year and Limitation Year also shall include any elective deferral (as defined in Code Section 402(g)(3) or Puerto Rico Code Section 1081.01(d) or its predecessor Section 1165(e) of the Puerto Rico Internal Revenue Code of 1994), and any amount which is contributed or deferred by the Employer 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. For Plan Years and Limitation Years (as applicable) beginning on and after January 1, 2001, Compensation as defined in this paragraph also shall include any elective amounts that are not includible in the gross income of the Employee by reason of Code Section 132(f)(4).

(f) Notwithstanding any provision of the Plan to the contrary, effective January 1, 2012, for purposes of the application of Sections 5.6 and 5.7 to a Participant who is a resident of Puerto Rico and to whom the Puerto Rico Code is applicable, Compensation considered under such Sections may not exceed the limit under Code Section 401(a)(17), as adjusted from time to time. Provided, that the application of this limitation shall not operate to reduce any benefit accrual as of December 31, 2011.

ARTICLE VI

FORM OF PENSIONS

6.1 Unmarried Participants . The pension of a Participant who is unmarried when payments begin shall be paid as a Single Life Annuity unless he or she elects an optional form of benefit under Section 6.3 or receives a lump sum distribution under Section 6.5.

6.2 Married Participants . The pension of a Participant who is married when payments begin shall be paid as a Qualified Joint and Survivor Annuity, unless he or she elects an optional form of benefit under Section 6.3 or receives a lump sum distribution under Section 6.5.

6.3 Election of Optional Form of Benefit . A Participant may waive the Single Life Annuity or, in the case of a married Participant, the Qualified Joint and Survivor Annuity and elect any optional form of benefit described in Section 6.4 in accordance with the following rules:

(a) The election shall be made in writing in a manner prescribed by the Committee on a form that clearly states that the Participant is electing to receive his or her pension other than as a Single Life Annuity or, in the case of a married Participant, his or her pension other than as a Qualified Joint and Survivor Annuity. No such election shall be effective with respect to a married Participant unless: (i) the Participant’s spouse consents in writing to the election; (ii) such election designates the form of benefit and a specific beneficiary; (iii) the consent acknowledges the effect of the election; and (iv) the consent is witnessed by a notary public or by a Plan representative. Notwithstanding the foregoing, an election without spousal consent shall be effective if a married Participant elects a joint

and survivor option providing for payment of at least 50% of his or her annuity to his or her surviving spouse, the Sponsor determines there is no spouse, or the spouse cannot be located.

(b) The election may be made or revoked at any time during an election period established by the Committee. Such election period shall begin when the information described in paragraph (d) is furnished to the Participant and, subject to paragraphs (c) through (e), shall end, with no opportunity for a further election, on the Participant’s Annuity Starting Date. For purposes of Article VII (pertaining to pre-retirement death benefits), if an optional form of benefit is elected in accordance with this Section 6.3 within the 90 day period ending on the Participant’s date of death, the Participant’s pension shall be deemed to have commenced even if the Participant dies prior to the Annuity Starting Date.

(c) Subject to paragraphs (d) and (e), in the case of a Participant who retires after attaining age 55, the election period described in paragraph (b) shall end on the date of the Participant’s Severance, or on such later date as the Committee shall fix, but an election made during the election period may be revoked at any time before the later of the end of the election period or the Participant’s Annuity Starting Date.

(d) Each Participant shall receive a written explanation of a Single Life Annuity or, in the case of a married Participant, a Qualified Joint and Survivor Annuity which shall include: (i) the terms and conditions of such annuity form of benefit; (ii) the Participant’s right to make and the effect of waiving such annuity form of benefit; (iii) the rights of a spouse; (iv) the right to make, and the effect of, a revocation of a previous election to waive such annuity form of benefit; (v) the relative values of the optional forms of benefit available under the Plan; and (vi) on or after December 31, 2006 and if applicable, the Participant’s right to defer and the effect of deferring the payment of his or her benefit. Such explanation shall be furnished to the Participant no less than 30 days and no more than 180 days prior to the Participant’s Annuity Starting Date except as provided in paragraph (e).

(e) The written explanation described in paragraph (d) may be furnished to the Participant less than 30 days prior to the Participant’s Annuity Starting Date; provided, that, the written explanation: (i) clearly indicates that the Participant has at least 30 days to consider whether to waive the Single Life Annuity or, in the case of a married Participant, the Qualified Joint and Survivor Annuity and to elect with spousal consent, if applicable, an optional form of benefit; (ii) the Participant is permitted to revoke any affirmative distribution election at least until the Annuity Starting Date or, if later, at any time prior to the expiration of the 7-day period that begins the day after the written explanation is provided to the Participant; and (iii) the Annuity Starting Date is a date after the date that the written explanation was provided to the Participant. Notwithstanding the foregoing, the Annuity Starting Date may be a date prior to the date the written explanation is provided to the Participant; provided, that, the Participant’s pension is not paid or does not commence until at least 30 days after such written explanation is furnished, subject to the waiver of the 30-day period as provided in the foregoing sentence.

6.4 Optional Forms of Benefit . Subject to the provisions of Sections 6.3 and 6.5, a Participant may elect to receive the Actuarial Equivalent of his or her pension in another form. The

specific options shall be (i) a Single Life Annuity which pays a monthly benefit for the Participant’s lifetime; (ii) a contingent beneficiary option which pays a reduced monthly benefit for the Participant’s lifetime, then continues 100%, 75%, 66-2/3%, or 50% of the reduced monthly benefit for the lifetime of one designated beneficiary; (iii) a guaranteed payment option which pays a reduced monthly benefit for the longer of the Participant’s lifetime or a specified number of months (60, 120, 180, or 240) with any remaining guaranteed payments on the Participant’s death to a designated beneficiary or beneficiaries (as more fully described in Appendix B); or (iv) a level income option (as more fully described in Appendix B) which pays an increased monthly benefit to a Participant (if payments begin between the ages of 55 and 62) until age 62, and a reduced monthly benefit beginning at age 62. Under each such option the Actuarial Equivalent of the anticipated payments to the Participant shall be greater than that of those to his or her beneficiary, except that if the beneficiary is the Participant’s spouse, the option may provide for a joint and survivor annuity under which the periodic payments to the spouse are no greater than those to the Participant and each option shall otherwise comply with Code Section 401(a)(9) and the final and temporary Treasury Regulations thereunder.

6.5 Cash-Outs .

(a) Notwithstanding anything in this Article to the contrary, if the lump sum Actuarial Equivalent of a Participant’s nonforfeitable Accrued Benefit does not exceed or has never exceeded $5,000, the Participant, or the Participant’s beneficiary in the event of the Participant’s death, may only elect (i) to be paid the lump sum Actuarial Equivalent, or (ii) to have the lump sum Actuarial Equivalent paid directly by the Trustee to the trustee of an Eligible Retirement Plan.

(b) If the lump sum Actuarial Equivalent of a Participant’s nonforfeitable Accrued Benefit exceeds $5,000 but does not exceed $10,000, the Participant, or the Participant’s beneficiary in the event of the Participant’s death, may elect (i) to be paid the lump sum Actuarial Equivalent, or (ii) to have the lump sum Actuarial Equivalent paid directly by the Trustee to the trustee of an Eligible Retirement Plan. No distribution may be elected under this paragraph (b) unless the Participant has attained at least age 55 with five (5) or more Vesting Years. For purposes of this paragraph (b), a Participant who is an AMO Employee (as defined in Section 2.20) shall be treated as having not less than five (5) Vesting Years as of the day following his or her transfer to Advanced Medical Optics, Inc. In addition, the election may not be made after pension payments start, except that a Participant or a Participant’s beneficiary whose payments started prior to September 1, 1993, and whose lump sum Actuarial Equivalent did not exceed $10,000 at the date payments started, may elect to be paid the remaining lump sum Actuarial Equivalent. A married Participant who elects a lump sum under this paragraph (b) must comply with the applicable requirements for spousal consent.

(c) A Participant who has no nonforfeitable Accrued Benefit in the Plan at the time of his or her Severance shall be deemed to have been cashed out with a zero cash benefit upon such Severance Date.

6.6 Retroactive Annuity Starting Dates . Notwithstanding anything in the Plan to the contrary, in the case of pensions paid to a Participant and spousal benefits (as described in Section 7.2) paid to a Participant’s surviving spouse, a Participant or a surviving spouse may elect a Retroactive Annuity Starting Date under this Section; provided, that the requirements of this Section are met.

(a) A Retroactive Annuity Starting Date shall be permitted under this Section only if the following requirements are met:

(i) The Retroactive Annuity Starting Date may not be earlier than the date on which benefit payments otherwise could have commenced under the terms of the Plan in effect as of the Retroactive Annuity Starting Date.

(ii) Any future periodic payments shall be the same as the future periodic payments (if any) that would have been paid had payment actually begun on the Retroactive Annuity Starting Date.

(iii) A make-up payment shall be made in an amount equal to any missed payment or payments for the period from the Retroactive Annuity Starting Date to the date of the actual make-up payment (with an appropriate interest adjustment for that period).

(iv) In determining whether any Retroactive Annuity Starting Date pension (including the required interest adjustment for the make-up payment described above) satisfies Code Section 415, the date that distribution commences shall be treated as the Annuity Starting Date for all purposes, including the determination of the applicable interest rate and the applicable mortality table; provided, that this requirement shall not apply to any form of payment if:

(A) The form of payment would not have been subject to the present value requirements under Regulation Section 1.417(e)-1(d)(6) had payment commenced on the Retroactive Annuity Starting Date; and

(B) The date payment commences in that form begins no more than twelve (12) months after the Retroactive Annuity Starting Date.

(b) The election of a Retroactive Annuity Starting Date shall be made in writing in a manner prescribed by the Committee on a form that clearly states that the Participant is electing a Retroactive Annuity Starting Date. No such election shall be effective with respect to a married Participant unless his or her spouse consents to such election as provided in Section 6.3(a); provided that, this requirement shall not apply if the amount of the spouse’s survivor annuity payments under the Retroactive Annuity Starting Date election is no less than the survivor benefit amount the spouse would have been entitled to receive under the Qualified Joint and Survivor Annuity with an Annuity Starting Date after the date that the required written explanation was provided to the Participant.

(c) For any form of benefit that would have been subject to Code Section 417(e)(3) had distribution commenced as of the Retroactive Annuity Starting Date, the amount of the distribution must be no less than what the amount would have been as of the date the distribution actually begins, using the (i) applicable interest rate and the applicable mortality table in effect under the Plan on that date and (ii) same annuity form in determining present value.

(d) If a Participant or a surviving spouse elects a Retroactive Annuity Starting Date, the date that benefit payments actually begin shall be treated as the Annuity Starting Date for purposes of satisfying the notice and other requirements for commencing benefit payments to the Participant or surviving spouse under this Article VI and Article VII.

(e) For purposes of this Section, a Retroactive Annuity Starting Date means an annuity starting date affirmatively elected by a Participant or surviving spouse that (i) is on or before the date that the written explanation required under Section 6.3 is provided and (ii) otherwise meets the requirements of this Section and Treasury Regulations under Code Section 417.

ARTICLE VII

PRE-RETIREMENT DEATH BENEFITS

7.1 Eligibility . A death benefit shall be payable under Section 7.2 with respect to a Participant if, on the date of his or her death:

(a) he or she is an Employee who has met the requirements for normal or early retirement under Sections 5.1 or 5.3;

(b) he or she is an Employee not described in paragraph (a), above, who has a nonforfeitable interest in his or her Accrued Benefit; or

(c) he or she is a former Employee who has a nonforfeitable interest in his or her Accrued Benefit and whose pension has not yet commenced to be paid.

7.2 Spousal Benefit . Upon the death of a Participant described in Section 7.1, the Participant’s surviving spouse, if living on the date set forth in this Section, shall receive a lump sum distribution if applicable under Section 6.5 or a pension in accordance with the following rules:

(a) If the Participant is an Employee who has met the requirements for normal or early retirement under Sections 5.1 or 5.3, the pension to the surviving spouse shall begin as of the first day of the month following the Participant’s date of death, shall end on the last day of the month in which the spouse’s death occurs, and shall be in a monthly amount equal to the amount the spouse would have received if the Participant had retired on the date of his or her death and had elected an immediate pension in the form of a Qualified Joint and Survivor Annuity beginning on the first day of the month following the day of his or her death with the spouse as joint annuitant.

(b) If the Participant is an Employee who has not met the requirements for normal or early retirement under Sections 5.1 or 5.3 but at the time of death has a nonforfeitable interest in his or her Accrued Benefit, the pension to the surviving spouse shall begin on the first day of the month following the month in which the Participant would have first met the requirements for early retirement, shall end on the last day of the month in which the spouse’s death occurs, and shall be in a monthly amount equal to the amount the spouse would have received if (i) the Participant’s Severance had occurred on the date of his or her death, (ii) the Participant had survived to meet the requirements for early retirement, (iii) the Participant had elected an immediate pension in the form of a Qualified Joint and Survivor Annuity beginning on the first day of the month coincident with or next following his or her attainment of the earliest retirement age with the spouse as joint annuitant, and (iv) the Participant had died the day after the date his or her pension commenced.

(c) If the Participant is a former Employee who retired under Section 5.1, the pension to the surviving spouse shall begin as of the first day of the month coincident with or next following the Participant’s date of death, shall end on the last day of the month in which the spouse’s death occurs, and shall be in a monthly amount equal to the amount the

spouse would have received if the Participant had elected an immediate pension in the form of a Qualified Joint and Survivor Annuity beginning on the first day of the month coincident with or next following the date of his or her death with the spouse as joint annuitant.

(d) If the Participant is a former Employee who retired under Section 5.3, the pension to the surviving spouse shall begin as of the first day of the month coincident with or next following the Participant’s date of death, shall end on the last day of the month in which the spouse’s death occurs, and shall be in a monthly amount equal to the amount the spouse would have received if the Participant had elected an immediate pension in the form of a Qualified Joint and Survivor Annuity beginning on the first day of the month coincident with or next following the date of his or her death with the spouse as joint annuitant.

(e) If the Participant is a former Employee who did not meet the requirements for normal or early retirement under Sections 5.1 or 5.3 but has a nonforfeitable interest in his or her Accrued Benefit, the pension to the surviving spouse shall begin on the first day of the month coincident with or next following the date the Participant would have first met the requirements for early retirement if he or she had not died but had lived, shall end on the last day of the month in which the spouse’s death occurs, and shall be in a monthly amount equal to the amount the spouse would have received if (i) the Participant had survived to meet the requirements for early retirement, (ii) the Participant had elected an immediate pension in the form of a Qualified Joint and Survivor Annuity beginning on the first day of the month coincident with or next following his or her attainment of the earliest retirement age with the spouse as joint annuitant, and (iii) the Participant had died the day after the date his or her pension commenced.

7.3 Alternate Death Benefit . In lieu of the benefit provided in Section 7.2, a Participant described in Section 7.1(a) may, at any time before his or her pension commences, select a beneficiary or beneficiaries other than his or her spouse for a survivor income benefit subject to Section 7.5. The monthly payment to the beneficiary shall equal the payment the beneficiary would have received and which would have been attributable to the Participant’s Accrued Benefit, if the Participant had retired on the day of his or her death with a pension in the form of a 50% joint and survivor annuity beginning as of the first day of the month following the day of his or her death with the beneficiary as joint annuitant.

7.4 Children’s Survivor Benefit . In lieu of the benefit provided in Section 7.2, a Participant described in Section 7.1(a) may, at any time before his or her pension commences, select his or her child or children as beneficiary or beneficiaries for the survivor income benefit subject to Section 7.5. The aggregate monthly payment to the child or children shall equal the monthly payment a surviving spouse of an age equal to that of the Participant would have received under a 50% joint and survivor annuity and which would have been attributable to the Participant’s Accrued Benefit, if the Participant had been covered by Section 7.2 and had left such a surviving spouse. Payments to each child shall continue during such child’s life or until the end of the month in which the child attains age 19, whichever is earlier except that if the child is enrolled as a full-time student in an academic institution, payments shall continue until the earlier of the end of the month in which the child attains age 23 or the termination of the child’s education.

7.5 Waiver of Spousal Benefit . An election under Section 7.3 or 7.4 shall be effective with respect to a married Participant only if he or she waives the benefit provided in Section 7.2 in accordance with the following rules:

(a) A waiver shall be made in writing in a manner prescribed by the Committee on a form that clearly states that the Participant is waiving the benefit provided in Section 7.2. No such waiver shall be effective unless: (i) the Participant’s spouse consents in writing to the waiver; (ii) the waiver election designates the form of benefit and a specific beneficiary; (iii) the spouse’s consent to the waiver acknowledges the effect of the waiver; and (iv) the spouse’s consent is witnessed by a notary public or by a Plan representative. A waiver without spousal consent shall be effective if the Sponsor determines there is no spouse or the spouse cannot be located.

(b) Each Participant and his or her spouse shall receive a written explanation of the benefit provided in Section 7.2 which shall include: (i) the terms and conditions of the benefit; (ii) the Participant’s right to make and the effect of waiving the benefit; (iii) the rights of a spouse; and (iv) the right to make, and the effect of, a revocation of a previous election to waive the benefit. Such explanation shall be furnished to the Participant within the applicable period. The term “applicable period” means, with respect to a Participant, whichever of the following periods ends earliest: (i) the period beginning with the first day of the Plan Year in which the Participant becomes a Participant described in Section 7.1(a) and ending on the date of the Participant’s death or (ii) the period beginning with the first day of the Plan Year in which the Participant becomes a Participant described in Section 7.1(a) and ending on the date his or her pension commences.

ARTICLE VIII

CONTRIBUTIONS

8.1 Company Contributions . The Company shall contribute each year an amount actuarially determined to be sufficient to provide the benefits under the Plan. Notwithstanding the foregoing, Company contributions for any Plan Year shall be conditioned upon the deductibility of such contributions by the Company under Code Section 404. The Company reserves the right, however, to reduce, suspend or discontinue its contributions under the Plan for any reason at any time. Except as provided in Section 8.3, it shall be impossible for any part of the Company’s contributions to revert to the Company, or to be used for, or diverted to, any purpose other than for the exclusive benefit of Participants and their Beneficiaries.

8.2 Source of Benefits . All benefits under the Plan shall be paid exclusively from the Fund, and the Company shall have no duty to contribute thereto except as provided in this Article.

8.3 Irrevocability . The Company shall have no right or title to, nor interest in, the Company contributions made to the Fund, and no part of the Fund shall revert to the Company, except that on and after the Effective Date funds may be returned to the Company as follows:

(a) In the case of a contribution which is made by a mistake of fact, such contribution may be returned to the Company within one year after it is made.

(b) In the case of a contribution conditioned on the initial qualification of the Plan under Code Section 401 (or any successor statute thereto), and the Plan does not initially qualify upon the filing of a timely determination letter request, such contribution may be returned to the Company within one year after the date of denial of the initial qualification of the Plan.

(c) In the case of a contribution conditioned on the deductibility thereof under Code Section 404 (or any successor statute thereto), such contribution shall, to the extent such deduction is disallowed, be returned to the Company within one year after such disallowance.

(d) In the case of a contribution conditioned on the initial qualification of the Plan under Puerto Rico Code Section 1081.01 (or any successor statute thereto), and the Plan does not initially qualify upon the filing of a timely determination letter request, such contribution may be returned to the Company within one year after the date of denial of the initial qualification of the Plan, provided, such return of such contribution does not cause the Plan to be disqualified under the Code.

(e) In the case of a contribution conditioned on the deductibility thereof under Puerto Rico Code Section 1033.09 (or any successor statute thereto), such contribution shall, to the extent such deduction is disallowed, be returned to the Company within one year after

such disallowance, provided, such return of such contribution does not cause the Plan to be disqualified under the Code.

8.4 Funding-Based Limits on Benefits and Benefit Accruals .

(a) Effective as of January 1, 2008, notwithstanding any other provision of the Plan, no benefit shall accrue or be paid under the Plan, and no amendment increasing liability for benefits shall take effect to the extent prohibited by the funding-based limits in Code Section 436 (or any successor provision thereto) and effective as of January 1, 2010, the final regulations issued thereunder (the “Limits”).

(b) The Limits imposed by Code Section 436 and guidance issued thereunder on (i) Plan amendments, (ii) accelerated benefit payments, (iii) benefit accruals, and (iv) unpredictable contingent event benefits are set forth below. The Limits shall be applied on a Participant by Participant and Beneficiary by Beneficiary basis.

The Committee shall provide notification to affected Participants and Beneficiaries, as applicable, in accordance with the requirements of Section 1.436-1(a)(6) of the Treasury Regulations if the Plan becomes subject to the Limits of Code Sections 436(b), (d), or (e).

Except to the extent required by law or provided in a subsequent amendment to the Plan, the Plan shall not restore any benefits that did not accrue (by reason of a cessation of accruals or failure of an amendment to take effect), and shall not make any payment in lieu of any benefits that are not paid, by reason of the Limits unless the provisions of Subsection (h) below apply and the Limits are lifted within the same Plan Year.

This Section 8.4 is intended to comply with the requirements of Code Section 436 and guidance issued thereunder. If there is any discrepancy or ambiguity between this Section 8.4 and Code Section 436 and applicable guidance, Code Section 436 and such guidance shall control. This Section 8.4 shall not be construed in a manner that would impose limitations that are more stringent than those required by Code Section 436 and applicable guidance. If any limitation described in this Section 8.4 is determined not to be required by Code Section 436 and guidance issued thereunder, such limitation shall not apply.

(c) No amendment to the Plan which would increase the Plan’s liabilities by increasing benefits, establishing new benefits, or changing the rate of benefit accrual or vesting of benefits shall take effect during a Plan Year if the Plan’s AFTAP for such Plan Year is less than 80% or would be less than 80% if the Plan amendment were taken into account. However, this Subsection (c) shall not apply to any amendment that (i) implements a mandatory change in the vesting requirements applicable to the Plan under the Code or ERISA, (ii) provides for a benefit increase under a formula that is not compensation-based and the rate of such increase does not exceed the contemporaneous increase in average wages for Participants covered by the amendment (provided that the limit described in Subsection (d) below does not also apply), or (iii) is excepted under guidance issued by the Commissioner of Internal Revenue.

If any Plan amendment cannot take effect during the Plan Year in which it would otherwise have become effective by reason of the limit described in this Subsection (c), then

such amendment, if previously adopted, shall be treated as if it were never adopted unless the amendment specifically provides otherwise; provided, however, that if the Plan amendment does not go into effect for a Plan Year because of the application of a presumed AFTAP determined under Code Section 436(h) and Section 1.436-1(h) of the Treasury Regulations, then the Plan amendment must go into effect for the Plan Year if it would be permitted under the rules of Code Section 436 based on a certified AFTAP for the Plan Year which takes into account the increase in the funding target attainment percentage attributable to the Plan amendment, unless the Plan amendment provides otherwise.

(d) If the Plan’s AFTAP for a Plan Year is less than 80%, the following limits on accelerated benefit payments shall apply:

(i) Subject to Subsection (iii) below, if the Plan’s AFTAP for a Plan Year is at least 60% but is less than 80%, a Participant or Beneficiary may not elect an optional benefit form that includes a Prohibited Payment, and the Plan shall not make a Prohibited Payment, with an Annuity Starting Date on or after the Section 436 Measurement Date as of which the limit described in this Subsection (d)(i) begins to apply and before the Section 436 Measurement Date as of which it ceases to apply, unless the present value (determined using the Applicable Interest Rate and Applicable Mortality Table) of the portion of the benefit that is being paid in a Prohibited Payment ( i.e. , the unrestricted portion) does not exceed the lesser of:

(A) 50% of the present value of the benefit payable in the optional form of benefit that includes the Prohibited Payment; or

(B) 100% of the present value of the maximum guaranteed benefit applicable to the Participant under Section 4022 of ERISA for the year in which the Annuity Starting Date occurs.

For purposes of this paragraph (B), the portion of the benefit that is being paid in a Prohibited Payment is deemed to be the excess of each payment over the smallest payment during the Participant’s lifetime under the optional form of benefit (treating a period after the Annuity Starting Date and during the Participant’s lifetime in which no payments are made as a payment of zero).

(ii) If the Plan’s AFTAP for a Plan Year is less than 60%, a Participant or Beneficiary may not elect an optional benefit form that includes a Prohibited Payment, and the Plan shall not make a Prohibited Payment, with an Annuity Starting Date on or after the Section 436 Measurement Date as of which the limit described in this Subsection (ii) begins to apply and before the Section 436 Measurement Date as of which it ceases to apply.

For any period in which the Plan sponsor is a debtor in a case under Title 11 of the United States Code, or a similar federal or state law, a Participant or Beneficiary may not elect an optional benefit form that includes a Prohibited Payment, and the Plan shall not make a Prohibited Payment, with an Annuity Starting Date during

such period and before the date the actuary for the Plan certifies that the Plan’s AFTAP is not less than 100%.

(iii) The following special rules shall apply:

(A) Only one Prohibited Payment may be made with respect to any Participant during any period of consecutive Plan Years during which the limits described in this Subsection (iii) apply.

(B) If an optional form of benefit that is otherwise available under the Plan is not available as of an Annuity Starting Date due to the limits described in this Subsection (iii), the Participant or Beneficiary may elect to bifurcate his benefit into unrestricted and restricted portions as described in Section 1.436-1(d)(3)(ii) of the Treasury Regulations.

(C) Participants or Beneficiaries shall not be permitted to have a new Annuity Starting Date for which the form of payment previously elected may be modified with respect to a period of time during which the limitations of Code Section 436 cease to apply and benefits shall continue to be paid in the normal or optional form of payment previously applied or elected after the limits cease to apply.

(D) If a Participant or Beneficiary requests a distribution in an optional form of payment that includes a Prohibited Payment not permitted to be currently paid, the Participant or Beneficiary retains the right to defer payment until his Normal Retirement Date or his Later Retirement Date, as applicable, subject to the requirements of Code Sections 411(a)(11) and 401(a)(9) and regulations thereunder.

(E) Benefits provided to a Participant and any Beneficiary (including an Alternate Payee) of such Participant are aggregated as described in Section 1.436-1(d)(3)(iv)(B) of the Treasury Regulations.

(F) If the limits described in this Subsection (iii) apply as of a Section 436 Measurement Date, but the limits subsequently cease to apply to the Plan as of a later Section 436 Measurement Date, then the limits shall not apply to benefits with Annuity Starting Dates that occur on or after that later Section 436 Measurement Date.

(e) If the Plan’s AFTAP for a Plan Year is less than 60%, all benefit accruals under the Plan other than interest credits shall cease as of the applicable Section 436 Measurement Date. During any period that the Plan is required to cease accruals under this Subsection (e) the Plan may not be amended to increase Plan liabilities by increasing benefits or providing new benefits. If the limit described in this Subsection (e), ceases to apply to the Plan, the limit does not apply to benefit accruals based on service on or after the Section 436 Measurement Date as of which the limit ceases to apply.

(f) No Unpredictable Contingent Event Benefit shall be paid with respect to an unpredictable contingent event occurring during a Plan Year if the Plan’s AFTAP for the Plan Year is less than 60% or would be less than 60% taking into account any benefits that could be payable with respect to such event. If any benefit does not become payable during the Plan Year by reason of the limit described in this Subsection (f), the Plan is treated as if it does not provide for such benefit. Notwithstanding the foregoing, if an Unpredictable Contingent Event Benefit is not paid for a Plan Year because of application of a presumed AFTAP determined under Code Section 436(h) and Section 1.436-1(h) of the Treasury Regulations, then the Unpredictable Contingent Event Benefit must be paid if it would be permitted under the rules of Code Section 436 based on a certified AFTAP for the Plan Year which takes into account the increase in the funding target attainment percentage attributable to the Unpredictable Contingent Event Benefit.

(g) Any Code Section 436 limitation in effect immediately prior to termination of the Plan shall continue to apply after such termination, provided however, that the restriction of Code Section 436(d) shall not apply to a Prohibited Payment made to carry out the termination of the Plan in accordance with applicable law.

(h) The Employer may use any method permitted under Code Section 436 and guidance issued thereunder to avoid application of any limit described in this Section 8.4, including providing security in the form described in Section 1.436-1(f)(3) of the Treasury Regulations. However, the Employer shall not be required (i) to make additional contributions, (ii) to provide additional security to the Plan, or (iii) to alter the method or timing of any actuarial valuation, in order to avoid the application of the funding-based limits described in this Section 8.4.

(i) For purposes of this Section 8.4, the following special definitions shall apply:

(i) “AFTAP” means the “adjusted funding target attainment percentage” as described in Code Section 436(j) and Section 1.436-1(j)(1) of the Treasury Regulations. Notwithstanding the foregoing, for Plan Years beginning on or after October 1, 2008 and before October 1, 2010:

(A) for the purpose of determining if the funding limits would apply to a payment under a social security leveling option as defined in Code Section 436(j)(3)(C) and in accordance with Section 203 of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (“PRA 2010”), the AFTAP shall be determined in accordance with the special rules set forth in Code Sections 436(j)(3)(A) and (B) and in accordance with PRA 2010 Section 203; and

(B) for the purpose of determining if the Plan’s AFTAP for a Plan Year is less than 60%, the AFTAP shall be determined in accordance with the special rules set forth in Code Sections 436(j)(3)(A) and (B) and in accordance with Section 203 of the Worker, Retiree, and Employer Recovery Act of 2008 which shall apply only to the extent that such Section produces

a higher AFTAP for the Plan Year than under Code Sections 436(j)(3)(A) and (B).

(ii) “Annuity Starting Date” means the “annuity starting date” as defined in Section 1.436-1(j)(2) of the Treasury Regulations.

(iii) “Prohibited Payment” means a “prohibited payment” as defined in Code Section 436(d)(5) and Section 1.436-1(j)(6) of the Treasury Regulations and generally includes: (A) any payment in excess of the monthly amount paid under a life annuity (plus any social security supplement described in the last sentence of Code Section 411(a)(9)), to a Participant or Beneficiary whose Annuity Starting Date occurs during any period in which a limitation under Subsection (d) above is in effect; (B) any payment for the purchase of an irrevocable commitment from an insurer to pay benefits; (C) any transfer of assets and liabilities to another plan maintained by the Employer or an Affiliated Company that is made in order to avoid or terminate application of the limitations described in this Section 8.4, and (D) any other payment specified by the Secretary of the Treasury. However, such term shall not include a payment that may be immediately distributed without consent pursuant to Code Section 411(a)(11).

(iv) “Section 436 Measurement Date” means the “section 436 measurement date” as defined in Section 1.436-1(j)(8) of the Treasury Regulations that is used to determine when the limitations described in this Section 8.4 apply or cease to apply.

(v) “Unpredictable Contingent Event Benefit” means an “unpredictable contingent event benefit” as defined in Code Section 436(b)(3) and Section 1.436-1(j)(9) of the Treasury Regulations.

ARTICLE IX

ADMINISTRATION

9.1 Appointment of Committee . There is hereby created a committee (the “Committee”) which shall exercise such powers and have such duties in administering the Plan as are hereinafter set forth. The Board of Directors shall determine the number of members of such Committee. The members of the Committee shall be appointed by the Board of Directors and such Board shall from time to time fill all vacancies occurring in said Committee. The members of the Committee shall constitute the Named Fiduciaries of the Plan within the meaning of Section 402(a)(2) of ERISA.

9.2 Appointment of Subcommittee . The Global Investments & Benefits Subcommittee established by the Company (the “Subcommittee”) shall exercise management and control over the assets of the Trust. The Board of Directors, acting through the Committee, shall determine the number of members of the Subcommittee. The members of the Subcommittee shall be appointed by the Board of Directors, acting through the Committee, and shall from time to time appoint such members to or fill any vacancies in the Subcommittee. The members of the Subcommittee shall constitute the Named Fiduciaries of the Plan within the meaning of Section 402(a)(2) of ERISA with respect to the management and control of the assets of the Trust.

9.3 Transaction of Business . The Committee and Subcommittee shall transact business as provided in paragraphs (a) and (b), respectively:

(a) A majority of the Committee shall constitute a quorum for the transaction of business. Actions of the Committee may be taken either by vote at a meeting or in writing without a meeting. All action taken by the Committee at any meeting shall be by a vote of the majority of those present at such meeting. All action taken in writing without a meeting shall be by a vote of the majority of those responding in writing. All notices, advices, directions and instructions to be transmitted by the Committee shall be in writing and signed by or in the name of the Committee. In all its communications with the Trustee, the Committee may, by either of the majority actions specified above, authorize any one or more of its members to execute any document or documents on behalf of the Committee, in which event it shall notify the Trustee in writing of such action and the name or names of its members so designated and the Trustee shall thereafter accept and rely upon any documents executed by such member or members as representing action by the Committee until the Committee shall file with the Trustee a written revocation of such designation.

(b) A majority of the Subcommittee shall constitute a quorum for the transaction of business. Actions of the Subcommittee may be taken either by vote at a meeting or in writing without a meeting. All action taken by the Subcommittee at any meeting shall be by a vote of the majority of those present at such meeting. All action taken in writing without a meeting shall be by a vote of the majority of those responding in writing. All notices, advices, directions and instructions to be transmitted by the Subcommittee shall be in writing and signed by or in the name of the Subcommittee. In all its communications with the Trustee, the Subcommittee may, by action specified above, authorize any one or more of its members

to execute any document or documents on behalf of the Subcommittee, in which event it shall notify the Trustee in writing of such action and the name or names of its members so designated and the Trustee shall thereafter accept and rely upon any documents executed by such member or members as representing action by the Subcommittee until the Subcommittee shall file with the Trustee a written revocation of such designation.

9.4 Voting . Any member of the Committee who is also a Participant hereunder shall not be qualified to act or vote on any matter relating solely to himself or herself, and upon such matter his or her presence at a meeting shall not be counted for the purpose of determining a quorum. If, at any time a member of the Committee is not so qualified to act or vote, the qualified members of the Committee shall be reduced below two (2) and the Board of Directors shall promptly appoint one or more special members to the Committee so that there shall be at least one qualified member to act upon the matter in question. Such special Committee members shall have power to act only upon the matter for which they were especially appointed and their tenure shall cease as soon as they have acted upon the matter for which they were especially appointed.

9.5 Responsibility of Committees . The responsibilities of the Committee and Subcommittee shall be as provided in paragraphs (a) and (b), respectively:

(a) The authority to manage and control the operation and administration of the Plan, the general administration of the Plan, the responsibility for carrying out the Plan, and to the extent provided in Section 9.7(e), the authority and responsibility to manage and control the assets of the Trust are hereby delegated by the Board of Directors to and vested in the Committee except to the extent reserved to the Board of Directors, the Sponsor, or the Company. Subject to the limitations of the Plan, the Committee shall, from time to time, establish rules for the performance of its functions and the administration of the Plan. In the performance of its functions, the Committee shall not discriminate in favor of Highly Compensated Employees.

(b) The authority and responsibility to manage and control the assets of the Trust are hereby delegated by the Board of Directors, acting through the Committee, to and vested in the Subcommittee except to the extent reserved to the Board of Directors or the Board of Directors, acting through the Committee, or the Sponsor. Subject to the limitations of the Plan, the Subcommittee shall, from time to time, establish rules for the performance of its functions.

9.6 Committee Powers . The Committee shall have all discretionary powers necessary to supervise the administration of the Plan and control its operations. In addition to any discretionary powers and authority conferred on the Committee elsewhere in the Plan or by law, the Committee shall have, but not by way of limitation, the following discretionary powers and authority:

(a) To designate agents to carry out responsibilities relating to the Plan, other than fiduciary responsibilities as provided in Section 9.7.

(b) To employ such legal, actuarial, medical, accounting, clerical, and other assistance as it may deem appropriate in carrying out the provisions of the Plan, including

one or more persons to render advice with regard to any responsibility any Named Fiduciary or any other fiduciary may have under the Plan.

(c) To establish rules and regulations from time to time for the conduct of the Committee’s business and the administration and effectuation of the Plan.

(d) To administer, interpret, construe, and apply the Plan and to decide all questions which may arise or which may be raised under the Plan by any Employee, Participant, former Participant, Beneficiary or other person whatsoever, including but not limited to all questions relating to eligibility to participate in the Plan, the amount of Benefit Years or Vesting Years of any Participant, and the amount of benefits to which any Participant or his or her Beneficiary may be entitled.

(e) To determine the manner in which the assets of the Plan, or any part thereof, shall be disbursed.

(f) Subject to provisions (a) through (d) of Section 10.1, to make administrative amendments to the Plan that do not cause a substantial increase or decrease in benefit accruals to Participants and that do not cause a substantial increase in the cost of administering the Plan.

(g) To perform or cause to be performed such further acts as it may deem to be necessary, appropriate or convenient in the efficient administration of the Plan.

Any action taken in good faith by the Committee in the exercise of discretionary powers conferred upon it by the Plan shall be conclusive and binding upon the Participants and their Beneficiaries. All discretionary powers conferred upon the Committee shall be absolute; provided, however, that all such discretionary power shall be exercised in a uniform and nondiscriminatory manner.

9.7 Additional Powers of Committee . In addition to any discretionary powers or authority conferred on the Committee elsewhere in the Plan or by law, such Committee shall have the following discretionary powers and authority:

(a) To appoint one or more Investment Managers pursuant to Section 9.17 to manage and control any or all of the assets of the Trust.

(b) To designate persons (other than the members of the Committee) to carry out fiduciary responsibilities, including the power to appoint one or more Investment Managers pursuant to Section 9.17 but excluding any other responsibility to manage or control the assets of the Trust;

(c) To allocate fiduciary responsibilities among the members of the Committee, including the power to appoint one or more Investment Managers pursuant to Section 9.17 but excluding any other responsibility to manage or control the assets of the Trust;

(d) To cancel any such designation or allocation at any time for any reason;

(e) To exercise management and control over the assets of the Trust to the extent provided in paragraph (a) above and in Section 9.9 (relating to review by the Committee of the long-run and short-run financial needs of the Plan and the determination of the funding policy for the Plan).

Any action under this Section 9.7 shall be taken in writing, and no designation or allocation under paragraphs (a), (b) or (c) shall be effective until accepted in writing by the indicated responsible person.

9.8 Subcommittee Powers . The Subcommittee shall have all discretionary powers necessary to manage and control the assets of the Trust, including but not limited to, the following:

(a) To exercise management and control over the assets of the Trust except to the extent the Committee appoints an Investment Manager pursuant to Section 9.7(a) and subject to the requirement that all action taken by the Subcommittee shall be in accordance and consistent with the funding policy established by the Committee and shall be communicated to the Committee at periodic intervals.

(b) To employ consulting, actuarial, and other assistance as it may deem appropriate in carrying out its responsibilities under the Plan, including one or more persons to render advice with regard to any fiduciary responsibility the Subcommittee may have under the Plan.

(d) To direct the Trustee, in writing, from time to time, to invest and reinvest the Trust Fund, or any part thereof, or to purchase, exchange, or lease any property, real or personal, which the Subcommittee may designate. This shall include the right to direct the investment of all or any part of the Trust in any one security or any one type of securities permitted hereunder. Among the securities which the Subcommittee may direct the Trustee to purchase are “qualifying employer securities” as defined in ERISA Section 407(d)(5).

Any action taken in good faith by the Subcommittee in the exercise of discretionary powers conferred upon it by the Plan shall be conclusive and binding upon the Participants and their Beneficiaries.

9.9 Periodic Review of Funding Policy . Notwithstanding the delegation of authority and responsibility to manage and control the assets of the Trust to the Subcommittee, the Committee, at periodic intervals, shall review the long-run and short-run financial needs of the Plan and shall determine a funding policy for the Plan consistent with the objectives of the Plan and the minimum funding standards of ERISA, if applicable. In determining such funding policy the Committee shall take into account, at a minimum, not only the long-term investment objectives of the Trust Fund consistent with the prudent management of the assets thereof, but also the short-run needs of the Plan to pay benefits. All actions taken by the Committee with respect to the funding policy of the Plan, including the reasons therefor, shall be fully reflected in the minutes of the Committee.

9.10 Claims Procedures . If a Participant or his or her Beneficiary believes that he or she is being denied any rights or benefits under the Plan, the Participant, Beneficiary, or in either case, his or her authorized representative (the “Claimant”) shall follow the administrative procedures for filing a claim for benefits as set forth in this Section. A claim for benefits shall be in writing and shall be reviewed by the Committee or a claims official designated by the Committee. The Committee or claims official shall review a claim for benefits in accordance with the procedures established by the Committee subject to the following administrative procedures set forth in this Section.

(a) The Committee shall furnish the Claimant with written or electronic notice of the decision rendered with respect to a claim for benefits within 90 days following receipt by the Committee of the claim unless the Committee determines that special circumstances require an extension of time for processing the claim. In the event an extension is necessary, written or electronic notice of the extension shall be furnished to the Claimant prior to the expiration of the initial 90 day period. The notice shall indicate the special circumstances requiring an extension of time and the date by which a final decision is expected to be rendered. In no event shall the period of the extension exceed 90 days from the end of the initial 90 day period.

(b) In the case of a denial of the Claimant’s claim, the written or electronic notice of such denial shall set forth (i) the specific reasons for the denial, (ii) references to the Plan provisions upon which the denial is based, (iii) a description of any additional information or material necessary for perfection of the claim (together with an explanation why such material or information is necessary), (iv) an explanation of the Plan’s appeals procedures, and (v) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA if his or her claim is denied upon appeal.

(c) In the case of a denial of a claim, a Claimant who wishes to appeal the decision shall follow the administrative procedures for an appeal as set forth in Section 9.11 below.

9.11 Appeals Procedures . A Claimant who wishes to appeal the denial of his or her claim for benefits shall follow the administrative procedures for an appeal as set forth in this Section and shall exhaust such administrative procedures prior to seeking any other form of relief. Appeals shall be reviewed in accordance with the procedures established by the Committee subject to the following administrative procedures set forth in this Section.

(a) In order to appeal a decision rendered with respect to his or her claim for benefits, a Claimant must file an appeal with the Committee in writing within 60 days following his or her receipt of the notice of denial with respect to the claim.

(b) The Claimant’s appeal may include written comments, documents, records and other information relating to his or her claim. The Claimant may review all pertinent documents and, upon request, shall have reasonable access to or be provided free of charge, copies of all documents, records, and other information relevant to his or her claim.

(c) The Committee shall provide a full and fair review of the appeal and shall take into account all claim related comments, documents, records, and other information

submitted by the Claimant without regard to whether such information was submitted or considered under the initial determination or review of the initial determination. Where appropriate, the Committee will overturn a notice of denial if it determines that an error was made in the interpretation of the controlling plan documents or if the Committee determines that an existing interpretation of the controlling plan documents should be changed on a prospective basis. In the event the Claimant is a subordinate, as determined by the Committee, to an individual conducting the review, such individual shall recuse himself or herself from the review of the appeal.

(d) The Committee shall furnish the Claimant with written or electronic notice of the decision rendered with respect to an appeal within 60 days following receipt by the Committee of the appeal unless the Committee determines that special circumstances require an extension of time for processing the appeal. In the event an extension is necessary, written or electronic notice of the extension shall be furnished to the Claimant prior to the expiration of the initial 60 day period. The notice shall indicate the special circumstances requiring an extension of time and the date by which a final decision is expected to be rendered. In no event shall the period of the extension exceed 60 days from the end of the initial 60 day period.

(e) In the case of a denial of an appeal, the written or electronic notice of such denial shall set forth (i) the specific reasons for the denial, (ii) references to the Plan provisions upon which the denial is based, (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relating to his or her claim for benefits, and (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.

9.12 Limitation on Liability . Each of the fiduciaries under the Plan shall be solely responsible for its own acts and omissions and no fiduciary shall be liable for any breach of fiduciary responsibility resulting from the act or omission of any other fiduciary or person to whom fiduciary responsibilities have been allocated or delegated pursuant to Section 9.2 or 9.7, except as provided in Sections 405(a) and 405(c)(2)(A) or (B) of ERISA. Neither the Committee nor the Subcommittee shall have responsibility over assets as to which management and control has been delegated to an Investment Manager appointed pursuant to Section 9.17 hereof or as to which management and control has been retained by the Trustee.

9.13 Indemnification and Insurance . To the extent permitted by law, the Company shall indemnify and hold harmless the Committee, the Subcommittee and each member thereof, the Board of Directors and each member thereof, and such other persons as the Board of Directors may specify, from the effects and consequences of his or her acts, omissions, and conduct in his or her official capacity in connection with the Plan and Trust. To the extent permitted by law, the Company may also purchase liability insurance for such persons.

9.14 Compensation of Committee and Plan Expenses . Members of the Committee and the Subcommittee shall serve as such without compensation unless the Board of Directors shall otherwise determine, but in no event shall any member of the Committee or Subcommittee who is an Employee receive compensation from the Plan for his or her services as a member of the

Committee or the Subcommittee. All members shall be reimbursed for any necessary expenditures incurred in the discharge of duties as members of the Committee or the Subcommittee. The compensation or fees, as the case may be, of all officers, agents, counsel, the Trustee or other persons retained or employed by the Committee or the Subcommittee shall be fixed by the Committee, subject to approval by the Board of Directors. The expenses incurred in the administration and operation of the Plan, including but not limited to the expenses incurred by the members of the Committee or the Subcommittee in exercising their duties, shall be paid by the Plan from the Trust Fund, unless paid by the Company, provided, however, that the Plan and not the Company shall bear the cost of interest and normal brokerage charges which are included in the cost of securities purchased by the Trust Fund (or charged to proceeds in the case of sales).

9.15 Resignation . Any member of the Committee or Subcommittee may resign by giving fifteen (15) days notice to the Board of Directors, and any member shall resign forthwith upon receipt of the written request of the Board of Directors, whether or not said member is at that time the only member of the Committee or the Subcommittee.

9.16 Reliance Upon Documents and Opinions . The members of the Committee, the Subcommittee, the Board of Directors, the Company and any person delegated to carry out any fiduciary responsibilities under the Plan (hereinafter a “delegated fiduciary”), shall be entitled to rely upon any tables, valuations, computations, estimates, certificates and reports furnished by any consultant, or firm or corporation which employs one or more consultants, upon any opinions furnished by legal counsel, and upon any reports furnished by the Trustee or any Investment Manager. The members of the Committee, the Subcommittee, the Board of Directors, the Company and any delegated fiduciary shall be fully protected and shall not be liable in any manner whatsoever for anything done or action taken or suffered in reliance upon any such consultant, or firm or corporation which employs one or more consultants, Trustee, Investment Manager, or counsel. Any and all such things done or such action taken or suffered by the Committee, the Subcommittee, the Board of Directors, the Company and any delegated fiduciary shall be conclusive and binding on all Employees, Participants, Beneficiaries, and any other persons whomsoever, except as otherwise provided by law. The Committee, the Subcommittee, and any delegated fiduciary may, but are not required to, rely upon all records of the Company with respect to any matter or thing whatsoever, and may likewise treat such records as conclusive with respect to all Employees, Participants, Beneficiaries, and any other persons whomsoever, except as otherwise provided by law.

9.17 Appointment of Investment Manager . From time to time the Committee, in accordance with Section 9.7 hereof, may appoint one or more Investment Managers who shall have investment management and control over assets of the Trust. The Committee shall notify the Trustee of such assets of the appointment of the Investment Manager. In the event more than one Investment Manager is appointed, the Committee shall determine which assets shall be subject to management and control by each Investment Manager and shall also determine the proportion in which funds withdrawn or disbursed shall be charged against the assets subject to each Investment Manager’s management and control. As shall be provided in any contract between an Investment Manager and the Committee, such Investment Manager shall hold a revocable proxy with respect to all securities which are held under the management of such Investment Manager pursuant to such contract, and

such Investment Manager shall report the voting of all securities subject to such proxy on an annual basis to the Committee.

ARTICLE X

AMENDMENT AND ADOPTION OF PLAN

10.1 Right to Amend Plan . The Sponsor, by resolution of the Board of Directors, shall have the right to amend the Plan and any trust agreement with the Trustee at any time and from time to time and in such manner and to such extent as it may deem advisable, including retroactively, subject to the following provisions:

(a) No amendment shall have the effect of reducing any Participant’s vested interest in the Plan or eliminating an optional form of distribution.

(b) No amendment shall have the effect of diverting any part of the assets of the Plan to persons or purposes other than the exclusive benefit of the Participants or their Beneficiaries.

(c) No amendment shall have the effect of increasing the duties or responsibilities of a Trustee without its written consent.

(d) No amendment shall result in discrimination in favor of officers, shareholders, or other highly compensated or key employees.

The Committee shall have the right to amend the Plan, subject to paragraphs (a) through (d) above, in accordance with the provisions of Section 9.6(f).

10.2 Adoption of Plan by Affiliated Companies . Subject to approval by the Board of Directors and consistent with the provisions of ERISA, an Affiliated Company may adopt the Plan for all or any specified group of its Eligible Employees by entering into an adoption agreement in the form and substance prescribed by the Committee. The adoption agreement may include such modification of the Plan provisions with respect to such Eligible Employees as the Committee approves after having determined that no prohibited discrimination or other threat to the qualification of the Plan is likely to result. The Board of Directors may prospectively revoke or modify an Affiliated Company’s participation in the Plan at any time and for any or no reason, without regard to the terms of the adoption agreement, or terminate the Plan with respect to such Affiliated Company’s Eligible Employees and Participants. By execution of an adoption agreement (each of which by this reference shall become part of the Plan), the Affiliated Company agrees to be bound by all the terms and conditions of the Plan.

ARTICLE XI

TERMINATION AND MERGER

11.1 Right to Terminate Plan . The Sponsor, by resolution of the Board of Directors, may terminate or partially terminate the Plan. If the Plan is terminated or partially terminated, the assets of the Plan shall be allocated, subject to Section 11.3, as provided in Section 4044 of the Employee Retirement Income Security Act of 1974 (as it may be from time to time amended or construed by any appropriate governmental agency or corporation), without subclasses. Effective as of the first day of the sixth calendar year following the adoption date of this amended and restated Plan, in the event of a termination of the Plan (other than a partial termination), any amount remaining after all fixed and contingent liabilities of the Plan have been satisfied shall revert to the Company notwithstanding any provision in the Plan to the contrary. In the event of a termination of the Plan (other than a partial termination) prior to the first day of the sixth calendar year following the adoption date of this amended and restated Plan, any amount remaining after all fixed and contingent liabilities of the Plan have been satisfied shall be allocated to each Participant in proportion to the present value of a benefit commencing at Normal Retirement Date equal to such Participant’s Average Earnings times Benefit Years. Any allocations under this Section to Participants with respect to whom the Plan is terminating shall be nonforfeitable. Except as otherwise required by law, the time and manner of distribution of the assets or the time and manner of any reversion of assets to the Company shall be determined by the Sponsor by amendment to the Plan.

11.2 Merger Restriction . No merger or consolidation with, or transfer of any of the Plan’s assets or liabilities to, any other plan shall occur at any time unless each Participant would (if the Plan had then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he or she would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated).

11.3 Effect on Trustee and Committee . The Trustee and the Committee shall continue to function as such for such period of time as may be necessary for the winding up of the Plan and for the making of distributions in the manner prescribed by the Board of Directors at the time of termination of the Plan.

11.4 Effect of Reorganization, Transfer of Assets or Change in Control .

(a) In the event of a consolidation or merger of the Company, or in the event of a sale and/or any other transfer of the operating assets of the Company, any ultimate successor or successors to the business of the Company may continue the Plan in full force and effect by adopting the same by resolution of its board of directors and by executing a proper supplemental or transfer agreement with the Trustee.

(b) In the event of a Change in Control (as herein defined), all Participants who were Participants on the date of such Change in Control shall become 100% vested in their Accrued Benefit on the date of such Change in Control and in any benefit accruals subsequent to the date of the Change in Control. Notwithstanding the foregoing, the Board of Directors

may, at its discretion, amend or delete this paragraph (b) in its entirety prior to the occurrence of any such Change in Control. For the purpose of this paragraph (b), “Change in Control” shall mean the following and shall be deemed to occur if any of the following events occur:

(i) Any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”), is or becomes the “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act (a “Beneficial Owner”), directly or indirectly, of securities of the Sponsor representing (1) 20% or more of the combined voting power of the Sponsor’s then outstanding voting securities, which acquisition is not approved in advance of the acquisition or within 30 days after the acquisition by a majority of the Incumbent Board (as hereinafter defined) or (2) 33% or more of the combined voting power of the Sponsor’s then outstanding voting securities, without regard to whether such acquisition is approved by the Incumbent Board;

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

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

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

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

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

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

(c) For purposes of this Section 11.4, a Change of Control shall not be deemed to have occurred upon the distribution of the stock of Advanced Medical Optics, Inc. on June 29, 2002 by the Sponsor to its stockholders.

11.5 Termination Restrictions . The following termination restrictions shall apply:

(a) In the event the Plan is terminated, the Accrued Benefit of any Highly Compensated Employee (active or former) shall be limited to an Accrued Benefit that is nondiscriminatory under Code Section 401(a)(4).

(b) The Accrued Benefit distributed to any of the 25 most Highest Compensated Employees (active or former) with the greatest Earnings in the current or any prior year shall be restricted so that the annual payments to such Highest Compensated Employee are no greater than an amount equal to the payment that would be made on behalf of the Highly Compensated Employee under a straight life annuity that is the actuarial equivalent of the sum of the Highly Compensated Employee’s Accrued Benefit, other benefits under the Plan (other than social security supplement, within the meaning of Section 1.411(a)-7(c)(4)(ii) of the Income Tax Regulations), and the amount that he or she is entitled to receive under a social security supplement.

(i) After payment of the Accrued Benefit to an Employee described in paragraph (a), the value of Plan assets equals or exceeds 110% of the value of current liabilities, as defined in Code Section 412(1)(7),

(ii) The value of the Accrued Benefit for an Employee described in paragraph (a) is less than 1% of the value of current liabilities before distribution, or

(iii) The value of the Accrued Benefit payable under the Plan to an Employee described in paragraph (b) does not exceed $3,500.

For purposes of this paragraph (c), the Accrued Benefit includes loans in excess of the amount set forth in Code Section 72(p)(2)(A), any periodic income, any withdrawal values payable to a living Employee, and any death benefits not provided for by insurance on the Employee’s life.

ARTICLE XII

TOP-HEAVY RULES

12.1 Applicability . Notwithstanding any provision in the Plan to the contrary, and subject to the limitations set forth in Section 12.7, the requirements of Sections 12.4, 12.5, and 12.6 shall apply under the Plan in the case of any Plan Year in which the Plan is determined to be a Top-Heavy Plan under the rules of Section 12.3. For the purpose of this Article XII, the term “Company” shall mean the Sponsor and any Affiliated Company whether or not such Affiliated Company has adopted the Plan.

12.2 Definitions . For purposes of this Article XII, the following special definitions and rules shall apply:

(a) The term “Key Employee” means any Employee or former Employee (including any deceased Employee) who, at any time during the Plan Year that includes the Determination Date, was an officer of the Company having annual Compensation greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan Years beginning after December 31, 2002), a Five Percent Owner of the Company, or an One Percent Owner of the Company having annual Compensation of more than $150,000.

(b) The term “Five Percent Owner” means any person who owns (or is considered as owning within the meaning of Code Section 318) more than 5% of the outstanding stock of the Company or stock possessing more than 5% of the total combined voting power of all stock of the Company.

(c) The term “One Percent Owner” means any person who would be described in paragraph (b) if “1%” were substituted for “5%” each place where it appears therein.

(d) The term “Non-Key Employee” means any Employee who is not a Key Employee.

(e) The term “Determination Date” means, with respect to any plan year, the last day of the preceding plan year. In the case of the first plan year of any plan, the term “Determination Date” shall mean the last day of that plan year.

(f) The term “Aggregation Group” means (i) each qualified plan of the Company in which at least one Key Employee participates or participated at any time during the determination period (regardless of whether the plan has terminated), and (ii) any other qualified plan of the Company which enables a plan described in clause (i) to meet the requirements of Code Sections 401(a)(4) or 410. Any plan not required to be included in an Aggregation Group under the preceding rules may be treated as being part of such group if the group would continue to meet the requirements of Code Sections 401(a)(4) and 410 with the plan being taken into account.

(g) For purposes of determining ownership under paragraphs (a), (b) and (c) above, the following special rules shall apply: (i) Code Section 318(a)(2)(C) shall be applied by substituting “5%” for “50%”, and (ii) the aggregation rules of Code Sections 414(b), (c) and (m) shall not apply, with the result that the ownership tests of this Section 12.2 shall apply separately with respect to each Affiliated Company.

(h) The terms “Key Employee” and “Non-Key Employee” shall include their Beneficiaries, and the definitions provided under this Section 12.2 shall be interpreted and applied in a manner consistent with the provisions of Code Section 416(i) and the regulations thereunder.

(i) For purposes of this Article XII, an Employee’s Compensation shall be determined in accordance with the rules of Code Section 415 and the regulations thereunder.

12.3 Top-Heavy Status .

(a) The term “Top-Heavy Plan” means, with respect to any Plan Year:

(i) Any defined benefit plan if, as of the Determination Date, the present value of the cumulative accrued benefits under the plan for Key Employees exceeds 60% of the present value of the cumulative accrued benefits under the plan for all Employees; and

(ii) Any defined contribution plan if, as of the Determination Date, the aggregate of the account balances of Key Employees under the plan exceeds 60% of the aggregate of the account balances of all Employees under the plan.

In applying the foregoing provisions of this paragraph (a), the valuation date to be used in valuing Plan assets shall be (i) in the case of a defined benefit plan, the same date which is used for computing costs for minimum funding purposes, and (ii) in the case of a defined contribution plan, the most recent valuation date within a 12-month period ending on the applicable Determination Date.

(b) Each plan maintained by the Company required to be included in an Aggregation Group shall be treated as a Top-Heavy Plan if the Aggregation Group is a Top-Heavy Group.

(c) The term “Top-Heavy Group” means any Aggregation Group if the sum (as of the Determination Date) of (i) the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in the group, and (ii) the aggregate of the account balances of Key Employees under all defined contribution plans included in the group exceeds 60% of a similar sum determined for all Employees. For purposes of determining the present value of the cumulative accrued benefit of any Employee, or the amount of the account balance of any Employee, such present value or amount shall be increased by the aggregate distributions made with respect to the Employee under the plan (including a terminated plan which, had it not been terminated, would have been aggregated

with the plan under Code Section 416(g)(2)(A)(i)) during the one year period ending on the Determination Date. In the case of distributions made for a reason other than severance from employment, death, or disability, the preceding sentence shall be applied by substituting “5-year period” for “1-year period.” Any rollover contribution or similar transfer initiated by the Employee and made after December 31, 1983, to a plan shall not be taken into account with respect to the transferee plan for purposes of determining whether such plan is a Top-Heavy Plan (or whether any Aggregation Group which includes such plan is a Top-Heavy Group).

(d) If any individual is a Non-Key Employee with respect to any plan for any plan year, but the individual was a Key Employee with respect to the plan for any prior plan year, any accrued benefit for the individual (and the account balance of the individual) shall not be taken into account for purposes of this Section 12.3.

(e) If any individual has not performed services for the Company at any time during the one year period ending on the Determination Date, any accrued benefit for such individual (and the account balance of the individual) shall not be taken into account for purposes of this Section 12.3.

(f) In applying the foregoing provisions of this Section, the accrued benefit of a Non-Key Employee shall be determined (i) under the method, if any, which is used for accrual purposes under all plans of the Company and any Affiliate, or (ii) if there is no such uniform method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under Code Section 411(b)(1)(C).

(g) For all purposes of this Article XII, the definitions provided under this Section 12.3 shall be applied and interpreted in a manner consistent with the provisions of Code Section 416(g) and the Regulations thereunder.

12.4 Minimum Benefit .

(a) The Plan shall provide a minimum benefit for each Participant who is not classified as a “Key Employee.” This minimum benefit, when expressed as an annual retirement benefit payable in the form of a single life annuity beginning when the Participant attains Age 65, shall not be less than the Participant’s average annual compensation during the period of consecutive years (not exceeding five (5)) during which the Participant had the greatest aggregate compensation from the Company multiplied by the lesser of:

(i) Two percent (2%) multiplied by the number of his or her Vesting Years; or

(ii) Twenty percent (20%).

(b) For purposes of this Section 12.4, Vesting Years shall be determined under Code Sections 411(a)(4), (5), and (6), but excluding:

(i) Any Vesting Year if the Plan was not a Top-Heavy Plan for the Plan Year ending during such Vesting Year;

(ii) Any Vesting Year which was completed in a Plan Year beginning before January 1, 1984; and

(iii) Any Vesting Year which was completed in a Plan Year beginning on or after January 1, 2002 during which the Plan benefits (within the meaning of Code Section 410(b)) no Key Employee or former Key Employee.

(c) The Participant’s minimum benefit determined under this Section 12.4 shall be calculated without regard to any Social Security benefits payable to the Participant.

(d) In the event a Participant is covered by both a defined contribution and a defined benefit plan maintained by the Company, both of which are determined to be Top-Heavy Plans, the Company shall satisfy the minimum benefit requirements of Code Section 416 by providing (in lieu of the minimum contribution described under the defined contribution plan) a minimum benefit under the Plan so as to prevent the duplication of required minimum benefits hereunder.

12.5 Maximum Benefit .

(a) Except as set forth below, in the case of any Top-Heavy Plan the rules of Sections 5.7(a)(i) and 5.7(b) shall be applied by substituting “1.0” for “1.25.”

(b) The rule set forth in paragraph (a) above shall not apply if the requirements of both subparagraphs (i) and (ii) are satisfied.

(i) The requirements of this subparagraph (i) are satisfied if the rules of Section 12.4(a) above would be satisfied after substituting “three percent (3%)” for “two percent (2%)” where it appears therein and by increasing (but not by more than ten (10) percentage points) twenty percent (20%) by one (1) percentage point for each year for which the Plan is a Top Heavy Plan.

(ii) The requirements of this subparagraph (ii) are satisfied if the Plan would not be a Top-Heavy Plan if “ninety percent (90%)” were substituted for “sixty percent (60%)” each place it appears in Sections 12.3(a) and 12.3(c).

(i) Company contributions, forfeitures, or voluntary nondeductible contributions allocated to the Employee under a defined contribution plan maintained by the Company, or

(ii) Accruals by the Employee under a defined benefit plan maintained by the Company.

(d) In the case where the Plan is subject to the rules of paragraph (a) above, the transition fraction rules of Code Section 415(e)(6) shall be applied by substituting “$41,500” for “$51,875.”

12.6 Minimum Vesting Rules .

(a) For any Plan Year in which it is determined that the Plan is a Top-Heavy Plan, the vesting schedule of the Plan shall be changed to that set forth below (unless the Plan’s vesting schedule otherwise provides for vesting at a rate at least as rapid as that set forth below):

Number of Vesting Years Nonforfeitable Percentage

Less than 3 years 0%

3 or more 100%

(b) If the Plan ceases to be a Top-Heavy Plan, the vesting schedule of the Plan shall (for such Plan Years as the Plan is not a Top-Heavy Plan) revert to that provided in Section 5.11 (the “Regular Vesting Schedule”). If such reversion to the Regular Vesting Schedule is deemed to constitute a vesting schedule change that is attributable to a Plan amendment (within the meaning of Code Section 411(a)(10)), then such reversion to said Regular Vesting Schedule shall be subject to the requirements of Code Section 411(a)(10). For such purposes, the date of the adoption of such deemed amendment shall be the Determination Date as of which it is determined that the Plan has ceased to be a Top-Heavy Plan.

12.7 Noneligible Employees . The rules of this Article XII shall not apply to any Employee included in a unit of employees covered by a collective bargaining agreement between employee representatives and one or more employers if retirement benefits were the subject of good faith bargaining between such employee representatives and the employer or employers. The rules of this Article XII shall not apply to a Participant who is a resident of Puerto Rico unless such exclusion is impermissible under the Code, in which case the application of the rules of Article XII to a Participant who is a resident of Puerto Rico shall not cause the Participant’s maximum permissible benefit to exceed the limits of Section 5.7.

ARTICLE XIII

RESTRICTION ON ASSIGNMENT OR
OTHER ALIENATION OF PLAN BENEFITS

13.1 General Restrictions Against Alienation .

(a) The interest of any Participant or his or her Beneficiary in the income, benefits, payments, claims or rights hereunder, or in the Trust Fund, shall not in any event be subject to sale, assignment, hypothecation, or transfer. Each Participant and Beneficiary is prohibited from anticipating, encumbering, assigning, or in any manner alienating his or her interest under the Trust Fund, and is without power to do so. The interest of any Participant or Beneficiary shall not be liable or subject to his or her debts, liabilities, or obligations, now contracted, or which may hereafter be contracted, and such interest shall be free from all claims, liabilities, or other legal process now or hereafter incurred or arising. Neither the interest of a Participant or Beneficiary, nor any part thereof, shall be subject to any judgment rendered against any such Participant or Beneficiary. Notwithstanding the foregoing, a Participant’s or Beneficiary’s interest in the Plan may be subject to the enforcement of a federal tax levy made pursuant to Code Section 6331 or the collection by the United States on a judgment resulting from an unpaid tax assessment.

(b) In the event any person attempts to take any action contrary to this Article XIII, such action shall be null and void and of no effect, and the Company, the Committee, the Trustee and all Participants and their Beneficiaries, may disregard such action and are not in any manner bound thereby, and they, and each of them, shall suffer no liability for any such disregard thereof, and shall be reimbursed on demand out of the Trust Fund for the amount of any loss, cost or expense incurred as a result of disregarding or of acting in disregard of such action.

(c) The foregoing provisions of this Section shall be interpreted and applied by the Committee in accordance with the requirements of Code Section 401(a)(13) and Section 206(d) of ERISA as construed and interpreted by authoritative judicial and administrative rulings and regulations.

13.2 Qualified Domestic Relations Orders . The rule set forth in Section 13.1 above shall not apply with respect to a “Qualified Domestic Relations Order” as described below.

(a) A “Qualified Domestic Relations Order” is a judgment, decree, or order (including approval of a property settlement agreement) that:

(i) Creates or recognizes the existence of an Alternate Payee’s right to, or assigns to an Alternate Payee the right to, receive all or a portion of the benefits payable under this Plan with respect to a Participant,

(ii) Relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of a Participant,

(iii) Is made pursuant to a State domestic relations law (including a community property law), and

(iv) Clearly specifies: (1) the name and last known mailing address (if any) of the Participant and the name and mailing address of each Alternate Payee covered by the order (if the Committee does not have reason to know that address independently of the order); (2) the amount or percentage of the Participant’s benefits to be paid to each Alternate Payee, or the manner in which the amount or percentage is to be determined; (3) the number of payments or period to which the order applies; and (4) each plan to which the order applies.

For purposes of this Section 13.2, “Alternate Payee” means any spouse, former spouse, child or other dependent of a Participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable with respect to the Participant.

(b) A domestic relations order is not a Qualified Domestic Relations Order if it requires:

(i) The Plan to provide any type or form of benefit, or any option, not otherwise provided under the Plan;

(ii) The Plan to provide increased benefits; or

(iii) The payment of benefits to an Alternate Payee that are required to be paid to another Alternate Payee under a previous Qualified Domestic Relations Order.

(c) A domestic relations order shall not be considered to fail to satisfy the requirements of paragraph (b)(i) above with respect to any payment made before a Participant has separated from service solely because the order requires that payment of benefits be made to an Alternate Payee:

(i) On or after the date on which the Participant attains (or would have first attained) his earliest retirement age (as defined in Code Section 414(p)(4)(B));

(ii) As if the Participant had retired on the date on which such payment is to begin under such order (but taking into account only the present value of accrued benefits and not taking into account the present value of any subsidy for early retirement benefits); and

(iii) In any form in which such benefits may be paid under the Plan to the Participant (other than in the form of a joint and survivor annuity with respect to the Alternate Payee and his or her subsequent spouse).

Notwithstanding the foregoing, if the Participant dies before his or her earliest retirement age (as defined in Code Section 414(p)(4)(B)), the Alternate Payee is entitled to benefits only if the Qualified Domestic Relations Order requires survivor benefits to be paid to the Alternate Payee.

(d) To the extent provided in any Qualified Domestic Relations Order, the former spouse of a Participant shall be treated as a surviving spouse of the Participant for purposes of applying the rules (relating to minimum survivor annuity requirements) of Code Sections 401(a)(11) and 417, and any current spouse of the Participant shall not be treated as a spouse of the Participant for such purposes.

(e) In the case of any domestic relations order received by the Plan, the Committee shall promptly notify the Participant and any Alternate Payee of the receipt of the order and the Plan’s procedures for determining the qualified status of domestic relations orders. Within a reasonable period after the receipt of the order, the Committee shall determine whether the order is a Qualified Domestic Relations Order and shall notify the Participant and each Alternate Payee of such determination.

(f) The Committee shall establish reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions under Qualified Domestic Relations Orders. During any period in which the issue of whether a domestic relations order is a Qualified Domestic Relations Order is being determined (by the Committee, by a court of competent jurisdiction, or otherwise), the Committee shall segregate in a separate account in the Plan (or in an escrow account) the amounts which would have been payable to the Alternate Payee during the period if the order had been determined to be a Qualified Domestic Relations Order. If within the 18 Month Period (as defined below), the order (or modification thereof) is determined to be a Qualified Domestic Relations Order, the Committee shall pay the segregated amounts (plus any interest thereon) to the person or persons entitled thereto. However, if within the 18 Month Period (i) it is determined that the order to not a Qualified Domestic Relations Order, or (ii) the issue as to whether the order is a Qualified Domestic Relations Order is not resolved, then the Committee shall pay the segregated amounts (plus any interest thereon) to the person or persons who would have been entitled to the amounts if there had been no order (assuming such benefits were otherwise payable). Any determination that an order is a Qualified Domestic Relations Order that is made after the close of the 18 Month Period shall be applied prospectively only. For purposes of this Section 13.2, the “18 Month Period” shall mean the 18 month period beginning with the date on which the first payment would be required to be made under the domestic relations order.

ARTICLE XIV

MISCELLANEOUS

14.1 No Right of Employment Hereunder . The adoption and maintenance of the Plan and Trust shall not be deemed to constitute a contract of employment or otherwise between the Company and any Employee or Participant, or to be a consideration for, or an inducement or condition of, any employment. Nothing contained herein shall be deemed to give any Employee the right to be retained in the service of the Company or to interfere with the right of the Company to discharge, with or without cause, any Employee or Participant at any time, which right is hereby expressly reserved.

14.2 Effect of Article Headings . Article headings are for convenient reference only and shall not be deemed to be a part of the substance of this instrument or in any way to enlarge or limit the contents of any Article.

14.3 Limitation on Company Liability . Any benefits payable under the Plan shall be paid or provided for solely from the Plan and the Company assumes no liability or responsibility therefor.

14.4 Interpretation . The provisions of the Plan shall in all cases be interpreted in a manner that is consistent with the Plan satisfying the requirements of Code Section 401(a) and related statutes for qualification as a defined benefit plan.

14.5 Withholding For Taxes . Any payments from the Trust Fund may be subject to withholding for taxes as may be required by any applicable federal or state law.

14.6 California Law Controlling . All legal questions pertaining to the Plan which are not controlled by ERISA shall be determined in accordance with the laws of the State of California and all contributions made hereunder shall be deemed to have been made in that State.

14.7 Plan and Trust as One Instrument . The Plan and any trust agreement adopted hereunder shall be construed together as one instrument. In the event that any conflict arises between the terms and/or conditions of any trust agreement with the Trustee and the Plan, the provisions of the Plan shall control, except that with respect to the duties and responsibilities of the Trustee, the trust agreement shall control.

14.8 Invalid Provisions . If any paragraph, section, sentence, clause or phrase contained in the Plan shall become illegal, null or void or against public policy, for any reason, or shall be held by any court of competent jurisdiction to be incapable of being construed or limited in a manner to make it enforceable, or is otherwise held by such court to be illegal, null or void or against public policy, the remaining paragraphs, sections, sentences, clauses or phrases contained in the Plan shall not be affected thereby.

14.9 Counterparts . This instrument may be executed in one or more counterparts each of which shall be legally binding and enforceable.

14.10 Forfeitures . All forfeitures arising under the Plan shall be used as soon as possible to reduce the Company’s contributions and shall not be applied to increase the benefits any person would otherwise receive under the Plan.

14.11 Facility of Payment . If the Committee deems any person incapable of receiving benefits to which he is entitled by reason of minority, illness, infirmity, or other incapacity, it may direct that payment be made directly for the benefit of such person or to any person selected by the Committee to disburse it, whose receipt shall be a complete acquittance therefor. Such payments shall, to the extent thereof, discharge all liability of the Company and the party making the payment.

14.12 Lapsed Benefits .

(a) In the event that a benefit is payable under the Plan to a Participant and after reasonable efforts the Participant cannot be located for the purpose of paying the benefit during a period of three consecutive years, the Participant shall be presumed dead and the benefit (if any) shall, upon the termination of that three year period, be paid to the Participant’s Beneficiary.

(b) If any eligible Beneficiary cannot be located for the purpose of paying the benefit for the following two years, then the benefit shall be forfeited and applied in accordance with the provisions of Section 14.10.

(c) Notwithstanding the foregoing rules, if after such a forfeiture the Participant or an eligible Beneficiary shall claim the forfeited benefit, the amount forfeited shall be reinstated and paid to the claimant as soon as practical following the claimant’s production of reasonable proof of his or her identity and entitlement to the benefit (determined pursuant to the Plan’s normal claim review procedures under Sections 9.8 and 9.9).

(d) The Committee shall direct the Trustee with respect to the procedures to be followed concerning a missing Participant (or Beneficiary), and the Company shall be obligated to contribute to the Trust Fund any amounts necessary after the application of Section 14.10 to pay any reinstated benefit after it has been forfeited pursuant to the provisions of this Section.

14.13 Correction of Errors .

(a) Recovery of Overpayment. The Plan has the right to recover any mistaken payment, overpayment, or any payment made to any individual who was not eligible for that payment (“Overpayment”). Any Overpayment creates a lien by agreement, and the Plan, or its designee, may withhold or offset future benefit payments, sue to recover any Overpayment, or use any other lawful remedy to recoup any Overpayment.

(b) Maintenance of Compliance. The Committee may take whatever action they determine to be appropriate to correct any error, or any Plan operational or document defect, including but not limited to those that may be necessary to maintain the Plan’s qualified status or compliance with applicable law. The Committee shall also have the discretion to

correct any operational or qualification defect or failure of this Plan pursuant to any program of voluntary correction sponsored by the Internal Revenue Service or the Department of Labor, or any other agency of the federal government.

IN WITNESS WHEREOF, Allergan, Inc. hereby executes this instrument, evidencing the terms of the Allergan, Inc. Pension Plan as restated this 31 day of January , 2013.

ALLERGAN, INC.

By: /s/ Scott D. Sherman

Title: Executive Vice President, Human Resources

APPENDIX A

A.1. The Actuarial Equivalent of a benefit other than a lump sum shall be determined as follows:

(a) For Annuity Starting Dates on or after July 1, 2002, the Actuarial Equivalent of a benefit other than a lump sum shall be determined by applying a 7% interest rate and the 1994 Group Annuity Reserving Table; provided, however, the Actuarial Equivalent of a contingent benefit option which provides a benefit following a Participant’s death to the Participant’s surviving spouse shall be determined by the factors set forth in Table I under this Appendix A if greater.

(b) For Annuity Starting Dates commencing as of the Plan’s Original Effective Date and ending June 30, 2002, the Actuarial Equivalent of a benefit other than a lump sum shall be determined by applying a 7% interest rate and the 1971 GAM Mortality Table -- Males (age set-back 2 years); provided, however, the Actuarial Equivalent of a contingent benefit option which provides a benefit following a Participant’s death to the Participant’s surviving spouse shall be determined by the factors set forth in Table II under this Appendix A.

A.2. The Actuarial Equivalent of a Participant’s nonforfeitable Accrued Benefit payable in the form of a lump sum benefit shall, for purposes of Section 6.5, be determined as follows:

(a) The Actuarial Equivalent for a lump sum benefit with an Annuity Starting Date on or after January 1, 2008 shall mean an amount of equal actuarial value based on the Applicable Mortality Table and the Applicable Interest Rate where:

(i) “Applicable Mortality Table” is the table prescribed by the Secretary of the Treasury pursuant to Code Section 417(e)(3); and

(ii) “Applicable Interest Rate” is the interest rate set forth in Code Section 417(e)(3) for the December prior to the Plan Year in which the Annuity Starting Date occurs.

(b) The Actuarial Equivalent of a lump sum benefit with an Annuity Starting Date on or after July 1, 2002 and prior to January 1, 2008 shall mean an amount of equal actuarial value based on the Applicable Mortality Table and the Applicable Interest Rate where:

(i) “Applicable Mortality Table” means the 1994 Group Annuity Reserving Table; and

(ii) “Applicable Interest Rate” means the annual interest rate on 30- year Treasury securities as specified by the Commissioner of Internal Revenue for the first full calendar month preceding the Plan Year that contains the annuity starting date.

(c) The Actuarial Equivalent of a lump sum benefit with an Annuity Starting Date on or after January 1, 1995 and prior to July 1, 2002 shall mean an amount of equal actuarial value based on the Applicable Mortality Table and the Applicable Interest Rate where:

(i) “Applicable Mortality Table” means the 1983 Group Annuity Mortality Table; and

(d) The Actuarial Equivalent of a lump sum benefit with an Annuity Starting Date prior to January 1, 1995, shall mean an amount equal to the actuarial value based on the interest rate(s) which would be used (as of the first day of the Plan Year in which falls the annuity starting date) by the Pension Benefits Guaranty Corporation (PBGC) for a trusteed single-employer plan to value a benefit upon termination of an insufficient trusteed single-employer plan and the 1971 GAM Mortality Table – Males (age set-back 2 years).

A.3. The Actuarial Equivalent of a Participant’s pension payable in the form of a level income option under Section 6.4(iv) with an Annuity Starting Date on or after January 1, 2009, shall be the greater of the benefit determined using the interest and mortality factors set forth in Section A.1(a) or the benefit using the interest and mortality factors set forth Section A.2(a) of this Appendix A.



ATTACHMENT TO APPENDIX A TABLE I OPTIONAL BENEFIT FORM FACTORS (TO BE APPLIED TO STRAIGHT LIFE ANNUITY) 7%/1994 Group Annuity Reserving Table
Retire Age	50% J&S	66-2/3% J&S	75% J&S	100% J&S	5 Yr C&C	10 Yr C&C	15 Yr C&C	20 Yr C&C
35	0.984	0.979	0.977	0.969	1.000	0.998	0.997	0.994
36	0.984	0.978	0.976	0.968	1.000	0.998	0.996	0.994
37	0.983	0.977	0.974	0.966	1.000	0.998	0.996	0.994
38	0.982	0.976	0.973	0.964	1.000	0.998	0.996	0.993
39	0.981	0.974	0.971	0.962	0.999	0.998	0.995	0.992
40	0.980	0.973	0.970	0.960	0.999	0.998	0.995	0.992
41	0.979	0.972	0.968	0.958	0.999	0.998	0.995	0.991
42	0.977	0.970	0.967	0.956	0.999	0.997	0.994	0.990
43	0.976	0.968	0.965	0.953	0.999	0.997	0.994	0.989
44	0.975	0.967	0.963	0.951	0.999	0.997	0.993	0.987
45	0.973	0.965	0.961	0.948	0.999	0.996	0.992	0.986
46	0.972	0.963	0.959	0.946	0.999	0.996	0.991	0.984
47	0.970	0.961	0.956	0.943	0.999	0.996	0.990	0.982
48	0.969	0.959	0.954	0.939	0.999	0.995	0.989	0.980
49	0.967	0.957	0.951	0.936	0.999	0.995	0.988	0.977
50	0.965	0.954	0.949	0.933	0.998	0.994	0.986	0.974
51	0.963	0.952	0.946	0.929	0.998	0.993	0.984	0.971
52	0.961	0.949	0.943	0.925	0.998	0.992	0.982	0.967
53	0.959	0.946	0.940	0.921	0.998	0.991	0.979	0.963
54	0.957	0.943	0.937	0.917	0.997	0.990	0.976	0.958
55	0.954	0.940	0.933	0.913	0.997	0.988	0.973	0.953
56	0.952	0.937	0.930	0.908	0.997	0.986	0.969	0.947
57	0.949	0.934	0.926	0.904	0.996	0.984	0.965	0.941
58	0.947	0.930	0.922	0.899	0.995	0.982	0.960	0.934
59	0.944	0.927	0.918	0.894	0.995	0.979	0.955	0.926
60	0.941	0.923	0.915	0.889	0.994	0.976	0.949	0.918
61	0.939	0.920	0.911	0.884	0.993	0.973	0.943	0.909
62	0.936	0.916	0.906	0.879	0.992	0.969	0.937	0.899
63	0.933	0.912	0.902	0.874	0.991	0.965	0.929	0.888
64	0.930	0.909	0.898	0.869	0.989	0.961	0.921	0.877
65	0.927	0.905	0.894	0.864	0.988	0.956	0.913	0.865
66	0.924	0.901	0.890	0.859	0.986	0.951	0.904	0.852
67	0.921	0.898	0.887	0.854	0.985	0.946	0.894	0.838
68	0.919	0.894	0.883	0.850	0.983	0.940	0.883	0.824



ATTACHMENT TO APPENDIX A TABLE I OPTIONAL BENEFIT FORM FACTORS (TO BE APPLIED TO STRAIGHT LIFE ANNUITY) 7%/1994 Group Annuity Reserving Table
69	0.916	0.891	0.879	0.845	0.981	0.933	0.871	0.808
70	0.913	0.887	0.875	0.840	0.979	0.926	0.858	0.791
71	0.910	0.883	0.871	0.835	0.976	0.917	0.844	0.773
72	0.907	0.879	0.866	0.829	0.973	0.907	0.828	0.754
73	0.904	0.875	0.862	0.824	0.970	0.896	0.811	0.734
74	0.900	0.871	0.857	0.819	0.966	0.884	0.792	0.712
75	0.897	0.867	0.853	0.813	0.961	0.870	0.772	0.690
76	0.893	0.863	0.848	0.807	0.955	0.854	0.750	0.667
77	0.890	0.858	0.843	0.801	0.948	0.837	0.727	0.643
78	0.886	0.854	0.838	0.795	0.941	0.819	0.703	0.619
79	0.883	0.849	0.834	0.790	0.932	0.798	0.678	0.595
80	0.879	0.845	0.829	0.784	0.923	0.777	0.653	0.570



ATTACHMENT TO APPENDIX A TABLE II OPTIONAL BENEFIT FORM FACTORS (TO BE APPLIED TO STRAIGHT LIFE ANNUITY) 7%/ 1971 GAM Mortality Table -- Males (age set-back 2 years)
Retire Age	50% J&S	75% J&S	100% J&S	5 Yr C&C	10 Yr C&C	15 Yr C&C	20 Yr C&C
35	0.984	0.977	0.969	1.000	0.998	0.997	0.994
40	.975	.960	.945	.999	.996	.990	.983
41	.973	.958	.942	.999	.995	.989	.981
42	.971	.956	.939	.999	.995	.988	.979
43	.969	.954	.936	.999	.994	.986	.976
44	.967	.952	.933	.998	.993	.984	.973
45	.965	.950	.930	.998	.992	.982	.970
46	.963	.948	.926	.998	.991	.980	.967
47	.961	.946	.922	.997	.990	.978	.963
48	.959	.944	.918	.997	.988	.975	.959
49	.957	.942	.914	.997	.987	.972	.954
50	.955	.940	.910	.996	.985	.969	.950
51	.953	.937	.906	.996	.984	.966	.945
52	.951	.934	.902	.995	.982	.962	.939
53	.949	.931	.898	.995	.980	.959	.933
54	.947	.928	.894	.994	.978	.954	.926
55	.945	.925	.890	.993	.975	.950	.919
56	.942	.921	.885	.993	.973	.945	.911
57	.939	.917	.880	.992	.970	.939	.902
58	.936	.913	.875	.991	.967	.933	.893
59	.933	.909	.870	.990	.963	.926	.883
60	.930	.905	.865	.989	.959	.918	.872
61	.927	.901	.860	.987	.954	.909	.860
62	.924	.897	.855	.986	.949	.899	.847
63	.921	.893	.850	.984	.943	.889	.833
64	.918	.889	.845	.982	.937	.877	.818
65	.915	.885	.840	.980	.929	.865	.802
66	.911	.881	.834	.977	.921	.851	.785
67	.907	.877	.828	.974	.911	.836	.768
68	.903	.873	.822	.971	.901	.821	.749
69	.899	.869	.816	.967	.890	.804	.730
70	.895	.865	.810	.962	.878	.787	.711
71	.892	.862	.805	.957	.865	.769	.691
72	.889	.859	.800	.952	.851	.750	.671



ATTACHMENT TO APPENDIX A TABLE II OPTIONAL BENEFIT FORM FACTORS (TO BE APPLIED TO STRAIGHT LIFE ANNUITY) 7%/ 1971 GAM Mortality Table -- Males (age set-back 2 years)
73	.886	.856	.795	.946	.837	.731	.651
74	.883	.853	.790	.940	.822	.711	.631
75	.880	.850	.785	.934	.806	.691	.610
76	.877	.846	.781	.927	.789	.671	.590
77	.874	.842	.777	Left intentionally blank
78	.871	.838	.773	Left intentionally blank
79	.868	.834	.769	Left intentionally blank
80	.865	.830	.765	Left intentionally blank

APPENDIX B

B.1. For purposes of Section 4.3(b) of the Plan, the Accrued Benefit of a Participant shall be equal to one-twelfth (1/12) of the difference between:

(a) the sum of:

(i) 1.7% of his or her Average Earnings multiplied by the number of his or her Benefit Years to a maximum of 35 Benefit Years; plus

(ii) 0.5% of his or her Average Earnings for each Benefit Year in excess of 35 Benefit Years; and

(b) 1.43% of the Participant’s Primary Social Security Benefit multiplied by the number of his or her Benefit Years to a maximum of 35 Benefit Years.

Notwithstanding the foregoing, the Accrued Benefit of a Participant who is considered a highly compensated employee in 1989 within the meaning of Code Section 414(q)(1)(A) or (B) is limited to the Participant’s Accrued Benefit under the SKB Plan as of the Spin-Off Date. The Accrued Benefit of a Participant who is considered a highly compensated employee in 1990 within the meaning of Code Section 414(q)(1)(A) or (B), and is not considered a highly compensated employee in 1989 within the meaning of Code Section 414(q)(1)(A) or (B) is limited to the Participant’s Accrued Benefit as of December 31, 1989.

B.2. The level income option offered as an optional form of benefit under Section 6.4(b) of the Plan, provides a monthly pension payable as a Single Life Annuity or under a contingent beneficiary option. For purposes of this paragraph, the Single Life Annuity or, if a contingent beneficiary option is elected, the monthly amount payable to a Participant as reduced for the contingent beneficiary option shall be referred to as the Participant’s Life Pension. In order to recognize the increased benefits payable until age 62 (the “Temporary Pension”), the Participant’s Life Pension is reduced. The Temporary Pension shall end on the earlier of the Participant’s death or his or her attainment of age 62. If a contingent beneficiary option is elected and the Participant dies, then 100%, 75%, 66 2/3% or 50% (as previously elected by the Participant) of the Participant’s Life Pension as determined prior to the adjustment for the Temporary Pension shall be payable for the lifetime of his or her designated beneficiary.

B.3. The guaranteed payment option offered as an optional form of benefit under Section 6.4(b) of the Plan, provides a reduced benefit for the longer of the Participant’s lifetime or a specified number of months (60, 120, 180, or 240) with payments made to the Participant and any remaining guaranteed payments on the Participant’s death to a designated beneficiary or beneficiaries (hereinafter referred to as the “designated beneficiary”). For purposes of the guaranteed payment option, the following rules shall apply to beneficiary designations:

(a) A Participant may change his or her designated beneficiary at any time and may designate a secondary beneficiary or beneficiaries to receive any remaining guaranteed

payments on the Participant’s death in the event his or her designated beneficiary predeceases the Participant or dies during the guaranteed payment period.

(b) If the Participant fails to designate a secondary beneficiary and the Participant’s designated beneficiary predeceases the Participant, any guaranteed payments on the Participant’s death shall be paid in a lump sum to either the Participant’s personal representative or heirs at law as determined under paragraph (d) below.

(c) If the Participant fails to designate a secondary beneficiary and the Participant’s designated beneficiary dies while receiving payments during the guaranteed payment period, the designated beneficiary’s interest in the remaining guaranteed payments shall be paid in a lump sum to either the designated beneficiary’s personal representative or heirs at law as determined under paragraph (d) below.

(d) In the event the deceased Participant or deceased designated beneficiary under paragraphs (b) and (c) above, respectively, is not a resident of California at the date of his or her death, the Committee, in its discretion, may require the establishment of ancillary administration in California. If the Committee cannot locate a qualified personal representative of the deceased Participant or deceased designated beneficiary, or if administration of the deceased Participant’s or deceased designated beneficiary’s estate is not otherwise required, the Committee, in its discretion, may pay the remaining guaranteed payments (or interest therein) to the deceased Participant’s or deceased designated beneficiary’s heirs at law (determined in accordance with the laws of the State of California as they existed at the date of the Participant’s or designated beneficiary’s death).

B.4. Notwithstanding anything in the Plan to the contrary, the reductions applied to the Accrued Benefits of Participants whose last Severance Date was prior to July 27, 1989 to reflect the value of coverage for pre-retirement death benefits shall no longer apply to benefits with Annuity Starting Dates on or after July 1, 2002.

APPENDIX C

Benefit Years and Vesting Years include service with the following Affiliated Companies (or their predecessors) effective on the dates shown:



	Vesting	Benefit
	Service	Service
	Effective	Effective
	Date	Date

Allergan America	At hire	04/11/80
Allergan Corporate	At hire	At hire*
Allergan Humphrey	02/07/80	01/01/87
Allergan International	At hire	At hire*
Allergan Medical Optics	At hire	04/30/86
Allergan Medical Optics-Ioptex	At hire	09/08/94
Allergan Medical Optics-Lenoir	At hire	03/01/92
(Departments 120-130)
Allergan Medical Optics-Puerto Rico	At hire	04/30/86
Allergan Optical Inc.	At hire	11/13/87
(formerly International Hydron Corporation)
Allergan Optical Puerto Rico, Inc.	At hire	11/13/87
Allergan Optical	At hire	At hire*
Allergan Pharmaceuticals	At hire	At hire*
Allergan Phoenix	At hire	12/01/95
Allergan Puerto Rico, Inc.	At hire	04/11/80
(formerly Allergan Caribbean)
Allergan Surgical	At hire	At hire*
(formerly Innovative Surgical Products)
Herbert Labs	At hire	At hire*
Herald Pharmacal	At hire	08/03/95
Oculinum, Inc.	At hire	06/28/91
Optical Micro Systems, Inc.	At hire	01/27/95

* If employment terminated between April 11, 1980 and January 1, 1986, Benefit Years shall be credited from April 11, 1980 or date of hire, whichever is later.

GP:3326525 v2

EXHIBIT 10.20

2013 PERFORMANCE OBJECTIVES – CEO

TARGET BONUS AS A PERCENTAGE OF BASE SALARY

The target bonus for the fiscal year ending December 31, 2013 (the “ Plan Year ”) for the Chief Executive Officer (“ CEO ”) of Allergan, Inc. (the “ Company ”) will be an amount equal to 135% of the CEO's annual base salary as of the last day of the Plan Year (the “ Target Bonus Amount ”).

PERFORMANCE OBJECTIVES AND BONUS AMOUNT DETERMINATION

If the Company's Adjusted EPS is greater than the Threshold EPS, the CEO will be eligible to receive a bonus based on the following three criteria: (i) Adjusted EPS, (ii) Net Sales Growth and (iii) R&D Reinvestment Rate. The bonus (if any) payable will be an amount determined by multiplying (i) the Target Bonus Amount by (ii) the Target Bonus Multiplier. In no event, however, will the CEO be eligible to receive all or any portion of such bonus if the Company's Adjusted EPS does not exceed the Threshold EPS. For sake of clarity, if the Company's performance exceeds any of the targets for Net Sales Growth and/or R&D Reinvestment Rate, but actual Adjusted EPS does not exceed the Threshold EPS, no bonus will be payable. Payment of the CEO's performance bonus (if any) will be made in accordance with, and subject to, the terms of the Allergan, Inc. 2011 Executive Bonus Plan, as in effect on the date hereof (the “ Plan ”), including, without limitation, the provisions of Sections 2.4, 3.3 and 6.3 of the Plan.

For purposes of determining the CEO's performance bonus, the following terms will have the following meanings:

“ Adjusted EPS ” means the Company's Adjusted Net Earnings divided by the weighted average number of common shares outstanding on a diluted basis during the Plan Year, rounded to the third decimal place.

“ Adjusted Net Earnings ” means the Company's net earnings from continuing operations for the Plan Year, adjusted to:


•	remove the effects of extraordinary, unusual or non-recurring items;


•	remove the effects of items that are outside the scope of the Company's core, on-going business activities;


•	remove the effects of accounting changes required by United States generally accepted accounting principles;


•	remove the effects of financing activities;


•	remove the effects of expenses for restructuring or productivity initiatives;


•	remove the effects of non-operating items;


•	remove the effects of spending for acquisitions;


•	remove the effects of divestitures; and


•	remove the effects of amortization of acquired intangible assets.

______________________________________________________________________________________________________



2013 PERFORMANCE OBJECTIVES		ALLERGAN, INC.

“ Net Sales Growth ” means the percentage increase (if any) in net product sales for the Plan Year relative to net product sales for the fiscal year preceding the Plan Year, adjusted for the translation effect of changes in foreign exchange rates between each fiscal year, rounded to the nearest one-tenth of one percent.

“ R&D Reinvestment Rate ” means total research and development expenses for the Plan Year as a percentage of the Company's total net sales for the Plan Year, adjusted for the translation effect of changes in foreign exchange rates between the Plan Year and the Company's budgeted foreign exchange rates for the Plan Year, rounded to the nearest one-tenth of one percent.

“ EPS Target ” means an amount per share specified by the Organization and Compensation Committee at the time of adoption of these performance objectives.

“ Target Bonus Multiplier ” means the sum of the “Bonus % of Target” corresponding to: (a) the Company's Adjusted EPS, (b) the Company's Net Sales Growth, and (c) the Company's R&D Reinvestment Rate, in each case as determined in accordance with Exhibit A .

“ Threshold EPS ” means the EPS Target, less $0.228.

METHOD OF BONUS PAYMENT

Payment of the CEO's performance bonus (if any) will be made in cash up to the Target Bonus Amount. If the CEO's performance bonus exceeds the Target Bonus Amount, such excess will be paid in the form of a restricted stock or restricted stock unit award granted under, and subject to the terms and conditions of, the Allergan, Inc. 2011 Incentive Award Plan, as amended from time to time, or its successor (the “2011 Incentive Award Plan”). The number of restricted shares or restricted stock units subject to such award will be determined by dividing (x) the portion of the CEO's performance bonus that exceeds his or her Target Bonus Amount by (y) the closing trading price of the Company's common stock on the date of grant, and rounding down to the next whole share. No cash payment will be made in lieu of any fractional share rounded down.

Any bonus amount payable to the CEO in the form of a restricted stock or restricted stock unit award will vest in a single installment upon the CEO's completion of continuous employment with the Company through the earlier of (i) the second anniversary of the grant date of such award, or (ii) his or her Normal Retirement Eligibility Date (as defined in 2011 Incentive Award Plan).

______________________________________________________________________________________________________



2013 PERFORMANCE OBJECTIVES		ALLERGAN, INC.

EXHIBIT A

2013 PERFORMANCE OBJECTIVES – CEO



Earnings Per Share			Net Sales Growth		R&D Reinvestment Rate
EPS Range %	EPS Range	Bonus % of Target	Net Sales growth	Bonus % of Target	R&D Reinvest Rate	Bonus % of Target	Bonus % of Target
-4.8%	-$0.228	0.0%					0.0%
-2.6%	-$0.124	46.0%	5.0%	0.0%	15.4%	0.0%	46.0%
-2.2%	-$0.105	57.0%	6.6%	2.0%	15.7%	2.0%	61.0%
-1.4%	-$0.067	68.0%	8.1%	4.0%	16.0%	4.0%	76.0%
-1.1%	-$0.052	72.0%	9.6%	6.0%	16.2%	6.0%	84.0%
-0.6%	-$0.029	76.0%	11.2%	8.0%	16.4%	8.0%	92.0%
	Target	80.0%	12.7%	10.0%	16.6%	10.0%	100.0%
1.0%	$0.048	84.0%	14.2%	13.8%	16.8%	13.8%	111.5%
1.9%	$0.090	88.0%	15.8%	17.5%	17.0%	17.5%	123.0%
2.6%	$0.124	92.0%	17.3%	21.3%	17.3%	21.3%	134.5%
3.2%	$0.152	96.0%	18.8%	25.0%	17.6%	25.0%	146.0%

If actual results for any one or more of the performance measures falls between the performance levels shown above, the “Bonus % of Target” for such performance measure(s) will be prorated accordingly. If the Company's performance exceeds the highest performance level shown above for one or more of the specified performance measures (i.e., Adjusted EPS, Net Sales Growth, and R&D Reinvestment Rate), the “Bonus % of Target” achieved with respect to that performance measure will be the maximum “Bonus % of Target” specified for that performance measure.

Notwithstanding anything to the contrary above, if Adjusted EPS exceeds the threshold level but does not exceed the target level, the “Bonus % of Target” for each of the Net Sales Growth and R&D Reinvestment Rate components will not exceed the “Bonus % of Target” specified for those performance measures at the target level.

In no event will a bonus be payable in the event the Company's Adjusted EPS does not exceed the Threshold EPS.

______________________________________________________________________________________________________

EXHIBIT 10.21

2013

MANAGEMENT BONUS PLAN

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 through December 31 (the “Plan Year”).

ELIGIBILITY

Unless otherwise provided in a written agreement between the Company and the applicable employee, and subject to the terms of the Plan, an individual will be eligible to participate in the Plan for a Plan Year if he or she is:


•	employed as a regular full-time or part-time employee of Allergan, Inc. and its subsidiaries (collectively, the “Company”) as of September 30 during such Plan Year,


•	employed in salary grades 7E and above,


•	regularly scheduled to and works 20 or more hours per week,


•	not covered by any other bonus or sales incentive plan (including the Executive Bonus Plan), and


•	actively employed by the Company on the date bonuses are paid (and not on a performance improvement plan on such date) or otherwise qualifies for a pro-rated bonus based upon retirement, disability, death or layoff under the terms set forth below.

Bonuses for a Plan Year, if any, will be prorated for any participant who (i) becomes eligible to participate in the Plan after the beginning of such Plan Year, (ii) terminates employment on or after his or her “Normal Retirement Eligibility Date” (as defined below), (iii) becomes disabled, (iv) dies or (v) transfers into a position covered by another incentive plan. “Normal Retirement Eligibility Date” means the later of (a) the date on which the participant attains age 55 and (b) the date such participant completes five years of employment with the Company or its affiliates. Notwithstanding the foregoing, a participant will receive no bonus in cases of normal retirement or termination that, in either case, the Company determines in its sole discretion to be (a) by mutual agreement, (b) due to performance issues or (c) for serious misconduct. Bonuses, if any, for any participant who is laid-off will be prorated provided the participant was eligible to participate in the Plan 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, as determined by the Company in its discretion. Any individual who terminates employment for reasons other than those noted above will receive no bonus.

Notwithstanding anything in this Plan to the contrary, any individual who (a) performs services for the Company and is classified or paid as an independent contractor (regardless of his or her

13 MBP Page - 1 -

classification for federal tax or other legal purposes) by the Company or (b) performs services for the Company pursuant to an agreement between the Company and any other person or entity (e.g. a leasing organization) shall not be eligible to participate in the Plan.

PERFORMANCE

Bonuses under the Plan will be determined based on both corporate performance and individual performance in relation to pre-established objectives.

Corporate Performance

Corporate performance will be measured based on Adjusted EPS, Net Sales Growth and R&D Reinvestment Rate, defined as follows and approved by the Organization & Compensation Committee (the “Committee”):

“Adjusted EPS” means the Company's Adjusted Net Earnings divided by the weighted-average number of common shares outstanding on a diluted basis during the Plan Year, rounded to the third decimal place.

“Adjusted Net Earnings” means the Company's net earnings from continuing operations for the Plan Year, adjusted to:


•	remove the effects of extraordinary, unusual or non-recurring items;


•	remove the effects of items that are outside the scope of the Company's core, on-going business activities;


•	remove the effects of accounting changes required by United States generally accepted accounting principles;


•	remove the effects of financing activities;


•	remove the effects of expenses for restructuring or productivity initiatives;


•	remove the effects of non-operating items;


•	remove the effects of spending for acquisitions;


•	remove the effects of divestitures; and


•	remove the effects of amortization of acquired intangible assets.

“Net Sales Growth” means the percentage increase (if any) in net product sales for the Plan Year relative to net product sales for the fiscal year preceding the Plan Year, adjusted for the translation effect of changes in foreign exchange rates between each fiscal year, rounded to the nearest one-tenth of one percent.

“R&D Reinvestment Rate” means total research and development expenses for the Plan Year as a percentage of the Company's total net sales for the Plan Year, adjusted for the translation effect of changes in foreign exchange rates between the Plan Year and the Company's budgeted foreign exchange rates for the Plan Year, rounded to the nearest one-tenth of one percent.

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Individual Performance

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

BONUS POOL CALCULATION AND ALLOCATION

Bonus Pool Amount

There will be no bonus pool, and bonuses will not be paid, unless the Company achieves a threshold level of Adjusted EPS performance. If Adjusted EPS exceeds the threshold level, the bonus pool will equal (i) the aggregate amount that would be payable if all participants received bonuses at the target level, multiplied by (ii) the aggregate “Bonus % of Target” determined based on the Adjusted EPS, Net Sales Growth and R&D Reinvestment Rate performance approved by the Committee, as set forth below.



Earnings Per Share			Net Sales Growth		R&D Reinvestment Rate
EPS Range %	EPS Range	Bonus % of Target	Net Sales growth	Bonus % of Target	R&D Reinvest Rate	Bonus % of Target	Bonus % of Target
-4.8%	-$0.228	0.0%					0.0%
-2.6%	-$0.124	46.0%	5.0%	0.0%	15.4%	0.0%	46.0%
-2.2%	-$0.105	57.0%	6.6%	2.0%	15.7%	2.0%	61.0%
-1.4%	-$0.067	68.0%	8.1%	4.0%	16.0%	4.0%	76.0%
-1.1%	-$0.052	72.0%	9.6%	6.0%	16.2%	6.0%	84.0%
-0.6%	-$0.029	76.0%	11.2%	8.0%	16.4%	8.0%	92.0%
	Target	80.0%	12.7%	10.0%	16.6%	10.0%	100.0%
1.0%	$0.048	84.0%	14.2%	13.8%	16.8%	13.8%	111.5%
1.9%	$0.090	88.0%	15.8%	17.5%	17.0%	17.5%	123.0%
2.6%	$0.124	92.0%	17.3%	21.3%	17.3%	21.3%	134.5%
3.2%	$0.152	96.0%	18.8%	25.0%	17.6%	25.0%	146.0%

If actual results for any one or more performance measures falls between the performance levels shown above, the “Bonus % of Target” for such performance measure(s) will be interpolated accordingly. If the Company's performance exceeds the highest performance level shown above for one or more of the specified performance measures (i.e., Adjusted EPS, Net Sales Growth, and R&D Reinvestment Rate), the “Bonus % of Target” achieved with respect to that performance measure will be the maximum “Bonus % of Target” specified for that performance measure.

13 MBP Page - 3 -

Bonus Pool Adjustments and Differentiation by Business Unit/Function

The bonus pool may be allocated among the business units/functions by the Company's Chief Executive Officer based on such matters as he or she may determine to be appropriate, including operating income results vs. budget, performance in relation to pre-established objectives and other financial results. For example, a business unit that exceeds budget may receive a greater share of the total bonus pool than a business unit that is below budget.

At the end of the Plan Year, the Company's Chief Executive Officer may recommend adjustments to the bonus pool to the Committee after consideration of key operating results. When calculating corporate performance for purposes of this Plan, the Committee has the discretion to consider such matters as it may determine to be appropriate, including any or all of the following items:


•	extraordinary, unusual or non-recurring items;


•	effects of accounting changes;


•	effects of financing activities;


•	expenses for restructuring or productivity initiatives;


•	other non-operating items;


•	spending for acquisitions;


•	effects of divestitures;


•	amortization of acquired intangible assets;


•	performance in relation to pre-established objectives;


•	achievement of key milestones; and


•	any other items of significant income or expense which are determined to be appropriate adjustments.

INDIVIDUAL BONUS AWARD CALCULATION

Target bonus awards will be expressed as a percentage of the participant's eligible earnings for the Plan Year (as determined by the Compensation department in its discretion). The target percentages will vary by salary grade and position (see Attachment No. 1). A participant's actual bonus award will be determined by the Administrator (as defined under “Administration” below) and may vary above or below the targeted level based on corporate performance, the overall performance of his or her business unit/function relative to the overall performance of the other business units/functions and the participant's performance in relation to his or her predetermined MBOs, each as determined by the Administrator or its delegate. Except as may otherwise be approved by the Committee, each participant's actual bonus award may be modified down to 0%

13 MBP Page - 4 -

or up to 150% of the bonus amount otherwise payable to such participant based on his or her target bonus amount and any adjustments for corporate performance and business unit/function performance. 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.

PAYMENT OF BONUSES

Form of Payment

Bonuses awarded under the Plan will be paid in cash, provided, however, that if the bonus pool is funded at a level that exceeds the targeted level (i.e., the aggregate “Bonus % of Target” exceeds 100%) and the recipient of the bonus is subject to the Company's executive stock ownership guidelines, then any portion of his or her bonus that exceeds his or her target bonus will be paid in the form of a restricted stock or restricted stock unit award (each, an “MBP Equity Award”) granted under, and subject to the terms and conditions of, the Allergan, Inc. 2011 Incentive Award Plan, as amended from time to time, or its successor (the “2011 Incentive Award Plan”). The number of restricted shares or restricted stock units subject to a participant's MBP Equity Award will be determined by dividing (x) the portion of his or her bonus amount that exceeds his or her target bonus by (y) the closing trading price of the Company's common stock on the date of grant, and rounding down to the next whole share. No cash payment will be made in lieu of any fractional share rounded down.

Each MBP Equity Award will vest in a single installment upon the recipient's completion of continuous employment with the Company through the earlier of (i) the second anniversary of the grant date of such award, or (ii) the recipient's Normal Retirement Eligibility Date (as defined in the 2011 Incentive Award Plan). The remaining terms and conditions of each MBP Equity Award will be determined by the Committee in its discretion.

Communication and Payment of Bonus Awards

Bonus awards will be communicated to participants following the close of the Plan Year after the review and authorization of bonus pool funding by the Committee and review and approval of the bonuses by the Administrator. Bonuses will be paid within 30 days following management communication of the award, with cash bonuses paid through the participant's normal payroll channel. In the event of a Change in Control (as defined in Attachment No. 2), bonuses will be paid within 30 days of the effective date of the Change in Control.

CHANGE IN CONTROL

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

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

13 MBP Page - 5 -


•	100% of the Adjusted EPS, Net Sales Growth and R&D Reinvestment Rate targets; or


•	the prorated actual year-to-date performance.

In either case, a participant's actual bonus may vary above or below the targeted level according to the provisions outlined in “Individual Bonus Award Calculation” above. Participants must be employed by the Company or its successor on the effective date of the Change in Control in order to receive the prorated payment, unless their employment is terminated by reason of retirement, death or disability or if it is determined that any such participant is terminated without cause in connection with the Change in Control. 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 Company's Board of Directors 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.

SECTION 409A

Any bonuses that become payable under this Plan to participants who are subject to U.S. federal income taxes are intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), as short-term deferrals within the meaning of Treasury Regulation section 1.409A-1(b)(4), and this Plan shall be administered and construed consistent with this intent. For purposes of the foregoing, any bonus that becomes payable to such a participant shall be paid no later than the 15 ^th day of the third month following the end of the later of (i) the participant's first taxable year in which the participant's right to receive such bonus is no longer subject to a “substantial risk of forfeiture” (within the meaning of Section 409A) or (ii) the Company's first taxable year in which the participant's right to receive such bonus is no longer subject to a substantial risk of forfeiture.

TAX WITHHOLDING

The Company shall have the authority and the right to deduct or withhold, or require a participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes required by law to be withheld with respect to any taxable event concerning a participant arising in connection with a bonus award granted under this Plan.

ADMINISTRATION

References in the Plan to “Administrator” mean the entity that conducts the general administration of the Plan in accordance with its provisions. With reference to the administration of awards under the Plan to executive officers of the Company, the term “Administrator” means the Committee. With reference to the administration of awards under the Plan to all other participants, the term “Administrator” means the management of the Company (or its delegate) (“Management”).

The Administrator shall have the power and authority to (a) determine corporate performance and individual performance, (b) interpret the Plan document, (c) adopt rules for the

13 MBP Page - 6 -

administration, interpretation and application of the Plan as are not inconsistent with the Plan, (d) interpret, amend or revoke any such rules, and (e) make factual determinations under the Plan. Management shall also have the power and authority to alter, amend, or terminate the Plan at any time, subject to approval of the Committee.

All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon all participants, the Company and all other interested persons. No member of the Committee or Management shall be personally liable for any action, inaction, determination or interpretation made in good faith with respect to the Plan or any bonus award, and all members of the Committee and Management shall be fully protected by the Company in respect of any such action, determination or interpretations, to the maximum extent permitted by law.

GENERAL

This Plan does not constitute a contract of employment and cannot be relied upon as such. Any questions regarding this Plan should be directed to the Human Resources department or the Vice President, Global Compensation and Benefits. This Plan document supersedes any previous document a participant may have received.

13 MBP Page - 7 -

ATTACHMENT NO. 1

ALLERGAN

MANAGEMENT BONUS PLAN

TARGET AWARDS ^*



	US	Asia Pacific	Canada	EAME	Latin America
Salary Grade	Target Bonus	Target Bonus	Target Bonus	Target Bonus	Target Bonus
7E	15%	23%	20%	20%	23%
8E	23%	28%	28%	25%	28%
9E	30%	30%	30%	30%	30%
10E	35%	35%	35%	35%	35%
11E	40%	40%	40%	40%	40%
12E	45%	45%	45%	45%	45%
13E	45%	50%	50%	50%	50%
14E	55%



Title		Target Bonus
EVP, Finance & Business Development, CFO		75%
EVP, R&D, Chief Scientific Officer		75%
EVP & President EAME		75%
EVP, General Counsel & Assistant Secretary		60%
EVP, Global Technical Operations		60%
EVP, Human Resources		60%
CVP & President US Medical, Latin America and Asia Pacific		60%
CVP & President North America Pharmaceuticals		60%

^* All target bonus amounts represent a percentage of the participant's eligible earnings. A participant's actual bonus award may vary based on a variety of factors (including individual performance, corporate performance and business unit performance), as described in the Plan.

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ATTACHMENT NO. 2

CHANGE IN CONTROL DEFINITION

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

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

(b) Individuals who, as of the date hereof, constitute the Board of Directors of Allergan (the “Incumbent Board”), cease for any reason to constitute at least a majority of the Board of Directors, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by Allergan's stockholders, is approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Allergan) shall be considered as though such person were a member of the Incumbent Board of Allergan; or

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

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

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

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

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

13 MBP Page - 9 -

EXHIBIT 10.40

NON-QUALIFIED STOCK OPTION GRANT NOTICE
FOR NON-EMPLOYEE DIRECTORS

Pursuant to the Allergan, Inc. 2011 Incentive Award Plan (the “ Plan ”), Allergan, Inc. (the “ Company ”) hereby grants to the individual listed below (“ Participant ”), an option to purchase the number of shares of the Company’s common stock, par value US$0.01 per share (“ Stock ”), set forth below (the “ Shares ”) at the price set forth below (the “ Option ”). The Option is subject to all of the terms and conditions set forth in this Non-Qualified Stock Option Grant Notice for Non-Employee Directors (this “ Grant Notice ”), in the Terms and Conditions for Non-Employee Directors attached hereto as Exhibit A (the “ Terms ”), in the Country-Specific Terms, if any, for Participant’s country attached hereto as Exhibit B (the “ Country-Specific Terms ”) and in the Plan attached hereto as Exhibit C , each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice.



Participant:
Grant ID:
Grant Date:
Exercise Price per Share:	US$
Total Number of Shares Subject to the Option:	shares
Expiration Date:

Type of Option: Non-Qualified Stock Option


Vesting Schedule:	Subject to the terms and conditions of the Plan, this Grant Notice, the Terms, the Country-Specific Terms and the Sub-Plan, as applicable, the Option shall vest and become exercisable on the earlier of:


(i)	the first anniversary of the grant date, or


(ii)	the first stockholder meeting held in ________ at which one or more members of the Board are standing for re-election.

Except as provided in Sections 3.2 or 3.5 of the Terms, in the Country-Specific Terms or in the Sub-Plan, if applicable, as otherwise provided by the Administrator or as set forth in a written agreement between the Company and Participant, in no event shall the Option vest and become exercisable for any additional shares of Stock following Participant’s termination of service as a Director of the Company, except as may otherwise be provided by the Administrator or as set forth in a written agreement between the Company and Participant.

Remainder of page intentionally left blank.

All decisions and interpretations of the Administrator arising under the Plan, this Grant Notice, the Terms or the Country-Specific Terms, if applicable, or relating to the Option shall be binding, conclusive and final.



ALLERGAN, INC.
By:
Print Name:	David E.I. Pyott
Title:	Chairman of the Board, President and Chief Executive Officer
Address:	2525 Dupont Drive
	Irvine, California 92612

Attachments: Terms and Conditions for Non-Employee Directors ( Exhibit A )

Country-Specific Terms ( Exhibit B )

Allergan, Inc. 2011 Incentive Award Plan ( Exhibit C)

Allergan, Inc. 2011 Incentive Award Plan Prospectus ( Exhibit D )

EXHIBIT A TO THE NON-QUALIFIED STOCK OPTION GRANT NOTICE
FOR NON-EMPLOYEE DIRECTORS

TERMS AND CONDITIONS

September 2012

Pursuant to the Non-qualified Stock Option Grant Notice (the “ Grant Notice ”) to which these Terms and Conditions (the “ Terms ”) are attached, Allergan, Inc. (the “ Company ”) granted to the participant (“ Participant ”) specified on the Grant Notice an option under the Allergan, Inc. 2011 Incentive Award Plan (the “ Plan ”) to purchase the number of shares of the Company’s common stock, par value US$0.01 per share (“ Stock ”), indicated in the Grant Notice, subject to the terms and conditions of the Grant Notice, the Terms, the Plan attached to the Grant Notice as Exhibit C and the Country-Specific Terms, if any, for Participant’s country attached to the Grant Notice as Exhibit B (the “ Country-Specific Terms ”). Any reference herein to the Terms shall include the Country-Specific Terms.

I. GENERAL

1.1. Defined Terms . Capitalized terms not specifically defined herein shall have the meanings specified in the Grant Notice or, if not defined therein, the Plan.

1.2. Incorporation of Terms of Plan . The Option (as defined in Section 2.1 below) is also subject to the terms and conditions of the Plan, which are incorporated herein by reference.

II. GRANT OF OPTION

2.1. Grant of Option . Effective as of the grant date specified on the Grant Notice (the “ Grant Date ”), the Company irrevocably grants to Participant an option (the “ Option ”) to purchase any part or all of the Shares specified on the Grant Notice, subject to the terms and conditions set forth in the Plan and the Terms.

2.2. Exercise Price . The exercise price payable for the Shares subject to the Option shall be as set forth in the Grant Notice, without commission or other charge. In addition to the exercise price, Participant shall be responsible for any Tax-Related Items, as defined in Section 4.5(a) of the Terms.

III. PERIOD OF EXERCISABILITY

3.1. Commencement of Exercisability .

(a) Subject to Sections 3.3 and 3.4, the Option shall become vested and exercisable in such amounts and at such times as are set forth in the Grant Notice and Sections 3.2 and 3.5, or at such earlier times as are set forth in a written agreement between the Company and Participant.

(b) Except as provided in Sections 3.2 and 3.5, in the Country-Specific Terms, as applicable, as otherwise provided by the Administrator or as set forth in a written agreement between the Company and Participant, the unvested and unexercisable portion of the Option shall terminate immediately upon Participant’s termination of service as a Director of the Company.

3.2. Acceleration of Vesting and Exercisability . Notwithstanding anything to the contrary in Section 3.1 or the Grant Notice, if Participant’s termination of service as a Director of the Company occurs

by reason of Participant’s death or permanent and total disability (within the meaning of Section 22(e)(3) of the Code), then the Option shall become fully vested and exercisable immediately prior to Participant’s termination of service as a Director of the Company.

3.3. Duration of Exercisability . The Option shall become vested and exercisable for the shares of Stock in one or more installments as specified in Section 3.1, subject to acceleration as provided in Section 3.2 or Section 3.5, the Country-Specific Terms, as applicable, or pursuant to the Plan, or any other written agreement between the Company and Participant. Each such installment that becomes vested and exercisable shall remain vested and exercisable until it becomes unexercisable under Section 3.4 or Section 3.5, as applicable.

3.4. Expiration of Option . Subject to the Country-Specific Terms, as applicable, the Option shall terminate and shall not be exercised after the first to occur of the following events:

(a) the expiration of ten years from the Grant Date;

(b) unless Participant served as a Director of the Company for a period of at least six years prior to the Grant Date, the expiration of three months following the date of Participant’s termination of service as a Director of the Company by reason of voluntary resignation or removal for cause; or

(c) unless Participant served as a Director of the Company for a period of at least six years prior to the Grant Date, the expiration of twelve months following the date of Participant’s termination of service as a Director of the Company by reason of voluntary resignation or removal for cause.

Notwithstanding anything to the contrary in this Section 3.4, if the Company receives an opinion of counsel that there has been a legal judgment and/or legal development that results in the treatment that applies to the Option pursuant to this Section being deemed unlawful and/or discriminatory, the Option will remain outstanding and exercisable for the maximum period permitted by applicable law, but in any event shall terminate and cease to be exercisable after the earlier of (i) the expiration of ten years from the Grant Date or (ii) the expiration of thirty-six months (or such shorter period of not less than three months as may be specified by the Administrator) following the date of Participant’s termination of service as a Director of the Company.

3.5. Effect of Change in Control . Notwithstanding anything to the contrary in Sections 3.1 through 3.4 or the Grant Notice, in the event of a Change in Control, the following provisions shall apply:

(a) If (i) the successor or surviving entity (or any affiliate thereto) assumes the Option (or permits the Option to remain outstanding) or replaces the Option with an option to acquire stock in such successor or surviving entity (or any affiliate thereto) (any such replacement award, a “ Substitute Award ”) and (ii) any assumption or replacement described in (i) satisfies the requirements set forth in U.S. Treasury Regulation section 1.409A-1(b)(5)(v)(D), the Option or Substitute Award shall remain outstanding and be governed by their respective terms and the provisions set forth in the Plan, subject to Section 3.5(c).

(b) If the successor or surviving entity (or any affiliate thereto) does not assume or replace the Option (or permit the Option to remain outstanding) as provided in Section 3.5(a), the Option shall become fully vested and exercisable immediately prior to the occurrence of such Change in Control and shall remain outstanding until the Change in Control, subject to the Administrator’s discretion to take any action with respect to the Option permitted under Section 14.2 of the Plan.

IV. EXERCISE OF OPTION

4.1. Person Eligible to Exercise . Except as provided in Sections 5.2(b), during Participant’s lifetime, only Participant may exercise the Option or any portion thereof. After Participant’s death, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.4 or Section 3.5 (as applicable), be exercised by Participant’s personal representative or by any person empowered to do so under Participant’s will or under the then applicable laws of descent and distribution.

4.2. Partial Exercise . Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.4 or Section 3.5, as applicable.

4.3. Manner of Exercise . The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company (or any third party administrator or other person or entity designated by the Company) of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.4 or Section 3.5, as applicable:

(a) An exercise notice in a form specified by the Administrator, stating that Participant is electing to exercise the Option or a portion thereof, such notice complying with all applicable rules established by the Administrator;

(b) The receipt by the Company of full payment for the shares of Stock with respect to which the Option or portion thereof is exercised, including full payment of all applicable Tax‑Related Items (as defined in Section 4.5(a)), which may be in one or more of the forms of consideration permitted under Section 4.4; and

(c) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than Participant, appropriate proof of the right of such person or persons to exercise the Option.

Notwithstanding the foregoing, the Company shall have the right to specify all conditions of the manner of exercise, which conditions may vary by country and which may be subject to change from time to time.

4.4. Method of Payment . Payment of the exercise price and any Tax-Related Items shall be by any of the following, or a combination thereof, at Participant’s election:

(a) cash;

(b) check;

(c) to the extent permitted under applicable laws, delivery of a notice that Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate exercise price and any Tax-Related Items (as defined in Section 4.5(a)); provided , that payment of such proceeds is then made to the Company upon settlement of such sale;

(d) if Participant resides in the U.S.: through the delivery of shares of Stock which have been owned by Participant for such period of time as may be necessary to avoid adverse accounting consequences, duly endorsed for transfer to the Company with a Fair Market Value on the date of exercise

equal to the aggregate exercise price and any Tax-Related Items (as defined in Section 4.5(a)) of the Option or exercised portion thereof;

(e) to the extent permitted by the Administrator, through the delivery of other lawful consideration; or

(f) any combination of the foregoing.

4.5. Taxes .

(a) Regardless of any action the Company takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related items related to Participant’s participation in the Plan and legally applicable to Participant (“ Tax-Related Items ”), Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company. Participant further acknowledges that the Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option grant, including, but not limited to, the grant, vesting or exercise of the Option, the subsequent sale of shares of Stock purchased pursuant to such exercise, and the receipt of any dividends; and (ii) does not commit to and is under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant becomes subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(b) Prior to any relevant taxable or tax withholding event, as applicable, Participant will pay or make adequate arrangements satisfactory to the Company to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company or its agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:

(i) withholding from Participant’s wages or other cash compensation payable to Participant by the Company; or

(ii) withholding from proceeds of the sale of shares of Stock purchased upon exercise of the Option either through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization); or

(iii) withholding in shares of Stock to be issued upon exercise of the Option.

(c) To avoid negative accounting treatment, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates. If the obligation for Tax-Related Items is satisfied by withholding in shares of Stock, for tax purposes, Participant is deemed to have been issued the full number of shares of Stock subject to the exercised Option, notwithstanding that a number of the shares of Stock are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of Participant’s participation in the Plan.

(d) Participant shall pay to the Company any amount of Tax-Related Items that the Company may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the

shares or the proceeds of the sale of shares of Stock, if Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items.

4.6. Conditions to Issuance of Stock Certificates . The shares of Stock deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions:

(a) The admission of such shares to listing on all stock exchanges on which such Stock is then listed;

(b) The completion of any registration or other qualification of such shares under any state, federal, foreign or local law or under rulings or regulations of the U.S. Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its sole and absolute discretion, deem necessary or advisable;

(c) The obtaining of any approval or other clearance from any state, federal, foreign or local governmental agency which the Administrator shall, in its sole and absolute discretion, determine to be necessary or advisable;

(d) The receipt by the Company of full payment for such shares, which may be in one or more of the forms of consideration permitted under Section 4.4 as well as the payment of any Tax-Related Items pursuant to Section 4.5; and

(e) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative convenience.

4.7. Rights as Stockholder . The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until such shares shall have been issued by the Company to such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the shares are issued, except as provided in Section 14.2 of the Plan.

V. OTHER PROVISIONS

5.1. Administration . The Administrator shall have the power to interpret the Plan and the Terms and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be binding, conclusive and final upon Participant, the Company and all other interested persons. No member of the Administrator shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, the Terms or the Option.

5.2. Limited Transferability .

(a) Subject to Section 5.2(b), the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution. Neither the Option nor any interest or right therein or part thereof shall be liable for Participant’s debts, contracts or engagements

or the debts, contracts or engagements of Participant’s successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

(b) Notwithstanding any other provision of the Terms, if Participant resides in the U.S. and the Administrator consents, Participant may transfer the Option to one or more “Permitted Transferees” (as defined in the Plan), subject to the following terms and conditions:

(i) the Option shall not be assignable or transferable by the Permitted Transferee other than by will or the laws of descent and distribution;

(ii) the Option shall continue to be subject to all the terms and conditions of the Plan and the Terms, as amended from time to time, as applicable to Participant (other than the ability to further transfer the Option); and

(iii) Participant and the Permitted Transferee execute any and all documents requested by the Company, including, without limitation, documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under applicable federal and state securities laws, and (C) evidence the transfer.

Unless transferred to a Permitted Transferee in accordance with Section 5.2(b), during the lifetime of Participant, only Participant may exercise the Option or any portion thereof. Subject to such conditions and procedures as the Administrator may require, a Permitted Transferee may exercise the Option or any portion thereof during Participant’s lifetime. After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.4 or Section 3.5, as applicable, be exercised by Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.

5.3. Nature of Grant . In accepting the grant of the Option, Participant acknowledges, understands and agrees that:

(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time;

(b) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past;

(d) Participant is voluntarily participating in the Plan;

(e) the Option and the shares of Stock subject to the Option are not intended to replace any pension rights;

(f) nothing in the Plan or the Terms shall confer upon Participant any right to continue in service as a member of the Board of Directors of the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company or its stockholders to remove Participant from the Board at any time in accordance with the provisions of applicable law;

(g) if Participant exercises the Option and obtains shares of Stock, the value of those shares purchased upon exercise may increase or decrease in value, even below the exercise price;

(h) if the underlying shares of Stock do not increase in value, the Option will have no intrinsic value;

(i) the future value of the underlying shares of Stock is unknown and cannot be predicted;

(j) no claim or entitlement to compensation or damages shall arise from termination of the Option resulting from Participant’s termination of service as a Director of the Company (for any reason whatsoever), and as a condition to receiving the Option grant, Participant irrevocably agrees (i) never to institute any claim against the Company in the event of any such termination of the Option, (ii) to waive his or her ability, if any, to bring any such claim, and (iii) to release the Company from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant shall be deemed irrevocably to have agreed not to pursue such claim and to execute any and all documents necessary to request dismissal or withdrawal of such claims;

(k) if Participant resides outside of the U.S., the following additional provisions shall apply:

(i) the Option and the shares of Stock subject to the Option are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company, and which is outside the scope of Participant’s employment contract, if any;

(ii) except as explicitly provided pursuant to the terms of a written benefit plan maintained by the Company or a Subsidiary, the Option and the shares of Stock subject to the Option are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or any Affiliate; and

(iii) Participant acknowledges and agrees that neither the Company nor any Affiliate shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the U.S. dollar that may affect the value of the Option or of any amounts due to Participant pursuant to the settlement of the Option or the subsequent sale of any shares of Stock acquired upon settlement.

5.4. Data Privacy . This Section 5.4 applies to Participant only if Participant resides outside of the U.S. If Participant resides outside the U.S., then Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in these Terms and any other Option grant materials by and among the Company and its Affiliates for the purpose of implementing, administering and managing Participant’s participation in the Plan.

Participant understands that the Company may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of the Option or any other entitlement to shares of Stock awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor, for the purpose of implementing, administering and managing the Plan (“Data”).

Participant understands that Data will be transferred to Charles Schwab & Co., Inc., or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Participant authorizes the Company, Charles Schwab & Co., Inc., and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Participant understands, however, that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.

5.5. Shares to Be Reserved . The Company shall at all times during the term of the Option reserve and keep available such number of shares of Stock as will be sufficient to satisfy the requirements of the Terms.

5.6. Notices . All notices or other communications required or permitted hereunder shall be in writing, and shall be deemed duly given only when delivered in person or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the local postal service, addressed as follows:


If to the Company:	Allergan, Inc. Attention: General Counsel 2525 Dupont Drive Irvine, California 92612


If to Participant:	To Participant’s most recent address then on file in the Company’s personnel records.

By a notice given pursuant to this Section 5.6, either party may thereafter designate a different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled to exercise the Option pursuant to Section 4.1 by written notice under this Section 5.6.

5.7. Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Terms.

5.8. Governing Law; Venue . The Terms shall be administered, interpreted and enforced under the laws of the State of Delaware, without regard to conflicts of law principles thereof.

For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or the Terms, the parties hereby submit to and consent to the exclusive jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of Orange County, California, or the U.S. federal courts for the Central District of California, and no other courts, where this grant is made and/or to be performed.

5.9. Severability . Should any provision of the Terms be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.

5.10. Conformity to Securities Laws . Participant acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the U.S. Securities and Exchange Commission thereunder, and state, foreign or local securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and the Terms shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

5.11. Amendments . Except as explicitly prohibited by the Plan, the Terms may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator; provided , that, except as may otherwise be provided by the Plan, no termination, amendment or modification of the Terms shall adversely affect the Option in any material way without Participant’s prior written consent. The Terms may not be modified, suspended or terminated except by an instrument in writing signed by a duly authorized representative of the Company and, if Participant’s consent is required, by Participant or such other person as may be permitted to exercise the Option pursuant to Section 4.1.

5.12. Successors and Assigns . The Company may assign any of its rights with respect to the Option to single or multiple assignees, and the Terms shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in Section 5.2, the Terms shall be binding upon Participant and Participant’s heirs, executors, administrators, successors and assigns.

5.13. Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or the Terms, the Option and the Terms shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Terms shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

5.14. No Advice Regarding Grant . The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying shares of Stock. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.

5.15. Language . If Participant has received these Terms or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

5.16. Electronic Delivery . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

5.17. Country-Specific Terms . Notwithstanding anything to the contrary herein, the Option grant shall be subject to the Country-Specific Terms. Moreover, if Participant relocates to one of the countries included in the Country-Specific Terms, the special terms and conditions for such country will apply to Participant to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Country-Specific Terms constitute part of these Terms and are incorporated herein by reference.

5.18. Imposition of Other Requirements . The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the Option and on any shares of Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

5.19. Currency . All calculations under the Plan shall be prepared based on U.S. dollars. Amounts denominated in any currency other than U.S. dollars shall be converted into U.S. dollars on the basis of the Exchange Rate in effect on the relevant date. The “ Exchange Rate ” shall be the rate at which the relevant currency is converted into U.S. dollars, as reported on the relevant date in The Wall Street Journal (or such other reliable source as may be selected from time to time by the Administrator in its discretion).

5.20. Waiver . Participant acknowledges that a waiver by the Company of a breach of any provision of the Terms shall not operate or be construed as a waiver of any other provision of the Terms, or of any subsequent breach by Participant or any other participant.

5.21. Entire Agreement . The Plan and the Terms constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.

EXHIBIT B TO THE NON-QUALIFIED STOCK OPTION GRANT NOTICE

FOR NON-EMPLOYEE DIRECTORS

COUNTRY-SPECIFIC TERMS

FOR NON-EMPLOYEE DIRECTOR PARTICIPANTS IN THE U.K.

Terms and Conditions

These Country-Specific Terms include additional terms and conditions that govern the Option granted to Participant under the Allergan, Inc. 2011 Incentive Award Plan (the “ Plan ”) if Participant resides in the United Kingdom. Capitalized terms used but not defined in these Country-Specific Terms are defined in the Plan, the Non-Qualified Stock Option Grant Notice, and/or the Terms, and have the meanings set forth therein.

Notifications

These Country-Specific Terms also include information regarding certain issues of which Participant should be aware with respect to Participant's participation in the Plan. The information is based on the laws in effect in the respective countries as of September 2012, which are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information noted in these Country-Specific Terms as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date by the time Participant exercises the Option or sells shares of Stock purchased under the Plan.

In addition, the information contained herein is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of a particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant's situation.

Finally, Participant understands that if he or she is a citizen or resident of a country other than the United Kingdom, transfers to a country other than the United Kingdom after the Grant Date, or is considered a resident of another country for local law purposes, the information contained herein may not apply to Participant, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply.

Terms and Conditions

Taxes . This provision supplements Section 4.5 of the Terms:

If payment or withholding of the income tax is not made within ninety (90) days of the event giving rise to the tax or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003 (the " Due Date "), the amount of any uncollected income tax will constitute a loan owed by Participant to the Company, effective on the Due Date. Participant agrees that the loan will bear interest at the then-current Official Rate of Her Majesty’s Revenue and Customs (“ HMRC ”), it will be immediately due and repayable, and the Company may recover it at any time thereafter by any of the means referred to in Section 4.5 of the Terms. Notwithstanding the foregoing, if Participant is a director of the Company at such time, he or she will not be eligible for such a loan to cover the uncollected tax. In the event that Participant is such a director and the taxes due are not collected from or paid by Participant by the Due Date, the amount of any uncollected income tax will constitute a benefit to Participant on which additional income

tax and national insurance contributions will be payable. Participant will be responsible for reporting and paying any income tax and national insurance contributions due on this additional benefit directly to HMRC under the self-assessment regime.

EXHIBIT 10.51

SECOND AMENDMENT OF

THE LICENSE, DEVELOPMENT, SUPPLY AND DISTRIBUTION AGREEMENT

This SECOND AMENDMENT OF THE LICENSE, DEVELOPMENT, SUPPLY AND DISTRIBUTION AGREEMENT (this “ Second Amendment ”) is made and effective as of January 29, 2013 (the “ Second Amendment Effective Date ”) by and among Allergan Sales, LLC , a Delaware corporation with its principal place of business at 2525 Dupont Drive, Irvine, California 92612 (“ Allergan Sales ”), Allergan USA, Inc. , a Delaware corporation with its principal place of business at 2525 Dupont Drive, Irvine, California 92612 (“ Allergan USA ”), Allergan, Inc. , a Delaware corporation with its principal place of business at 2525 Dupont Drive, Irvine, California 92612 (“ Allergan, Inc. ” and, collectively with Allergan Sales and Allergan USA, “ Allergan ”) and Spectrum Pharmaceuticals, Inc. (“ Spectrum ”), a Delaware corporation with its principal place of business at 11500 S. Eastern Avenue, Henderson, Nevada 89052. Allergan and Spectrum are collectively referred to herein as the “ Parties ” and individually as a “ Party ”.

WHEREAS , Allergan Sales, Allergan USA, Allergan, Inc. and Spectrum are parties to that certain License, Development, Supply and Distribution Agreement, dated October 28, 2008 and amended June 13, 2011 (the “ License Agreement ”), pursuant to which Spectrum granted Allergan the exclusive right to commercialize certain products containing Apaziquone in certain territories, and the Parties otherwise agreed to collaborate in the development and commercialization of such products;

WHEREAS , Allergan Sales, Allergan USA and Spectrum are also parties to that certain Co-Promotion Agreement, dated October 28, 2008 (the “ Co-Promotion Agreement ”), pursuant to which the Parties agreed to co-promote Licensed Product (as defined in the License Agreement) in the use for the treatment of bladder cancer, or pre-bladder cancer, conditions (the “ Field of Use ”);

WHEREAS , Spectrum now wishes to acquire back all the licensed rights to development and commercial activities for such products under the License Agreement and the Co-Promotion Agreement, and Allergan agrees to return to Spectrum all such rights to develop and commercialize such products, in consideration of which Spectrum has agreed to pay Allergan specified royalties on the future sales of Royalty Product (as defined herein); and

WHEREAS , the Parties desire to amend the License Agreement, terminate the Co-Promotion Agreement and set forth the terms and conditions under which Allergan will return, and Spectrum will accept, the rights to such products, all as set forth below.

NOW THEREFORE , in consideration of the foregoing premises and the mutual promises, covenants and conditions contained in this Second Amendment, the Parties agree as follows:

1. Unless otherwise indicated, capitalized terms used but not defined herein shall have the meanings set forth in the License Agreement.

2. In consideration of Spectrum’s acquisition of the licensed rights to development and commercial activities for the Licensed Product back from Allergan, the Parties hereby agree that, notwithstanding anything to the contrary in the License Agreement, Allergan shall have no further

***Certain confidential information contained in this document, marked with 3 asterisks (***), has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended

liability for any costs or expenses of any kind, including without limitation, any Development Costs incurred after December 31, 2012 and from and after December 31, 2012, Allergan shall have no obligations or liability under the License Agreement or Co-Promotion Agreement including, without limitation, any obligations or liability regarding development, regulatory or other responsibilities or activities of any kind (collectively, the “ Purpose ”).

3. To effectuate the Purpose, as of the Second Amendment Effective Date, the licenses granted to Allergan under Article 2 of the License Agreement are terminated. Allergan confirms that it did not grant any sublicenses under such licenses while they were in effect.

4. Product Royalty .

(a) Royalty . In consideration of the Purpose and Allergan’s economic contribution as a party to the License Agreement and the Co-Promotion Agreement, Spectrum shall pay to Allergan a royalty on the Royalty Net Sales (as defined below) of Licensed Product in the Field of Use or for the treatment of upper urinary tract carcinoma (collectively, “ Royalty Product ”) by Spectrum, its Affiliates or sublicensees of Spectrum or its Affiliates within the Allergan Territory, as set forth in the table below (the “ Royalty ”):



Net Sales of Royalty Product In The Allergan Territory Each Fiscal Year	Royalty Rate
First ***	***%
Amounts Greater Than ***	***%

“Royalty Net Sales” means, with respect to a given period of time, the gross amounts invoiced in such period, less the following deductions from such gross amounts which are actually incurred, allowed, paid, accrued or specifically allocated:

(1) credits or allowances actually granted for damaged products, returns or rejections of product, price adjustments and billing errors;

(2) governmental and other rebates (or equivalents thereof) granted to managed health care organizations, pharmacy benefit managers (or equivalents thereof), federal, state/provincial, local and other governments, their agencies and purchasers and reimbursers or to trade customers;

(3) normal and customary trade, cash and quantity discounts, allowances and credits actually allowed or paid;

(4) distribution services agreement fees allowed or paid to Third Party distributors;

(5) transportation costs, including insurance, for outbound freight related to delivery of the product to the extent included in the gross amount invoiced;

(6) sales taxes, VAT taxes and other taxes directly linked to the sales of the Royalty Product to the extent included in the gross amount invoiced; and

(7) any other items that reduce gross sales amounts as required by United States Generally Accepted Accounting Principles applied on a consistent basis.

Sales between or among Spectrum or its Affiliates or sublicensees of Spectrum or Spectrum’s Affiliates shall be excluded from the computation of Net Sales, but the subsequent final sales to Third Parties by such Party, Affiliates or sublicensees shall be included in the computation of Net Sales.

For clarity, and without limitation, a Royalty shall be paid on Royalty Products regardless of whether or not closed system packaging is included or utilized.

(b) Calculations . Notwithstanding Subsection 4(a) above:

(i) no royalty payments shall be due for Royalty Product which is sold and returned as defective, unusable, rejected by a purchaser; and

(ii) no royalty payments shall be due for Royalty Product which is used or provided to others by Spectrum, its Affiliates or its or their sublicensees solely for promotion (without consideration), research, conducting clinical trials, demonstration, evaluation, testing or training purposes.

(c) No Patent Protection . If any Royalty Product is sold in a country in the Allergan Territory in which (i) there is no Patent Protection (as defined below), (ii) there is no Regulatory Exclusivity (as defined below), and (iii) a Generic Product (as defined below) exists, then the royalty rates set forth in Subsection 4(a) of this Second Amendment for such Royalty Product shall be ***. “Generic Product” means, with respect to a Royalty Product in the Field of Use in a particular country in the Allergan Territory, another pharmaceutical product that: (x) contains as an active ingredient Apaziquone; and (y) is approved for use in such country (pursuant to 21 U.S.C. 355(b)(2), an ANDA, a separate NDA, compendia listing, other drug approval application or otherwise, including foreign equivalents of the foregoing, as applicable). “Patent Protection” means, in the country of sale in the Allergan Territory, that at least one of the claims of an issued and unexpired patent included within the Licensed Intellectual Property, which would be infringed by the sale of such Royalty Product in that country, is in effect and has not been revoked or held unenforceable or invalid by a final decision of a court or other governmental agency of competent jurisdiction having authority over said patent and that final decision is not appealed or unappealable (all claims are considered valid until so adjudicated and during prosecution of a patent application containing such claims) and is sufficient to prevent a Generic Product from being sold in such country. “Regulatory Exclusivity” means market exclusivity granted by a Governmental Authority designed to prevent the entry of Generic Product(s) onto the market in the Field of Use, including new chemical entity exclusivity, new use or indication exclusivity, new formulation exclusivity, orphan drug exclusivity, pediatric exclusivity and 180-day generic product exclusivity.

(d) Royalty Term . Spectrum’s royalty obligations shall commence on the first commercial sale of a Royalty Product and expire, on a country-by-country basis, on the later of: (i) the expiration or earlier invalidation of all of the patents in the Licensed Intellectual Property claiming the composition of matter of, the formulation of, or the method of making or using, such Royalty Product in such country; (ii) *** years after the first commercial sale of such Royalty Product in such country; or (iii) the expiration of all Regulatory Exclusivity covering such Royalty Product in such country. “ Royalty Term ” means the period of time from the Second Amendment Effective Date to that date upon which Spectrum’s royalty obligation expires in all countries within the Allergan Territory.

(e) Royalty Payment Schedule . Within five (5) business days after the end of each Fiscal Quarter during which a Royalty Product is sold by Spectrum, its Affiliates or its or their sublicensees, Spectrum shall provide to Allergan the estimated royalty payment calculation. Within forty-five (45) days after the end of each Fiscal Quarter during which a Royalty Product is sold by Allergan, its Affiliates or its or their sublicensees, Spectrum shall deliver to Allergan a detailed report, which shall include at least: (i) the net quantity sold, total sales, total to net deductions, and Net Sales of Royalty Product sold in the prior Fiscal Quarter; (ii) the calculation in U.S. dollars of royalty payments due hereunder with respect to such sales; and (iii) the total due hereunder for such Fiscal Quarter. Simultaneously with the delivery of each such report, Spectrum shall pay to Allergan the total due hereunder for such Fiscal Quarter.

(f) Currency of Payments . All payments under this Second Amendment will be made in U.S. dollars by electronic funds transfer to such bank accounts as each Party may designate from time to time, or by check. When Royalty Product is sold for monies other than U.S. dollars, the exchange rate shall be determined based on the average daily exchange rate calculated by averaging the closing daily rate between the country in which the Royalty Product was sold and the U.S., as obtained from Bloomberg or equivalent successor (absent manifest error therein), on a monthly basis during the Fiscal Quarter that Spectrum records the sale for accounting purposes.

(g) Books; Records . During the Royalty Term and for three (3) years thereafter, Spectrum shall keep and maintain at its regular places of business complete and accurate books, records and accounts in accordance with the U.S. Generally Accepted Accounting Principles, or other accounting standards mandated by the U.S. Securities and Exchange Commission, in sufficient detail to reflect all amounts required to be paid under this Second Amendment, as well as any other books, records or accounts required to be maintained in connection with the Royalty Product under any applicable Law. Prior to destroying any books, records or accounts which are material to the Allergan’s rights and obligations under this Second Amendment, Spectrum must seek prior written consent from Allergan, which consent may not be unreasonably withheld.

(h) Audits . During the Royalty Term and for three (3) years thereafter, Allergan (including a firm of certified public accountants engaged for such purpose) shall have access to and the right to examine such relevant records and accounts that Spectrum is required to maintain pursuant to Subsection 4(g) of this Second Amendment at Spectrum’s premises for the sole purpose of verifying the payments owed to Allergan hereunder; provided, however, that any such examination: (i) shall be at Allergan’s expense; (ii) shall be during normal business hours upon

reasonable prior written notice which shall in no event be less than five (5) business days; and (iii) shall not unreasonably interfere with Spectrum’s operations and activities. Allergan may not re-audit Spectrum’s records for a given period of time once audited unless a discrepancy has been discovered. All information reviewed during any such examination shall be treated as Confidential Information of Spectrum except as necessary in connection with the enforcement or interpretation under this Second Amendment. Spectrum shall promptly pay to Allergan any underpayment discovered in the course of such audit, together with interest at the rate specified in Subsection 4(k) of this Second Amendment accrued from the date due until paid. Notwithstanding Subsection 4(h)(i) above, if the audit uncovers an underpayment that is more than five percent (5%) of the amount payable for the period subject to such audit, Spectrum shall reimburse Allergan for its out-of-pocket expense of such audit.

(i) Withholding Taxes . Notwithstanding anything to the contrary herein, in the event that withholding taxes apply with respect to any amounts due by Spectrum hereunder, Spectrum shall be entitled to withhold from any payment due to Allergan under this Second Amendment any taxes that Spectrum is required to pay and such withholding shall decrease by an equivalent amount on the payment due to Allergan. Spectrum shall provide Allergan with notification of any anticipated withholding requirements with as much advance notice as practicable and shall cooperate in good faith with Allergan to legally minimize such withholding taxes. Spectrum will timely pay to the proper governmental authority the amount of any taxes withheld and will provide Allergan with an official tax certificate or other evidence of tax obligation, together with proof of payment from the relevant governmental authority sufficient to enable Allergan to claim such payment of taxes.

(j) Spectrum’s Obligations . Spectrum shall be solely responsible for, and shall pay, any royalties or other payments due under the ***, the *** or any other license to the Licensed Intellectual Property.

(k) Late Payment . If Allergan does not receive payment of any sum due to it on or before the due date, simple interest shall thereafter accrue on the sum due to Allergan from the due date until the date of payment at a rate equal to LIBOR, as reported in the Wall Street Journal, plus one percent (1%) or the maximum rate allowable by applicable law, whichever is less.

5. In consideration of the Purpose and the Royalty, Spectrum shall have the right to continue to use the data and results generated under the License Agreement before the Second Amendment Effective Date for its manufacture, development and/or commercialization of products containing Apaziquone anywhere in the world. Allergan hereby represents and warrants that to its knowledge, as of the Second Amendment Effective Date, there is no Allergan Intellectual Property Rights in either, any Allergan Solely Developed Know-How or any Joint Intellectual Property that have been incorporated in the Licensed Product in the Field of Use, or the making or using thereof.

6. Subject to regulatory approval to the extent applicable, Allergan shall assign to Spectrum all regulatory filings relating to the Licensed Product in the Field of Use in the Allergan Territory that are in the name of Allergan, its Affiliates and its or their sublicensees, if any. The Parties shall cooperate in good faith toward a goal of completing such assignment within thirty (30) days after the Second Amendment Effective Date or as soon as reasonably practicable thereafter.

7. Allergan hereby agrees to assign to Spectrum all right, title and interest in and to the trademarks specified on Exhibit 1 hereto, including the accompanying goodwill; provided, however, with respect to any abandoned application, Allergan’s obligation to assign shall only apply to the extent such abandoned application is reasonably assignable. The Parties shall cooperate in good faith toward a goal of completing such assignment within thirty (30) days after the Second Amendment Effective Date or as soon as reasonably practicable thereafter. Allergan consents to Spectrum’s continued ownership of the “eoquin” domain names registered in the name of Spectrum.

8. Allergan shall, to the extent assignable, assign to Spectrum the contracts listed on Exhibit 2 hereto, which were entered into by Allergan in connection with the development, manufacturing and/or commercialization of the Licensed Product in the Field of Use in the Allergan Territory. The Parties shall cooperate in good faith toward a goal of completing such assignment within thirty (30) days after the Second Amendment Effective Date or as soon as reasonably practicable thereafter.

9. Allergan hereby represents and warrants that as of the Second Amendment Effective Date, it does not possess any inventory of Licensed Product.

10. Spectrum hereby agrees to defend, indemnify and hold harmless Allergan Indemnitees from and against any Losses arising out of a Claim by a Third Party (other than an Affiliate of Allergan) arising out of, resulting from or relating to the manufacture, development or commercialization of pharmaceutical products containing Apaziquone by Spectrum, its Affiliates or its or their sublicensees, on or after the Second Amendment Effective Date. Spectrum’s obligations under this Section 10 shall be subject to the indemnification procedures of Section 12.3 of the License Agreement.

11. To effectuate the Purpose, as of the Second Amendment Effective Date:

(a)

all rights and obligations of both Parties under the License Agreement are hereby terminated, except for following portions of the License Agreement that will survive the termination: Article 1 (including Schedule 1 ) (Definitions; Interpretation); Article 9 (Confidential Information) (but as to Sections 9.1 thru 9.3 only for three (3) years from the Second Amendment Effective Date; for clarity, Section 9.4 (Independent Development; Residuals) shall continue after the three (3) year period); Article 12 (Indemnification; Limitations on Liability; Insurance Requirements) (but only to the extent any Loss arises prior to the Second Amendment Effective Date) and Section 12.3 (but only as applicable to Spectrum under this Second Amendment); Article 14 (Miscellaneous) (other than Sections 14.3 , 14.6 and 14.12 ); Section 6.9 (Books; Records); Section 6.10 (Audits); Section 6.11 (Offset); Section 6.13 (Withholding Taxes); Section 6.15 (Late Payment) (for these Sections in Article 6 , only as they relate to payments accrued before the Second Amendment Effective Date); Section 8.1 (Ownership); Section 8.2(a) and (8.2(b) (Prosecution) (as it relates to Joint Intellectual Property only and for clarity these sections shall not create or preserve any payment obligations of Allergan from and after December 31, 2012). For clarity, the appointment of Allergan as Spectrum’s agent under Section 5.1(a)(ii) is hereby terminated as of the Second Amendment Effective Date and Allergan shall have no obligations or liability under the License Agreement or Co-Promotion

Agreement including, without limitation, any obligations or liability regarding development, regulatory or other responsibilities or activities of any kind; and


(b)	the Co-Promotion Agreement is hereby terminated.

12. After the Second Amendment Effective Date, (i) Allergan shall promptly deliver to Spectrum or destroy (at Allergan’s option) all Confidential Information of Spectrum, subject to Allergan retaining a copy of such Confidential Information solely as may be reasonably necessary for Allergan to perform under this Second Amendment and for legal archival purposes and/or as may be required by Law, and (ii) Spectrum shall promptly deliver to Allergan or destroy (at Spectrum’s option) all Confidential Information of Allergan, subject to Spectrum retaining a copy of such Confidential Information solely as may be reasonably necessary for Spectrum to perform under this Second Amendment and for legal archival purposes and/or as may be required by Law. For clarity, Confidential Information of Allergan shall exclude the data and results generated under the License Agreement and regulatory filings assigned by Allergan to Spectrum pursuant to Section 6 of this Second Amendment, if any.

13. The Parties agree to the press release attached hereto as Exhibit 3 announcing the Second Amendment and the Purpose. The Parties further agree that such press release shall be issued no later than close of business February 1, 2013. Further, from and after the Second Amendment Effective Date, each Party shall not mention the other Party or its Affiliates in any press release or other public statements concerning this Amendment, the Purpose, the License Agreement or the Co-Promotion Agreement without first, in each instance: (a) providing such statement to the other Party for review at least two full (2) business days in advance of making such proposed statement, and (b) obtaining the other’s Party’s express written consent to such statement, which shall not be unreasonably withheld; provided, that the other Party’s review and consent shall not be required in connection with a Party making a public statement that conforms in all material respects to the language in Exhibit 3 or that is determined, based on advice of legal counsel, to be required by applicable Law.

14. Each Party hereby acknowledges and agrees that, as of the Second Amendment Effective Date, to the knowledge of such Party, the other Party has fulfilled its obligations under the License Agreement and Co-Promotion Agreement and neither Party is in breach of the License Agreement or Co-Promotion Agreement.

15. This Second Amendment amends the terms of the License Agreement as expressly provided above, and the License Agreement, as so amended, along with the Second Amendment, sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto with respect to the subject matter of the License Agreement and supersedes, as of the Second Amendment Effective Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matter of the License Agreement. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties other than as set forth in this Second Amendment and the License Agreement (as amended by this Second Amendment).

16. The validity, performance, construction, and effect of this Second Amendment shall be governed by and construed under the laws of the State of New York, without giving effect to any choice of law principles that would require the application of the laws of a different state.

17. This Second Amendment may be executed in one (1) or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

[ remainder of page intentionally left blank ]

IN WITNESS WHEREOF, the Parties have caused this Second Amendment of the License, Development, Supply and Distribution Agreement to be executed on the Second Amendment Effective Date.

ALLERGAN SALES, LLC

By: /s/ JEFFREY L. EDWARDS

Name: Jeffrey L. Edwards

Title: Vice President and

Chief Financial Officer

ALLERGAN USA, INC.

By: /s/ JEFFREY L. EDWARDS

Name: Jeffrey L. Edwards

Title: Vice President and

Chief Financial Officer

ALLERGAN, INC.

By: /s/ JEFFREY L. EDWARDS

Name: Jeffrey L. Edwards


Title:	Executive Vice President, Finance and Business Development, Chief Financial Officer

SPECTRUM PHARMACEUTICALS, INC.

By: /s/ BRETT L. SCOTT

Name: Brett L. Scott

Title: Senior Vice President

Acting Chief Financial Officer

Exhibit 1

Trademarks

EOQUIN either (a) as a stand-alone mark or (b) as the mark has been used in combination with any other words, stylizations, logos, or designs so as to create a unitary trademark

Applications



Country	Mark	Application No.	Filing Date	Status
European Union	EOQUIN	5317086	9/15/06	Abandoned

Registrations



Country	Mark	Registration No.	Registration Date	Status
Canada	EOQUIN	TMA838454	12/14/2012	Issued
Japan	EOQUIN	5041987	4/20/07	Issued
United States	EOQUIN	3,171,995	11/14/06	Issued

Exhibit 2

List of Contracts to be Assigned to Spectrum

None

Exhibit 3

Press Release Announcing the Second Amendment and the Purpose

COMPANY CONTACT:

Shiv Kapoor

Vice President, Strategic Planning & Investor Relations

702-835-6300

InvestorRelations@sppirx.com

Spectrum Pharmaceuticals Acquires Rights for Apaziquone in the U.S., Europe and Other Territories from Allergan; Expects to File New Drug Application


•	Based on communication with the FDA, Spectrum anticipates an Advisory Committee meeting to review a potential NDA for apaziquone.


•	The Company expects to file an NDA, which Spectrum will seek to expedite as part of a plan to achieve potential commercialization of apaziquone in key markets.


•	Apaziquone is in development to treat non-muscle invasive bladder cancer (NIMBC) as a single instillation following transurethral resection of bladder tumor (TURBT).


•	Approximately 70% of all patients with newly diagnosed bladder cancer have NMIBC, and yet there are no FDA-approved agents for post resection chemotherapy.

HENDERSON, Nev. – January 31, 2013 -- Spectrum Pharmaceuticals (NasdaqGS: SPPI), a biotechnology company with fully integrated commercial and drug development operations with a primary focus in hematology and oncology, today announced the Company has reacquired development and commercialization rights for apaziquone in the United States, Europe and other territories pursuant to an agreed-upon restructuring of Spectrum’s collaboration with Allergan, Inc. In exchange, Allergan will receive a royalty on future revenue. Apaziquone is an anticancer agent being developed for the treatment of non-muscle invasive bladder cancer (NIMBC) as a single instillation following transurethral resection of bladder tumor (TURBT).

Spectrum also announced that a scheduled meeting with the U.S. Food & Drug Administration (FDA) was held last month to discuss the results from the Company’s Phase 3 clinical trials. Based on the discussions with the FDA, Spectrum understands that the FDA can accept the NDA filing with the current Phase III data and will likely convene an Advisory Committee meeting. Further, based on discussions with the FDA, Spectrum has agreed to conduct one additional Phase III study following consultation with the FDA on its design.

“Regaining apaziquone rights will enable Spectrum to take the steps we believe are essential to advancing apaziquone toward commercialization in the U.S., Europe and other key territories,” stated Rajesh C. Shrotriya, M.D., Chairman, President and Chief Executive Officer of Spectrum Pharmaceuticals, Inc. “Spectrum is committed to

expediting our program for apaziquone, with the goal of accelerating potential registration and integrating apaziquone into our plan to expand our footprint in the U.S. and build our presence in the EU. Spectrum is grateful to the FDA for its thoughtful feedback on the apaziquone clinical program. We believe there continues to be a significant unmet need as no drugs have been approved and marketed in the U.S. for more than 20 years for low-grade NMIBC.”

Apaziquone is an anticancer drug that requires activation by bio-reductive enzymes that are over-expressed in bladder cancer cells, to render it a cytotoxic alkylating agent. Spectrum conducted two multi-center, international Phase 3 trials of a single dose of intravesical instillation of apaziquone into the bladder in the immediate post-operative period after surgical resection of low-grade, non-muscle invasive bladder tumors. In April 2012, Spectrum announced that the Phase 3 trials did not meet their primary endpoint of a statistically significant difference in the rate of tumor recurrence at 2 years between treatment and placebo arms. However, analysis of the pooled data from both studies showed a statistically significant treatment effect in favor of apaziquone in the primary endpoint of the rate of tumor recurrence at 2 years (p-value = 0.0174) and in a key secondary endpoint, time to recurrence (p-value = 0.0076).

NMIBC is a form of bladder cancer localized in the surface layers of the bladder that has not spread to the deeper muscle layer. Approximately 70% of all patients newly diagnosed with bladder cancer have NMIBC. More than one million patients in the U.S. and Europe are estimated to be affected by the disease, which is treated predominantly by urologists. Professional urology associations and NCCN Guidelines recommend instillation of a cytotoxic agent following transurethral resection of bladder tumor (TURBT) for NMIBC. However, in the US, there are no FDA-approved agents for this indication.

About Spectrum Pharmaceuticals, Inc.

Spectrum Pharmaceuticals is a leading biotechnology company focused on acquiring, developing, and commercializing drug products, with a primary focus in oncology and hematology. Spectrum and its affiliates market three oncology drugs ─ FUSILEV ^® (levoleucovorin) for Injection in the U.S.; FOLOTYN ^® (pralatrexate injection), also marketed in the U.S.; and ZEVALIN ^® (ibritumomab tiuxetan) Injection for intravenous use, for which the Company has worldwide marketing rights. Spectrum's strong track record in in-licensing and acquiring differentiated drugs, and expertise in clinical development have generated a robust, diversified, and growing pipeline of product candidates in advanced-stage Phase 2 and Phase 3 studies. More information on Spectrum is available at www.sppirx.com.

Forward-looking statement — This press release may contain forward-looking statements regarding future events and the future performance of Spectrum Pharmaceuticals that involve risks and uncertainties that could cause actual results to differ materially. These statements are based on management's current beliefs and expectations. These statements include, but are not limited to, statements that relate to

our business and its future, including certain company milestones, Spectrum's ability to identify, acquire, develop and commercialize a broad and diverse pipeline of late-stage clinical and commercial products, leveraging the expertise of partners and employees around the world to assist us in the execution of our strategy, and any statements that relate to the intent, belief, plans or expectations of Spectrum or its management, or that are not a statement of historical fact. Risks that could cause actual results to differ include the possibility that our existing and new drug candidates may not prove safe or effective, the possibility that our existing and new applications to the FDA and other regulatory agencies may not receive approval in a timely manner or at all, the possibility that our existing and new drug candidates, if approved, may not be more effective, safer or more cost efficient than competing drugs, the possibility that our efforts to acquire or in-license and develop additional drug candidates may fail, our lack of sustained revenue history, our limited marketing experience, our dependence on third parties for clinical trials, manufacturing, distribution and quality control and other risks that are described in further detail in the Company's reports filed with the Securities and Exchange Commission. We do not plan to update any such forward-looking statements and expressly disclaim any duty to update the information contained in this press release except as required by law.

SPECTRUM PHARMACEUTICALS, INC. ^® , FUSILEV ^® , FOLOTYN ^® , and ZEVALIN ^® are registered trademarks of Spectrum Pharmaceuticals, Inc and its affiliates. REDEFINING CANCER CARE ^™ and the Spectrum Pharmaceuticals logos are trademarks owned by Spectrum Pharmaceuticals, Inc.

Source: Spectrum Pharmaceuticals, Inc.

EXHIBIT 10.53

LICENSE AND COLLABORATION AGREEMENT

This LICENSE AND COLLABORATION AGREEMENT (the “Agreement” ) is entered into as of May 3, 2011 (the “Effective Date” ) by and between (a) MOLECULAR PARTNERS AG , a corporation organized and existing under the laws of Switzerland and having its principal place of business at Wagistrasse 14 8952, Zürich-Schlieren, Switzerland ( “Molecular Partners” ) and (b) ALLERGAN, INC. , a Delaware corporation having a place of business at 2525 Dupont Drive, Irvine, California 92612 USA, and ALLERGAN SALES, LLC , a Delaware Limited Liability Company having a place of business at 2525 Dupont Drive, Irvine, California 92612 USA (Allergan, Inc. and Allergan Sales, LLC, together “Allergan” ). Molecular Partners and Allergan are sometimes referred to herein individually as a “Party” and collectively as the “Parties . ”

RECITALS

WHEREAS , Molecular Partners is developing its proprietary product designated as MP0112 and other DARPin Compounds (each, as defined below);

WHEREAS , Allergan possesses resources and expertise in the development and commercialization of pharmaceutical products in the field of ophthalmology; and

WHEREAS , Allergan desires to obtain a license under Molecular Partners’ proprietary technology and intellectual property for the development and commercialization of Licensed Products (defined below) in the Field (defined below) upon the terms and conditions set forth herein, and Molecular Partners desires to grant such license.

NOW, THEREFORE , in consideration of the foregoing premises and the mutual covenants and conditions contained in this Agreement, the Parties agree as follows:

ARTICLE 1
DEFINITIONS

1.1 “Acquiror” has the meaning set forth in Section 15.6(a).

1.2 “Affiliate” means, with respect to a particular Party, a person, corporation, partnership, or other entity that controls, is controlled by or is under common control with such Party. For the purposes of this definition, the word “control” (including, with correlative meaning, the terms “controlled by” or “under common control with”) shall mean the actual power, either directly or indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of such entity, whether by the ownership of fifty percent (50%) or more of the voting stock of such entity, or by contract or otherwise.

1.3 “Allergan Indemnitees” has the meaning set forth in Section 11.1.

1.4 “Allergan Modification” has the meaning set forth in Section 4.7(b).

1.5 “Allergan Withholding Tax Action” has the meaning set forth in Section 8.11(c).

1.6 “AMD” means age-related macular degeneration.

1.7 “Asia” means China, India, Indonesia, Japan, South Korea, and Taiwan, as their boundaries are defined as of the Effective Date, and including any successors of the foregoing countries to the extent substantially including the boundaries of the countries set forth above as of the Effective Date.

1.8 “Biosimilar” means a biological or drug product that (a) is biosimilar to or interchangeable with a Licensed Product as described in 42 U.S.C. § 262(k)(2)(A)(i), or an equivalent determination by the applicable Regulatory Authorities outside the U.S., or any other equivalent provision that comes into force during the Term, (b) relies on or references Information, including safety or efficacy data, in the Regulatory Materials for a Licensed Product, (c) is the subject of a notice with respect to a Licensed Product under 42 U.S.C. § 262(l)(2) or any other equivalent provision that comes into force during the Term, or (d) is an A/B Rated product with respect to a Licensed Product. For clarity, a product may be a Biosimilar with respect to a Licensed Product regardless of whether it is subject to regulation as a biologic or drug product and regardless of the route used to obtain approval (for example, whether by Abbreviated New Drug Application, BLA or under 42 U.S.C. § 262). For the purposes of this definition, “A/B Rated” means, inside the U.S., “therapeutically equivalent” as determined by the FDA, applying the definition of “therapeutically equivalent” set forth in the preface to the then-current edition of the FDA publication “Approved Drug Products With Therapeutic Equivalence Evaluations” and, outside the U.S., such equivalent determination by the applicable Regulatory Authorities as is necessary to permit pharmacists or other individuals authorized to dispense biological or drug products under applicable Law to substitute one product for another product in the absence of specific instruction from a physician or other authorized prescriber under applicable Law.

1.9 “BLA” means a Biologics License Application (or supplement thereto) or similar application that is submitted to the FDA, or a foreign equivalent of the FDA, for marketing approval of a Licensed Product in the U.S. or any other country in the Territory, respectively.

1.10 “Business Day” means any weekday that is not a legal holiday in either Zurich, Switzerland or New York, NY, USA and is not a day on which banking institutions in such cities are required by Law to be closed.

1.11 “Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31; provided, however, that (a) the first Calendar Quarter of any particular period shall extend from the commencement of such period to the end of the first complete Calendar Quarter thereafter; and (b) the last Calendar Quarter shall end upon the expiration or termination of this Agreement.

1.12 “Calendar Year” means (a) for the first Calendar Year of the Term, the period beginning on the Effective Date and ending on December 31, 2011, (b) for each Calendar Year of the Term thereafter, each successive period beginning on January 1 and ending twelve (12) consecutive calendar months later on December 31, and (c) for the last Calendar Year of the Term, the period beginning on January 1 of the Calendar Year in which the Agreement expires or terminates and ending on the effective date of expiration or termination of this Agreement.

1.13 “Change of Control” means the occurrence of any of the following: (a) a Party enters into a merger, consolidation, stock sale or sale or transfer of all or substantially all of its assets to which this Agreement relates, or other similar transaction or series of transactions with a Third Party; or (b) any transaction or series of related transactions in which any Third Party or group of Third Parties acquires beneficial ownership of securities of a Party representing more than fifty percent (50%) of the combined voting power of the then outstanding securities of such Party. Notwithstanding Section 1.13(a) or (b), a stock sale to underwriters of a public offering of a Party’s capital stock or other Third Parties solely for the purpose of financing or a transaction solely to change the domicile of a Party shall not constitute a Change of Control.

1.14 “Claims” has the meaning set forth in Section 11.1.

1.15 “Clinical Trial” means any human clinical trial of a Licensed Product, such as those described in 21 C.F.R. § 312.21, or a human clinical trial prescribed by the Regulatory Authorities in a foreign country, including phase IV clinical trials.

1.16 “Combination Product” means a Licensed Product that includes a Licensed Compound and at least one (1) additional therapeutically active pharmaceutical ingredient other than a Licensed Compound.

1.17 “Commercialization” means the marketing, promotion, sale or distribution of a Licensed Product in the Field in the Territory. “Commercialize” has a correlative meaning.

1.18 “Commercially Reasonable Efforts” means, with respect to a Party’s obligations under this Agreement, efforts consistent with the efforts and resources normally used by a similarly situated pharmaceutical or biotechnology company in the exercise of its reasonable business discretion relating to the development or commercialization of a pharmaceutical product with similar product characteristics that is of similar market potential at a similar stage of development or commercialization, taking into account issues of efficacy, safety, patent and regulatory exclusivity, product profile, anticipated or approved labeling, present and future market potential, competitive market conditions, the proprietary position of the compound or product, the regulatory structure involved, and other technical, legal, scientific, medical or commercial factors, and the profitability of the product, including in light of pricing and reimbursement issues.

1.19 “Confidential Information” of a Party means any and all Information of such Party that is disclosed to the other Party under this Agreement, except as otherwise set forth in the last sentence of Section 12.1, whether in oral, written, graphic, or electronic form, regardless of whether any of the foregoing are marked “confidential” or “proprietary”. All Information disclosed by a Party pursuant to the Mutual Non-Disclosure Agreement between the Parties effective as of August 11, 2009, as amended on August 12, 2010 (the “ Confidentiality Agreement ”) shall be deemed to be such Party’s Confidential Information disclosed hereunder.

1.20 “Control” means, with respect to any Information or intellectual property right, that a Party (a) owns or (b) has the right to grant to the other Party access, a license, or a sublicense (as applicable) to such Information or intellectual property right on the terms and conditions set forth

in this Agreement without violating the terms of any then-existing agreement or other arrangement with any Third Party.

1.21 “DARPin Compound” means any compound comprising a *** as described or otherwise disclosed in Patent *** and any compound claimed in *** or any patent application claiming priority directly from ***.

1.22 “Development” means all activities that relate to obtaining, maintaining or expanding Regulatory Approval for a Licensed Product, including preclinical testing, toxicology, formulation, Clinical Trials, preparation, submission, review, and development of data or information for the purpose of submission to a Governmental Authority to obtain, maintain or expand Regulatory Approval for a Licensed Product, and including the activities to modify a Licensed Compound as provided in Section 4.7, but excluding research that is intended to evaluate DARPin Compounds generally and not specifically a particular Licensed Compound or Licensed Product. “Develop” has a correlative meaning.

1.23 “Development Plan” has the meaning set forth in Section 4.1(a).

1.24 “DME” means diabetic macular edema.

1.25 “Dollar” means a U.S. dollar, and “$” shall be interpreted accordingly.

1.26 “Domain Name” means any identification label that defines a realm of administrative autonomy, authority, or control on the Internet that is identical or similar to any Trademark.

1.27 “Drug Delivery System” means a substrate, encapsulant, mechanical device, ocular implant, or other means for delivering a compound to the eye or eyelid of a patient.

1.28 “EMA” means the European Medicines Agency or any successor entity.

1.29 “EU” or “European Union” means the European Union member states as then constituted. As of the Effective Date, the European Union member states are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and United Kingdom.

1.30 “Exclusive DARPin” means any DARPin Compound that inhibits any VEGF Receptor or VEGF Isoform with an IC50 value below 100 nM as demonstrated in a validated Allergan assay, but excluding any DARPin Compound that achieves its therapeutic, preventative or diagnostic effect by binding a first protein that is a VEGF Isoform or a VEGF Receptor and at least one additional protein other than a VEGF Isoform or VEGF Receptor.

1.31 “Executive Officer” means, with respect to Molecular Partners, its Chief Executive Officer, and with respect to Allergan, its Executive Vice President, Research and Development.

1.32 “Existing IND” has the meaning set forth in Section 5.2.

1.33 “FD&C Act” means the U.S. Federal Food, Drug and Cosmetic Act, as amended, and applicable regulations promulgated thereunder by the FDA.

1.34 “FDA” means the U.S. Food and Drug Administration or any successor entity.

1.35 “Field” means the treatment, amelioration, mitigation, or prevention of diseases or conditions of the eyes and their adnexa (for example, eye lids and lacrimal glands) with a product in any and all dosage forms and modes of administration (including topical application or direct injection either directly or through a Drug Delivery System) other than through Systemic Delivery.

1.36 “First Commercial Sale” means, with respect to a Licensed Product, the first sale to a Third Party of such Licensed Product in a given regulatory jurisdiction following the receipt of Regulatory Approval.

1.37 “FTE” means the equivalent of a full-time professional individual’s work, at one thousand nine hundred fifty (1,950) hours per year, as adjusted to account for permitted time off, for a twelve (12)-month period, performing activities pursuant to this Agreement. In the case that any full time personnel of Molecular Partners works partially on work pursuant to this Agreement and partially on other work in a given time period, then the full-time equivalent to be attributed to such individual’s work hereunder shall be calculated based upon the percentage of such individual’s total work time in such time period that such individual spent working under this Agreement and the percentage of a twelve (12)-month period that such time period equals. In the event that any part-time personnel of Molecular Partners works under this Agreement, the full time equivalent to be attributed to such work shall reflect appropriate adjustment for such personnel’s reduced total work time relative to full time personnel. FTE efforts shall include professional, scientific or technical work only and shall not include general corporate and administrative overhead. Molecular Partners shall track FTEs using its standard practice and normal systems and methodologies.

1.38 “FTE Rate” means the rate of FTE costs incurred by Molecular Partners, which for the purpose of this Agreement shall initially be set at an annual rate of *** per FTE. The FTE Rate shall be changed annually commencing January 1, 2012 to reflect any year-to-year percentage increase or decrease in the Swiss National Consumer Price Index as quoted by the Swiss Federal Statistical Office (Landesindex der Konsumentenpreise gemäss Bundesamt für Statistik BFS; www.lik.bfs.admin.ch) after the Effective Date.

1.39 “GAAP” means generally accepted accounting principles in the U.S. applied on a consistent basis.

1.40 “GCP” or “Good Clinical Practices” means the then-current standards, practices and procedures promulgated or endorsed by the FDA as set forth in the guidelines entitled “Guidance for Industry E6 Good Clinical Practice: Consolidated Guidance,” including related regulatory requirements imposed by the FDA and comparable regulatory standards, practices and procedures promulgated by the EMA or other Regulatory Authority applicable to the Territory, as they may be updated from time to time, including applicable quality guidelines promulgated under the ICH.

1.41 “Generic Competition” means, with respect to a Licensed Product in a given country in the Territory, that during three (3) consecutive calendar months, one (1) or more Generic Products with respect to such Licensed Product are sold in such country and units of such Generic Product(s) sold account for more than *** of the aggregate of all units of such Licensed Product and all units of such Generic Product(s) sold in such country.

1.42 “Generic Product” means, on a country-by-country and Licensed Product-by-Licensed Product basis, any biological or drug product sold by a Third Party that is used in the Field, other than pursuant to a sublicense from Allergan, its Affiliates or its Sublicensees, that either: (a) contains the same active ingredients as the applicable Licensed Product, (b) contains a DARPin Compound and is Biosimilar with respect to the applicable Licensed Product or (c) contains any ***.

1.43 “GLP” or “Good Laboratory Practices” means the then-current good laboratory practice standards promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58, and comparable regulatory standards promulgated by the EMA or other Regulatory Authority applicable to the Territory, as they may be updated from time to time, including applicable quality guidelines promulgated under the ICH.

1.44 “GMP” or “Good Manufacturing Practices” means the then-current Good Manufacturing Practices required by the FDA, as set forth in the FD&C Act and the regulations promulgated thereunder, for the manufacture and testing of pharmaceutical materials, and comparable laws or regulations applicable to the manufacture and testing of pharmaceutical materials promulgated by other Regulatory Authorities, as they may be updated from time to time.

1.45 “Governmental Authority” means any multi-national, federal, state, local, municipal, provincial or other governmental authority of any nature (including any governmental division, prefecture, subdivision, department, agency, bureau, branch, office, commission, council, court or other tribunal).

1.46 “Handover Plan” means that plan attached to this Agreement as Exhibit C .

1.47 “ICH” means International Conference on Harmonisation.

1.48 “IND” means (a) an Investigational New Drug Application as defined in the FD&C Act and applicable regulations promulgated thereunder by the FDA, or (b) the equivalent application to the equivalent agency in any other regulatory jurisdiction, the filing of which is necessary to Initiate or conduct a Clinical Trial of a pharmaceutical product in humans in such jurisdiction.

1.49 “Indemnified Party” has the meaning set forth in Section 11.3.

1.50 “Indemnifying Party” has the meaning set forth in Section 11.3.

1.51 “Indication” means a separately defined, well-categorized class of human disease or condition for which a separate Regulatory Approval Application (including any extensions or supplements) may be filed with a Regulatory Authority.

1.52 “Information” means any and all data, results, technology, business or financial information or information of any type whatsoever, in any tangible or intangible form, including know-how, trade secrets, practices, techniques, methods, processes, developments, specifications, formulations, or formulae of any type or kind (patentable or otherwise), software, algorithms, marketing reports, expertise, technology, test data (including pharmacological, biological, chemical, biochemical, clinical test data and data resulting from non-clinical studies), chemistry, manufacture and control (“ CMC ”) information, stability data and other study data and procedures.

1.53 “Initiation” of a Clinical Trial means the first dosing of the first subject in such Clinical Trial. “Initiate” has a correlative meaning.

1.54 “Invention” has the meaning set forth in Section 9.1.

1.55 “Joint Invention” has the meaning set forth in Section 9.3(b).

1.56 “Joint Patent” has the meaning set forth in Section 9.3(b).

1.57 “Joint Steering Committee” or “JSC” has the meaning set forth in Section 3.1.

1.58 “JSC Term” means the period commencing on the Effective Date and ending on the later of (i) the date of Initiation of the first Phase 3 Clinical Trial or (ii) the completion of all Phase 2 Clinical Trials conducted by Allergan under the Development Plan for *** for the Initial Licensed Compounds and any Modified Licensed Compounds that includes a Sequence Modification (defined below) performed under Section 4.7(a) by Molecular Partners.

1.59 “Laws” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision.

1.60 “Licensed Compound” means (a) MP0112 and certain other specified DARPin Compounds, in each case as described on Exhibit A , (collectively, the “Initial Licensed Compounds” ) or (b) any DARPin Compound that is developed by Molecular Partners and/or Allergan pursuant to Section 4.7 in accordance with the terms and conditions thereof (a “Modified Licensed Compound” ).

1.61 “Licensed Product” means any pharmaceutical product containing a Licensed Compound alone or in combination with other therapeutically active ingredients.

1.62 “Licensed Product Marks” has the meaning set forth in Section 9.11(a).

1.63 “Major European Market Country(ies)” means any of the following countries: France, Germany, Italy, Spain, and the United Kingdom.

1.64 “Manufacture” means all activities related to the manufacturing of a Licensed Compound or Licensed Product, or any ingredient thereof, including test method development and stability testing, formulation, process development, manufacturing scale-up, manufacturing any Licensed Compound or Licensed Product in bulk or finished form for Development, manufacturing

finished Licensed Product for Commercialization, packaging, in-process and finished Licensed Product testing, release of Licensed Product or any component or ingredient thereof, quality assurance activities related to manufacturing and release of Licensed Product, and regulatory activities related to any of the foregoing. “Manufacturing” has a correlative meaning.

1.65 “MHLW” means the Japanese Ministry of Health, Labour and Welfare or any successor entity.

1.66 “Molecular Partners Indemnitees” has the meaning set forth in Section 11.2.

1.67 “Molecular Partners Know-How” means all Information that is Controlled by Molecular Partners as of the Effective Date or during the Term and is directly related to the Development, Manufacturing, or Commercialization of Licensed Compounds or Licensed Products in the Field. For clarity, Molecular Partners Know-How excludes Information contained within the Molecular Partners Patents.

1.68 “Molecular Partners Patent” means any Patent (other than a Joint Patent) that (a) is Controlled by Molecular Partners as of the Effective Date or at any time during the Term, and (b) that would otherwise be infringed, absent a license, by the manufacture, use, sale, offer for sale, importation, and Development, Manufacture, or Commercialization of any Licensed Compound or Licensed Product. “Molecular Partners Patent” includes the Patents set forth on Exhibits F and G ; any Patent that claims priority, directly or indirectly, from the Patents set forth on Exhibits F and G ; and any Patent from which the Patents set forth on Exhibits F and G claim priority, directly or indirectly.

1.69 “Molecular Partners Platform Patents” has the meaning set forth in Section 9.4(a)(i).

1.70 “Molecular Partners Product Patents” has the meaning set forth in Section 9.4(a)(ii).

1.71 “Molecular Partners Technology” means the Molecular Partners Know-How, Molecular Partners Patents and Molecular Partners’ interest in the Joint Patents.

1.72 “MP0112” has the meaning set forth in Exhibit A .

1.73 “Necessary License” has the meaning set forth in Section 8.5(b).

1.74 “Net Sales” means, with respect to a given period of time, gross sales of Licensed Product by Allergan, its Affiliates and Sublicensees in such period, less the following deductions which are actually incurred, allowed, paid, accrued or specifically allocated to such gross sales amounts of Licensed Product:

(a) credits or allowances actually granted for damaged Licensed Product, returns or rejections of Licensed Product, price adjustments and billing errors;

(b) governmental and other rebates (or equivalents thereof) granted to managed health care organizations; pharmacy benefit managers (or equivalents thereof); federal, state/provincial, local and other governments, their agencies and purchasers and reimbursers; or to trade customers;

(d) distribution services agreement fees allowed or paid to Third Party distributors;

(e) transportation costs, including insurance, for outbound freight related to delivery of Licensed Product to the extent included in the gross amount invoiced;

(f) sales taxes, value added taxes and other taxes (other than income) applied to the sale of Licensed Product to the extent included in the gross amount invoiced; and

(g) any other items that reduce gross sales amounts as required by GAAP.

Sales of Licensed Product between or among Allergan and its Affiliates or Sublicensees shall be excluded from the computation of Net Sales, but the subsequent final sales of Licensed Product to Third Parties by such Affiliates and Sublicensees shall be included in the computation of Net Sales.

Notwithstanding the foregoing, in the event a Licensed Product is sold in a country in the Territory as a Combination Product, Net Sales of the Combination Product will be calculated as follows:

(i) If Licensed Product and other active component(s) each are sold separately in such country, Net Sales will be calculated by multiplying the total Net Sales (as described above) of the Combination Product by the fraction A/(A+B), where A is the average gross selling price in such country of the Licensed Product sold separately in the same formulation and dosage, and B is the sum of the average gross selling prices in such country of such other active component(s) sold separately in the same formulation and dosage, during the applicable Calendar Year.

(ii) If the Licensed Product is sold independently of the other active component(s) therein in such country, but the average gross selling price of such other active component(s) cannot be determined, Net Sales will be calculated by multiplying the total Net Sales (as described above) of the Combination Product by the fraction A/C where A is the average gross selling price in such country of such Licensed Product sold independently and C is the average gross selling price in such country of the entire Combination Product.

(iii) If the other active component(s) are sold independently of the Licensed Product therein in such country, but the average gross selling price of such Licensed Product cannot be determined, Net Sales will be calculated by multiplying the total Net Sales (as described above) of the Combination Product by the fraction [1-B/C], where B is the average gross selling price in the Territory of such other active component(s) and C is the average gross selling price in the Territory of the entire Combination Product.

(iv) If neither the Licensed Product nor the other active component(s) are sold independently in such country, the Parties shall determine Net Sales for such Combination Product by mutual agreement based on the relative contribution of the Licensed Product and the other active ingredient(s) in the Combination Product.

For purposes of the foregoing, in the Calendar Year during which a Combination Product is first sold in a country, a forecasted average gross selling price shall be used for the Licensed Product and the other active component(s), to be determined in good faith mutually by the Parties. Any over or under payment due to a difference between forecasted and actual average gross selling prices in such country shall be paid or credited, as applicable, in the first royalty payment of the following Calendar Year. In the following Calendar Year the average gross selling price of both the Licensed Product and the other active component(s) included in the Combination Product in the previous Calendar Year shall apply.

Allergan, its Affiliates, and Sublicensees will not sell any Licensed Product in combination with or as part of a bundle with other products, or offer packaged arrangements to customers that include a Licensed Product, in such a manner as to disproportionately discount the selling price of such Licensed Product as compared with the weighted-average discount applied to the other products, as a percent of the respective list prices (or if not available, a good faith estimate thereof) of such products and the Licensed Product prior to applying the discount.

1.75 “Patents” means (a) pending patent applications, issued patents, utility models and designs; (b) reissues, substitutions, confirmations, registrations, validations, re-examinations,

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additions, continuations, continued prosecution applications, continuations-in-part, or divisions of or to any of the foregoing; and (c) extensions, renewals or restorations of any of the foregoing by existing or future extension, renewal or restoration mechanisms, including supplementary protection certificates or the equivalent thereof.

1.76 “Phase 2 Clinical Trial ” means a Clinical Trial of a Licensed Product in the Field designed to determine the safe and effective dose range in the proposed therapeutic indication as and to the extent defined for the U.S. in 21 C.F.R. § 312.21(b), as amended from time to time, or equivalent law or regulation in regulatory jurisdictions outside the U.S.

1.77 “Phase 3 Clinical Trial” means a pivotal Clinical Trial of a Licensed Product in the Field with a defined dose or a set of defined doses of such Licensed Product on sufficient numbers of human patients designed to confirm with statistical significance the safety and efficacy of such Licensed Product and to support a Regulatory Approval for the proposed Indication as and to the extent defined for the U.S. in 21 C.F.R. § 312.21(c), as amended from time to time, or equivalent law or regulation in regulatory jurisdictions outside the U.S.

1.78 “Product Infringement” has the meaning set forth in Section 9.5(a).

1.79 “Regulatory Approval” means all approvals from the relevant Regulatory Authority in a given country or regulatory jurisdiction of the Regulatory Approval Application for a Licensed Product in the Field, including all licenses, registrations, and pricing or reimbursement approvals, that are necessary for the sale of such Licensed Product, including clinical testing, manufacture, distribution, or use of such Licensed Product, in such country or regulatory jurisdiction.

1.80 “Regulatory Approval Application” means an application to the appropriate Regulatory Authority for approval to sell a Licensed Product in any particular jurisdiction, including a BLA in the U.S.

1.81 “Regulatory Authority” means, in a particular country or jurisdiction, any applicable Governmental Authority that has the authority to regulate the manufacture, marketing, testing, pricing, or sale of drug products in such country or jurisdiction.

1.82 “Regulatory Exclusivity” means any exclusive marketing rights or data exclusivity rights conferred by any Governmental Authority under applicable Law with respect to a Licensed Product in a country or jurisdiction in the Territory to prevent Third Parties from Commercializing such Licensed Product in such country or jurisdiction, other than a Patent right, including orphan drug exclusivity, pediatric exclusivity, rights conferred in the U.S. under the Hatch-Waxman Act or the FDA Modernization Act of 1997, in the EU under Directive 2001/83/EC, or rights similar thereto in other countries or regulatory jurisdictions in the Territory.

1.83 “Regulatory Materials” means regulatory applications, submissions, notifications, communications, correspondence, registrations, Regulatory Approvals or other filings made to, received from or otherwise conducted with a Regulatory Authority in order to Develop, Manufacture, or Commercialize a Licensed Product in a particular country or jurisdiction.

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1.84 “Remedial Action” has the meaning set forth in Section 5.6.

1.85 “Royalty-Bearing Sales” means, for each Licensed Product and each country in the Territory, Net Sales of such Licensed Product in such country during the Royalty Term for such Licensed Product in such country.

1.86 “Royalty Term” has the meaning set forth in Section 8.4(b).

1.87 “Sequence Modification” has the meaning set forth in Section 4.7(a).

1.88 “Subject Patent” has the meaning set forth in Section 9.7.

1.89 “Sublicensee” has the meaning set forth in Section 2.3.

1.90 “Systemic Delivery” means the administration of a drug product systemically in the body of the patient, including by intravenous, subcutaneous, oral or pulmonary administration. Administration of a drug product to the eye or its adnexa through a Drug Delivery System shall not be deemed to be Systemic Delivery.

1.91 “Term” has the meaning set forth in Section 13.1.

1.92 “Terminated Product” means any Licensed Compound and Licensed Product then being Developed or Commercialized by Allergan as of the effective date of termination of this Agreement pursuant to Section 13.2, 13.3, or 13.4. For clarity, “Terminated Products” shall not include any modifications made after the date of such termination of the Licensed Compounds and Licensed Products then being Developed or Commercialized by Allergan as of the effective date of such termination.

1.93 “Territory” means all of the countries of the world.

1.94 “Third Party” means any entity other than Molecular Partners or Allergan or an Affiliate of either of them.

1.95 “Trademark” means any word, name, symbol, color, designation or device, or any combination thereof, whether registered or unregistered, including any trademark, trade dress, service mark, service name, brand mark, trade name, brand name, logo, or business symbol.

1.96 “U.S.” means the United States of America, including all possessions and territories thereof.

1.97 “Valid Claim” means an issued or pending claim of an issued Molecular Partners Patent or Joint Patent that has not: (a) expired or been revoked or canceled; (b) been declared invalid or unenforceable by a patent office or a decision of a court or other Governmental Authority of competent jurisdiction; provided that if any such claim that has been declared invalid or unenforceable is subsequently determined to be valid and enforceable by a court or other Governmental Authority of competent jurisdiction from which no appeal can be taken (or was taken within the allowable time period), then such claim shall thereafter be a Valid Claim except as

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otherwise provided under subsection (a), (c), or (d); (c) been admitted to be invalid or unenforceable through reissue, re-examination, disclaimer or otherwise; or (d) been abandoned or disclaimed; provided, however, that if a claim of a patent application has been pending for more than *** years from the Effective Date, such claim will not constitute a Valid Claim unless and until a Patent issues with such claim in which case the terms applicable to such Valid Claim (including the Royalty Term) shall once again apply from and after the date of issuance.

1.98 “VEGF Isoform” means any isoform of vascular endothelial growth factor ( “VEGF” ), including the proteins defined as of the Effective Date by *** (including the isoforms ***.

1.99 “VEGF Receptor” means any receptor that binds VEGF or any VEGF Isoform, including the molecules known as *** as defined as of the Effective Date by *** respectively, and any isoform thereof.

ARTICLE 2
LICENSES; EXCLUSIVITY

2.1 Licenses to Allergan . Subject to the terms and conditions of this Agreement,

(a) Molecular Partners hereby grants Allergan an exclusive (even as to Molecular Partners except as provided in Section 2.2), royalty-bearing license, with the right to sublicense solely as provided in Section 2.3, under the Molecular Partners Technology (including any Joint Modification Invention), to make, use (including, for clarity, to perform Development activities in accordance with Section 4.7), sell, offer for sale, or import any Licensed Compound (including, for clarity, Initial Licensed Compounds and Modified Licensed Compounds) or Licensed Product in the Field in the Territory. The foregoing license includes the right to have any of the foregoing performed pursuant to the last paragraph of Section 2.3.

(b) Molecular Partners hereby grants to Allergan a worldwide, perpetual, irrevocable, fully paid-up, royalty-free, exclusive license, with the right to grant sublicenses through multiple tiers, outside the Field, under its interest in any Joint Modification Invention, to make, use, sell, offer for sale and import compounds and products other than DARPin Compounds.

2.2 Molecular Partners Retained Rights . Except as expressly granted under Section 2.1 and as limited by Section 2.6, Molecular Partners retains the right, under the Molecular Partners Technology, (a) in the Territory to fulfill its obligations under this Agreement, (b) to exploit the Molecular Partners Technology outside the scope of the licenses granted to Allergan in Section 2.1, and (c) to use the Molecular Partners Know-How in connection with Molecular Partners’ conduct of general research and discovery of DARPin Compounds other than Licensed Compounds, provided that the activities permitted under this subsection (c) shall not be limited by Section 2.6.

2.3 Sublicense Rights . Allergan shall have the right to grant a sublicense of the license granted in Section 2.1 to its Affiliates or Third Parties (whether directly through Allergan or in the form of a sub-sublicense from a sublicensee of Allergan or its Affiliates in accordance with the

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terms of subsection (e) below) (each, a “Sublicensee” ); provided that any sublicenses to Third Parties shall be subject to Sections 2.3(a) through (e):

(a) Allergan shall remain primarily responsible for all of its Sublicensees’ activities and any and all failures by its Sublicensees to comply with the applicable terms of this Agreement;

(b) such sublicense shall refer to this Agreement, shall be consistent with the terms and conditions of this Agreement, and shall not limit the ability of Allergan (individually or through the activities of its Sublicensee) to perform its material obligations under this Agreement;

(c) within a reasonable time after execution of such sublicense, Allergan shall provide to Molecular Partners a copy of such sublicense, which may be redacted to omit any terms not relevant to determining Allergan’s and such Sublicensee’s obligations under this Agreement;

(d) except as otherwise provided in the sublicense, if this Agreement terminates for any reason, upon Allergan’s written notice to Molecular Partners, any Sublicensee shall, from the effective date of such termination, automatically become a direct licensee of Molecular Partners with respect to the rights licensed to Allergan on the terms and conditions hereunder and sublicensed to the Sublicensee by Allergan; provided, however, that such Sublicensee cures all breaches by Allergan of this Agreement and is not in breach of its sublicense and continues to perform thereunder, and the terms of such sublicense are consistent with the rights of Molecular Partners to receive a transfer of, and license to, the items described in Section 13.5 upon termination of such sublicense as if such items were generated by Allergan or its Affiliates; and

(e) such Sublicensees shall have the right to grant further sublicenses to Third Parties (upon the consent of Molecular Partners not to be unreasonably withheld) of same or lesser scope as its sublicense from Allergan under the licenses contained in Section 2.1, provided that such further Sublicenses shall be in accordance with and subject to all of the terms and conditions of this Section 2.3 (i.e., such Sublicensee shall be subject to this Section 2.3 in the same manner and to the same extent as Allergan). For clarity, any person or entity to whom a Sublicensee grants a sublicense as permitted by the terms of this Agreement shall be deemed to be a Sublicensee for purposes of this Agreement.

Allergan shall have the right to retain a Third Party contractor, including pursuant to Section 4.5, to perform any activity in connection with Allergan’s exercise of any of its rights granted under Section 2.1, where such activity is to be performed at the direction and control and for the sole benefit of Allergan or its Affiliates. Such retention of the Third Party contractor is not a sublicense within the meaning of this Section 2.3 but is considered an activity of Allergan under the license granted in Section 2.1.

2.4 License to Molecular Partners . Subject to the terms and conditions of this Agreement (including Section 2.6), Allergan hereby grants to Molecular Partners a worldwide, *** license, *** to make, use, sell, offer for sale and import *** outside the Field. Molecular Partners hereby covenants that, during the Term, it will not, and will not grant a license to any of its Affiliates or licensees permitting such Affiliates or licensees (i) to conduct any activities that infringe a Valid

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Claim, or misappropriate any Know-How, within the ***, outside the scope of the license expressly granted by Section 2.4 or (ii) to practice Molecular Partner’s interest in any *** for any product within the Field.

2.5 No Implied Licenses . Except as explicitly set forth in this Agreement, neither Party shall be deemed by estoppel or implication to have granted the other Party any license or other right to any intellectual property of such Party.

2.6 Exclusivity . During the Term, Molecular Partners (itself or through a Third Party) will not make, use, sell, offer for sale, import, or otherwise research, develop, commercialize, or exploit (a) a Licensed Compound or Licensed Product for any Indication in any mode of administration, or (b) an Exclusive DARPin in the Field. Notwithstanding the foregoing, Molecular Partners shall be permitted to use (itself or with or through a contract research organization, university or other non-profit research institution, but not any other Third Party) any Exclusive DARPin or Licensed Compound other than MP0112 solely to conduct research in the Field.

2.7 Negative Covenant . Allergan hereby covenants that, during the Term, it will not, and will not grant a license to any of its Affiliates or Sublicensees permitting such Affiliates or Sublicensees to conduct any activities that infringe a Valid Claim, or misappropriate any Know-How, within the Molecular Partners Technology, outside the scope of the license expressly granted by Section 2.1. In the event that Allergan, its Affiliates or its Sublicensee materially breaches this Section 2.7, then Allergan, its Affiliates or its Sublicensee, as applicable, shall ***.

ARTICLE 3
GOVERNANCE

3.1 Joint Steering Committee .

(a) Formation and Role . Upon the Effective Date, the Parties shall establish a joint steering committee (the “Joint Steering Committee” or “JSC” ) for the overall review of the Development of Licensed Products. The JSC shall be disbanded on the expiration of the JSC Term. Specifically, the role of the JSC shall be:

(i) to discuss the overall strategy for the Development and Regulatory Approval of Licensed Products in the Field throughout the Territory;

(ii) to facilitate communications and discussion between the Parties with respect to the Development and Manufacture of Licensed Products;

(iii) to discuss the Development Plan and any proposed amendments or revisions to such plan, including timeframes for such Development; and

(iv) to perform such other functions as agreed by the Parties in writing.

The JSC shall have only the powers expressly assigned to it in this Section 3.1 and elsewhere in this Agreement, and shall have no power to amend, modify, or waive compliance with this

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Agreement. Notwithstanding anything to the contrary above in Section 3.1(a), the scope of the functions of the JSC shall be limited to exclude the conduct of any Phase 3 Clinical Trial activities in the event that the JSC Term continues after the Initiation of the first Phase 3 Clinical Trial.

(b) Members . Each Party shall initially appoint three (3) representatives to the JSC, each of whom will be an officer or employee of the applicable Party having sufficient seniority within such Party to make decisions arising within the scope of the JSC’s responsibilities. The JSC may change its size from time to time by mutual consent of its members, and each Party may replace its representatives at any time upon written notice to the other Party. The JSC shall have a chairperson, who shall be selected by Allergan. The role of the chairperson shall be to convene and preside at the meeting of the JSC and to ensure the preparation of meeting minutes, but the chairperson shall have no additional powers or rights beyond those held by other JSC representatives.

(c) Meetings . The JSC shall meet at least one (1) time per Calendar Quarter during the JSC Term unless the Parties mutually agree in writing to a different frequency for such meetings. Prior to any meeting of the JSC, the chairperson of the JSC shall prepare and circulate an agenda for such meeting; provided, however, that either Party may propose additional topics to be included on such agenda, either prior to or in the course of such meeting. The JSC may meet in person or by teleconference, provided however, at least one (1) meeting per Calendar Year shall be in person. In-person JSC meetings shall be held at locations alternately selected by Molecular Partners and by Allergan. Each Party shall bear the expense of its respective JSC members’ participation in JSC meetings. Meetings of the JSC shall be effective only if at least one (1) representative of each Party is present or participating in such meeting. The chairperson of the JSC shall be responsible for preparing reasonably detailed written minutes of all JSC meetings that reflect all material decisions made at such meetings. The JSC chairperson shall send draft meeting minutes to each member of the JSC for review and approval within ten (10) Business Days after each JSC meeting.

(d) Decision Making . The JSC shall act by consensus. The representatives from each Party will have, collectively, one (1) vote on behalf of that Party. The JSC shall strive to seek consensus in its actions and decision making process. If after reasonable discussion and good faith consideration of each Party’s view on a particular matter before the JSC, the JSC is still unable after a period of thirty (30) days to reach a unanimous decision on such matter, then either Party may refer such matter to the Parties’ Executive Officers for attempted resolution by good faith resolution within ten (10) days after such matter has been referred to the Executive Officers. If the Executive Officers are not able to resolve such matter within such ten (10)-day period, then Allergan’s Executive Officer shall have the right to decide such matter consistent with the terms of this Agreement and in good faith, provided that Allergan’s Executive Officer shall not make any decision to materially change the Development Plan with respect to activities conducted or resources devoted by Molecular Partners without the prior written consent of Molecular Partners.

ARTICLE 4
DEVELOPMENT

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4.1 Development Program .

(a) General; Development Plan . All Development activities, and Manufacturing activities relating to Development, will be conducted pursuant to a reasonably detailed and written development plan prepared by Allergan that contains key Clinical Trials planned and estimated timelines (the “Development Plan” ), provided that Allergan shall have the right to conduct any activities that are not described or contemplated by the Development Plan in furtherance of the goals of the Development Plan, with Allergan to use good faith efforts to describe any such material activities in a subsequent Development Plan or in the updates provided under Section 4.1(d). The initial Development Plan is attached hereto as Exhibit B . The initial Development Plan, and all amendments thereof, will include Allergan’s plan for seeking Regulatory Approval for a Licensed Product for the treatment of wet AMD and at least one additional Indication in the U.S., ***. In the event of any inconsistency between the Development Plan and this Agreement, the terms of this Agreement shall prevail. Except for those activities allocated to Molecular Partners in the Handover Plan, Allergan shall be solely responsible for all Development of Licensed Compounds or Licensed Products in the Field. In conducting such Development activities, Allergan shall document all Clinical Trials in formal written study records according to applicable Laws, including applicable national and international guidelines such as ICH, GCP, GLP and GMP. Molecular Partners shall perform any activities allocated to it under the Handover Plan in accordance with applicable Laws.

(b) Amendments . From time to time (at least on an annual basis), Allergan, as appropriate, shall prepare amendments, if any, to the then-current Development Plan for discussion by the Parties. Such amendments shall reflect any changes, re-prioritization of studies within, reallocation of resources with respect to, or additions to the activities described in the Development Plan. Upon deciding to Initiate Clinical Trials for any Licensed Compound other than MP0112, or to Initiate Clinical Trials for any Licensed Compound or Licensed Product for a new Indication, the Development Plan shall be amended accordingly. For the avoidance of doubt, amendments to the Development Plan shall not include any additional activities to be conducted by Molecular Partners unless agreed to by Molecular Partners in writing in advance.

(c) Development Costs . Allergan shall be solely responsible for all costs and expenses incurred by Allergan (and will reimburse Molecular Partners for all costs and expenses reasonably incurred by Molecular Partners in the conduct of any activities set forth in the Handover Plan or otherwise agreed by the Parties in writing in a Development Plan) for the conduct of all Development of Licensed Compounds or Licensed Products in the Field. Following each Calendar Quarter in which Molecular Partners conducts any activities under the Development Plan, Molecular Partners will invoice Allergan for all Third Party expenses and FTE costs (at the FTE Rate) it incurred to conduct such activities during such Calendar Quarter. Allergan shall pay each such invoice within thirty (30) days after receipt thereof.

(d) Communication . Through the JSC during the JSC Term, and thereafter directly to Molecular Partners, Allergan will keep Molecular Partners reasonably informed about its efforts to Develop Licensed Compounds and Licensed Products. In addition, Allergan will provide Molecular Partners with written reports containing summaries of all material results and

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data (including safety and efficacy results and data and Clinical Trial reports) obtained from such Development efforts, progress towards meeting all goals and milestones in the Development Plan, significant findings and developments, and obstacles confronted and strategies for overcoming such obstacles, with such summaries to be provided during the JSC Term, at Molecular Partners’ request, no more frequently than once per Calendar Year. Thereafter, during the Term, Allergan shall provide Molecular Partners (i) summaries on an annual basis of its progress towards meeting key milestones that are expected to be achieved within the following year and the filing of any Regulatory Approval Application and the receipt of any Regulatory Approvals for Licensed Products in the Territory and (ii) upon the reasonable request of Molecular Partners, updates regarding material developments with respect to Licensed Products, including the completion and results of any Phase 3 Clinical Trials, with the frequency and timing of such requests to be reasonable under the circumstances and consistent with the anticipated development results and Allergan’s interest in the timing with respect to any public announcement of such material developments. In addition, Allergan will inform Molecular Partners regarding any material delay in the Development of any Licensed Product within a reasonable time after determining that such delay will occur. All reports and other Information provided by Allergan under this Section 4.1(d) will be Allergan’s Confidential Information subject to the terms of Article 12.

4.2 Diligence . Allergan will use Commercially Reasonable Efforts to Develop and seek Regulatory Approval for Licensed Products in the Field in the Territory. Allergan will be deemed to be using such Commercially Reasonable Efforts if it is using Commercially Reasonable Efforts to Develop and seek Regulatory Approval for Licensed Products for AMD and at least one other Indication in the following countries: (a) the U.S., ***. Allergan shall not be required to Develop or seek Regulatory Approval for Licensed Products in all such countries *** so long as it is using Commercially Reasonable Efforts to Develop and seek Regulatory Approval in the U.S. and ***. For example, Allergan may Develop and seek Regulatory Approval for a Licensed Product in ***.

4.3 Data Exchange . Reasonably promptly following the Effective Date, Molecular Partners will provide Allergan with copies of or access to the Molecular Partners Know-How that exists as of the Effective Date that has not already been provided or made available to Allergan. Thereafter, Molecular Partners will provide Allergan with copies of or access to the Molecular Partners Know-How that has not otherwise been previously disclosed (a) during the JSC Term, at Allergan’s reasonable request (but not more than once per Calendar Quarter), and (b) after the JSC Term, until the date upon which the NDA for the first Licensed Product is filed, at Allergan’s reasonable request (but not more than once per Calendar Year).

4.4 Records . Each Party shall maintain complete, current and accurate records of Development activities that reflect work done and results achieved in the performance of the research and Development activities necessary for regulatory compliance and patent purposes.

4.5 Subcontracts . Each Party may perform any of its obligations or activities under the Development Plan through one or more subcontractors or consultants, provided that (a) such Party remains responsible for the work allocated to, and payment to, such subcontractors and consultants as it selects to the same extent it would if it had done such work itself; (b) the subcontractor undertakes in writing obligations of confidentiality and non-use regarding

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Confidential Information that are no less protective than those set forth in Article 12 and (c) such subcontract shall not limit the rights of the other Party in any license granted hereunder or Molecular Partners’ right to receive a transfer of, and license to, the items described in Section 13.5 as if such items were generated by Allergan or its Affiliates.

4.6 Clinical Trial Activities . Reasonably promptly after the Effective Date, Molecular Partners shall provide such assistance, at no cost to Allergan, as may be reasonably necessary or useful for Allergan to continue Developing Licensed Products as set forth in the Handover Plan or as reasonably agreed by the Parties in a written modification thereto. As and to the extent set forth in the Handover Plan, Allergan shall assume the management and performance of all Clinical Trials for Licensed Products after the Effective Date. Molecular Partners shall not, during such applicable transition period, take any action that could reasonably be expected to have a material adverse impact on the further Development of any Licensed Product.

4.7 Modifications to Licensed Compounds .

(a) If Allergan desires to Develop and Commercialize a DARPin Compound that may be obtained by modifying the nucleic or amino acid sequence (through the replacement, insertion or deletion of one or more nucleic or amino acids of such sequence) of an Initial Licensed Compound (a “Sequence Modification” ), then Allergan shall provide Molecular Partners with a specific proposal of the Sequence Modification for the applicable DARPin Compound and a proposal for Development thereof. The Parties shall discuss such proposal in good faith, and either (i) Molecular Partners will conduct such activities subject to reasonable compensation by Allergan at the FTE Rate or (ii) if Molecular Partners elects not to conduct such activities, Allergan shall conduct such activities, in each of (i) and (ii) according to a mutually agreed to plan for such modification. Except with the consent of Molecular Partners, Allergan shall not have the right to request that Molecular Partners perform (or Allergan by or on behalf of itself perform) more than *** proposed Sequence Modifications during a Calendar Year.

(b) Subject to Section 4.7(a), ***. Each such permitted modification under this Section 4.7(b) shall be deemed an “Allergan Modification” . Allergan shall have the sole right to conduct Development activities in connection with any Allergan Modifications.

(c) Any Initial Licensed Compound that is modified under Section 4.7(a) or 4.7(b) in accordance with the terms thereof shall become a Modified Licensed Compound (as defined in Section 1.60) except as otherwise restricted by subsection (d) below.

(d) In no event shall either Party be required or permitted to perform any Sequence Modification or other modification under Section 4.7(b) that is intended to produce a compound that, ***. In the event that Allergan, in the performance of its modification activity under this Section 4.7, performs a modification that results in a compound that is described under subsection (i) or (ii) above, then Allergan shall promptly notify Molecular Partners and assign to Molecular Partners all of its rights in any Inventions to the extent relating solely to such compound, to the extent such compound is so modified and, at the request of Molecular Partners, provide to Molecular Partners all materials, data, information and results related thereto. If Molecular Partner’s activities under this Section 4.7 result in such a modified compound, then such modified compound

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shall not be deemed to be a Licensed Compound for purposes of this Agreement and Molecular Partners will retain all rights and interest in any Invention relating thereto.

(e) For clarity, Molecular Partners shall not be obligated to conduct development of any proposed DARPin Compound under this Section 4.7.

(f) Except as provided in subsection (d), as between the Parties, (i) any and all Inventions made solely by Allergan under Section 4.7(b), and intellectual property rights therein, shall be owned solely by Allergan, and (ii) any and all other Inventions made under Section 4.7(a) by either Party solely or the Parties jointly, and Patents and intellectual property rights therein (exclusive of any pre-existing intellectual property rights of a Third Party or a Party), shall be owned jointly by the Parties (collectively, a “ Joint Modification Invention ”) and deemed to be a Joint Patent. For clarity, this Section 4.7 shall cover modifications to a Licensed Compound only, and not modification to any other composition that a Licensed Product comprises.

(g) The rights of Allergan to request and/or perform any Sequence Modification under this Section 4.7 shall terminate and expire on the third (3 ^rd ) anniversary of the Effective Date, unless the Parties agree to extend such period in writing in their sole discretion.

ARTICLE 5
REGULATORY

5.1 Regulatory Responsibilities . In accordance with this Article 5, Allergan shall be solely responsible, at its expense, for preparing, filing and maintaining all Regulatory Materials for Licensed Products in the Field in the Territory, and Allergan shall own all Regulatory Materials (including all INDs, BLAs, Regulatory Approval Applications and Regulatory Approvals) for Licensed Products in the Field in the Territory.

5.2 Regulatory Materials; Data . Reasonably promptly after the Effective Date, to the extent permitted by applicable Laws, Molecular Partners shall (a) transfer and assign to Allergan all Regulatory Materials existing as of the Effective Date for Licensed Compounds and Licensed Products, including *** (the “Existing IND” ), (b) transfer or make available copies of such Regulatory Materials existing as of the Effective Date for the Licensed Products and (c) treat such Regulatory Materials as “Confidential Information” of Allergan (and not of Molecular Partners) under Article 12, except that (i) the foregoing shall not limit Molecular Partners’ use or disclosure of Information contained within such Regulatory Materials in the exercise of its retained rights under Section 2.2, provided that Molecular Partners provides prior written notice of any such disclosure and any disclosee is bound by obligations of confidentiality and restrictions on use of such Confidential Information that are no less protective than those set forth in Article 12, and (ii) Molecular Partners will be allowed to retain copies of such Regulatory Materials, including any such Information that a Regulatory Authority requires Molecular Partners to retain under applicable Laws. Upon assignment of the Regulatory Materials to Allergan, Molecular Partners shall submit notifications, filings, and submissions to all Regulatory Authorities as are necessary to transfer Molecular Partners’ rights with respect to such Regulatory Filings and Regulatory Approvals to Allergan. Thereafter, (A) Allergan or its designee shall be the owner of any and all Regulatory

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Filings and Regulatory Approvals covering the Licensed Products in the Territory, including all INDs and Regulatory Approvals therefor), (B) Allergan shall have the responsibility, in its sole discretion, at its sole expense for all regulatory activities and interactions relating to Licensed Products, including preparing, obtaining, and maintaining Regulatory Approvals and all substantive interactions with Regulatory Authorities relating thereto, (C) Allergan shall determine, in its sole discretion, the content of all such submissions and of all correspondence with Regulatory Authorities relating to Licensed Products, (D) Allergan shall be the sole point of contact with Regulatory Authorities in the Territory for Licensed Products, and (E) the regulatory filing fees and all expenses relating to seeking and obtaining Regulatory Approval for Licensed Products in the Field shall be borne solely by Allergan.

5.3 Regulatory Matters . Allergan shall keep Molecular Partners reasonably informed of all material regulatory developments relating to Licensed Products in the Territory through regular reports at the JSC meetings or after the JSC Term through the annual development reports under Section 4.1(d). Allergan shall notify Molecular Partners of any Regulatory Approval Application submitted to or Regulatory Approval received from any Regulatory Authority for a Licensed Product in the Territory within five (5) days after such submission or receipt.

5.4 Notification of Threatened Action . Each Party shall promptly notify the other Party of any information it receives regarding any threatened or pending action, inspection or communication by or from any Third Party, including a Regulatory Authority, which may materially affect the Development, Manufacturing, Commercialization or regulatory status of a Licensed Product. Upon receipt of such information, the Parties shall consult with each other in an effort to coordinate, to the extent reasonably necessary on appropriate action.

5.5 Adverse Event Reporting .

(a) Allergan shall be responsible for creating and maintaining a global safety database for the Licensed Products in the Field in the Territory, at Allergan’s expense. Allergan shall be responsible for reporting quality complaints, adverse events and safety data related to Licensed Products in the Field to applicable Regulatory Authorities in the Territory, as well as responding to safety issues and to all requests of Regulatory Authorities relating to Licensed Products in the Field in the Territory. Allergan will provide Molecular Partners with reasonable access to such safety database to the extent required under applicable Law.

(b) Allergan shall notify Molecular Partners of all serious adverse events for Licensed Compounds and Licensed Products promptly upon notification of any applicable Regulatory Authority (or in advance if practicable) and of all other adverse events for Licensed Compounds and Licensed Products through annual written reports to the JSC or after the JSC Term through the annual development reports under Section 4.1(d).

(c) Molecular Partners shall notify Allergan of the first serious adverse event for products containing DARPin Compounds developed or commercialized by Molecular Partners, its Affiliates, or licensees promptly upon notification of any applicable Regulatory Authority (or in advance if practicable) except as restricted by Third Party obligations. Thereafter, Molecular Partners shall notify Allergan of all serious adverse events for such products through annual written

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reports to the JSC or after the JSC Term on an annual basis except as restricted by Third Party obligations. mmm

5.6 Remedial Actions . Allergan shall have the sole right to decide whether any recall, corrective action or other regulatory action with respect to a Licensed Product taken by virtue of applicable Laws (a “Remedial Action” ) with respect to Licensed Products in the Field and in the Territory should be commenced, with advance notice to Molecular Partners to the extent practicable.

ARTICLE 6
COMMERCIALIZATION

6.1 General . Allergan will be solely responsible, at its expense, for all aspects of the Commercialization of Licensed Products in the Field in the Territory, which responsibilities include: (a) conducting Clinical Trials in support of its Commercialization efforts; (b) developing and executing a comprehensive commercial launch and pre-launch strategy and plan and subsequent Commercialization activities for such Licensed Product (including pricing, advertising, education, planning, marketing, sales force training and allocation); (c) negotiating with applicable Governmental Authorities regarding the price and reimbursement status of the Licensed Product; (d) marketing and promotion; (e) booking sales and distribution and performance of related services; (f) handling all aspects of order processing, invoicing and collection, inventory and receivables; (g) providing customer support, including handling medical queries, and performing other related functions; and (h) conforming its practices and procedures to applicable Laws relating to the marketing, detailing and promotion of Licensed Products in the Territory.

6.2 Commercial Diligence . Allergan shall use Commercially Reasonable Efforts to Commercialize Licensed Products in the Territory in the Field. Allergan will be deemed to be using Commercially Reasonable Efforts to Commercialize Licensed Products in the Territory in the Field if it is using Commercially Reasonable Efforts to Commercialize a Licensed Product after Regulatory Approval for such Licensed Product is obtained in the following countries: (a) the U.S., ***.

6.3 Commercialization Reports . After submission of a Regulatory Approval Application for a Licensed Product, upon the reasonable request of Molecular Partners on no more than an annual basis, Allergan shall provide Molecular Partners with a written summary of Allergan’s projection of the launch dates for each Licensed Product in the Field and the Territory and a non-binding estimate of Licensed Product sales for the subsequent Calendar Year. The obligations under this Section 6.3 shall terminate in the event of a Change of Control of Molecular Partners where the Acquiror is developing or commercializing a product in the Field.

ARTICLE 7
MANUFACTURE AND SUPPLY

7.1 Responsibilities . Except as otherwise expressly provided in this Article 7, as of the Effective Date and as between the Parties, Allergan will be solely responsible for the Manufacture of Licensed Products, at its expense, for Development and Commercialization purposes in the Field in the Territory.

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7.2 Third Party Manufacture . Allergan may perform the Manufacture of Licensed Compounds or Licensed Products through one or more Third Party manufacturers, provided that (a) Allergan remains responsible for such Third Party manufacturer; (b) the Third Party manufacturer undertakes in writing obligations of confidentiality and non-use regarding Confidential Information that are no less protective than those set forth in Article 12, and (c) the Third Party manufacturer agrees in writing to assign or license to Allergan all intellectual property developed in the course of performing any such Manufacture to the extent relating to the Licensed Compound or Licensed Product.

7.3 Transfer of Manufacturing Technology . Reasonably promptly following the Effective Date, the Parties will each perform the activities allocated to it in the Handover Plan relating to the transfer of Manufacturing technology to Allergan. In accordance with the Handover Plan, Molecular Partners shall transfer to Allergan or a Third Party manufacturer designated by Allergan, the process currently employed by or on behalf of Molecular Partners for the Manufacture of Licensed Compounds or Licensed Products. Such transfer shall include the transfer of all Molecular Partners Know-How then Controlled by Molecular Partners that is necessary or reasonably useful for Allergan or such Third Party manufacturer (as applicable) to conduct the Manufacturing process as then being conducted. Molecular Partners shall bear all internal FTE costs incurred by Molecular Partners in performing its activities under the Handover Plan, and Allergan will bear all other costs and expenses incurred by either Party relating to the transfer of the Manufacturing technology to Allergan. In the event that Allergan may reasonably request additional activities relating to such transfer not set forth in the Handover Plan, Molecular Partners will use reasonable efforts to provide such support with such activities to be reimbursed by Allergan at the FTE Rate. Upon Allergan’s request, Molecular Partners will use reasonable efforts to assign to Allergan its rights under its contract manufacturing agreement for Licensed Compounds or Licensed Products listed on Exhibit D and if such agreement cannot be assigned, then Molecular Partners shall reasonably cooperate with Allergan to arrange to continue to provide such services after the Effective Date, at Allergan’s expense. Molecular Partners shall reasonably cooperate with Allergan’s efforts to establish Licensed Compound Manufacture during such applicable transition period and shall not, during such applicable transition period, take any action that could reasonably be expected to have a material adverse impact on the further Manufacture of any Licensed Compound or Licensed Product. For the avoidance of doubt, nothing in this Section 7.3 with respect to Molecular Partners’ obligation to transfer such Molecular Partners Know-How to Allergan shall limit Molecular Partners’ right to use any such Molecular Partners Know-How in order to fulfill Molecular Partners’ obligations in accordance with this Agreement or its right to manufacture products other than Licensed Products.

7.4 Transfer of Inventory . At Allergan’s request, Molecular Partners shall supply, or cause to be supplied, at Molecular Partner’s cost, to Allergan its supplies of Licensed Compound as in Molecular Partners’ inventory or as being Manufactured as of the Effective Date. Any such supply will be made pursuant to a mutually acceptable supply agreement between the Parties. For clarity, Molecular Partner’s obligations to supply Licensed Compounds shall be limited to the first sentence of this Section 7.4, and Allergan shall be responsible for, and shall bear the cost of, all other supply of Licensed Compounds and Licensed Products, including any additional supply of Licensed Compound to be prepared for any Clinical Trial. All Licensed Compound provided under

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this Section 7.4 or any supply agreement shall be provided as is and without representations or warranties of any kind, except for those warranties provided to Molecular Partners by its Third Party contract manufacturers with respect to the particular materials supplied.

7.5 Use of Manufacturing Information . Allergan or its Affiliates and Third Party manufacturer shall use any Information transferred pursuant to Section 7.3 in accordance with the licenses granted in Section 2.1, including for the purpose of Manufacturing Licensed Products. Prior to any transfer of any Molecular Partners Know-How to a Third Party manufacturer, Allergan shall require that such Third Party be bound to confidentiality restrictions at least as protective as those of Article 12.

ARTICLE 8
COMPENSATION

8.1 Upfront Payment . Within ten (10) Business Days after the Effective Date, Allergan shall pay to Molecular Partners a one-time, non-refundable and non-creditable upfront payment of forty-five million Dollars ($45,000,000).

8.2 Development Milestone Payments . Allergan shall make each of the following non-refundable, non-creditable development milestone payments to Molecular Partners upon the achievement by Allergan or its Affiliates or Sublicensees of the applicable development milestone events by a Licensed Product for the first and second Indications. Allergan shall pay to Molecular Partners each such amount within thirty (30) days after the achievement of the applicable development milestone event. For clarity, each of the following development milestone payments shall be made only once for a given Indication, regardless of the number of Licensed Products developed for such Indication.

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Development Milestone Event	Development Milestone Payment (each paid one time only)
For the first Indication:
Initiation of the first Phase 3 Clinical Trial for a Licensed Product; provided that ***	***
Regulatory Approval by the FDA	***
Regulatory Approval by the EMA (or a country-specific Regulatory Approval in any one of the Major European Market Countries)	***
Regulatory Approval by the MHLW	***
Total Development Milestone Payments for First Indication	***
For the second Indication:
Initiation of the first Phase 3 Clinical Trial for a Licensed Product	***
Regulatory Approval by the FDA	***
Regulatory Approval by the EMA (or a country-specific Regulatory Approval in any one of the Major European Market Countries)	***
Regulatory Approval by the MHLW	***
Total Development Milestone Payments for Second Indication	***

For purposes of this Section 8.2, the “Target Phase 3 Start Date” means the date that is twelve (12) months following the date set forth in the initial Development Plan for Initiation of the first Phase 3 Clinical Trial for a Licensed Product, provided that such twelve (12) month period shall be extended by the length of any delay in Initiating the first Phase 3 Clinical Trial for a Licensed Product caused by (i) safety concerns, (ii) inability to obtain sufficient supply of such Licensed Product, or (iii) Molecular Partners or a Third Party (for example, if a contract manufacturer breaches its supply agreement with Allergan or Molecular Partners by failing to supply the applicable Licensed Compound or Licensed Product by the required delivery date), including the time required to correct such delay; provided that in the cases of subsections (ii) and (iii) any extended time period shall not include any extension to the extent incorporating any delay solely attributable to the fault of Allergan. For the avoidance of doubt, Allergan will not be required to pay Molecular Partners the *** if this Agreement has been terminated prior to the Target Phase 3 Start Date.

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8.3 Sales Milestones . Allergan shall make each of the following one-time, non-refundable (except as set forth in Section 8.9), non-creditable sales milestone payments to Molecular Partners when the aggregate Royalty-Bearing Sales of Licensed Products in the Territory in a period of any four (4) consecutive Calendar Quarters first reach the amount specified below. Allergan shall pay to Molecular Partners such amount within sixty (60) days after the Calendar Quarter in which such sales milestone event is achieved. For clarity, the sales milestone payments in this Section 8.3 shall be additive, such that if all three sales milestones below are met in the same period of four (4) consecutive Calendar Quarters, Allergan shall pay to Molecular Partners a payment of ***.



Sales Milestone Event	Milestone Payment
The aggregate Royalty-Bearing Sales of Licensed Products in the Territory in a period of four (4) consecutive Calendar Quarters equal or exceed ***	***
The aggregate Royalty-Bearing Sales of Licensed Products in the Territory in a period of four (4) consecutive Calendar Quarters equal or exceed ***	***
The aggregate Royalty-Bearing Sales of Licensed Products in the Territory in a period of four (4) consecutive Calendar Quarters equal or exceed ***	***
Total Sales Milestone Payments	***

8.4 Royalties .

(a) Royalty Rates . Subject to Section 8.4(c), 8.4(d), and 8.5, Allergan shall pay to Molecular Partners non-creditable, non-refundable (except as set forth in Section 8.9) royalties on aggregate annual Royalty-Bearing Sales of all Licensed Products in the Territory, as calculated by multiplying the applicable royalty rate by the corresponding amount of incremental Royalty-Bearing Sales of all Licensed Products in the Territory in each Calendar Year as follows:



Annual Royalty-Bearing Sales of Licensed Products in the Territory	Royalty Rate
For that portion of annual aggregate Royalty-Bearing Sales of Licensed Products in a Calendar Year that are less than or equal to ***	***
For that portion of annual aggregate Royalty-Bearing Sales of Licensed Products in a Calendar Year that are greater than ***	***
For that portion of annual aggregate Royalty-Bearing Sales of Licensed Products in a Calendar Year that are greater than ***	***
For that portion of annual aggregate Royalty-Bearing Sales of Licensed Products in a Calendar Year that are greater than ***	***

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For example, if aggregate annual Royalty-Bearing Sales of all Licensed Products in the Territory in a Calendar Year is ***, then royalties payable by Allergan equal ***.

(b) Royalty Term . Royalties shall be paid under this Section 8.4, on a country-by-country and Licensed Product-by-Licensed Product basis, commencing on First Commercial Sale of such Licensed Product in such country until the latest of: (i) the expiration of the last-to-expire Valid Claim in such country that would be infringed, absent a license, by the sale of a particular Licensed Product at the time of sale of such Licensed Product; (ii) the expiration of Regulatory Exclusivity in such country covering such Licensed Product; and (iii) the *** anniversary of the First Commercial Sale of such Licensed Product in such country (the “Royalty Term” ).

(c) Know-How Royalty . In any country in the Territory where there is no Valid Claim of a Molecular Partners Patent or a Joint Patent that would be infringed in such country, absent a license, by the sale of a particular Licensed Product at the time of sale of such Licensed Product during the Royalty Term for such Licensed Product, Allergan shall owe royalties under Section 8.4(a) on the Royalty-Bearing Sales of such Licensed Product in such country at rates that are *** of the rates otherwise payable under Section 8.4(a).

(d) Generic Competition . In the event a Licensed Product is subject to Generic Competition in a country in the Territory during the Royalty Term for such Licensed Product, then, beginning in the calendar month following the three (3) calendar month period during which Generic Competition has been determined to exist in accordance with Section 1.41 at the applicable level noted below, the royalty rates set forth in Section 8.4(a) (without giving effect to any reduction under Section 8.5) shall be reduced in such country:

(i) by *** if the units of such Generic Product(s) sold during the applicable three (3) month period exceed *** and are not more than *** of the aggregate units of all such Generic Product(s) and Licensed Product sold in such country;

(ii) by *** if the units of such Generic Product(s) sold during the applicable three (3) month period exceed *** and are not more than *** of the aggregate units of all such Generic Product(s) and Licensed Product sold in such country;

(iii) by *** if the units of such Generic Product(s) sold during the applicable three (3) month period exceed *** and are not more than *** of the aggregate units of all such Generic Product(s) and Licensed Product sold in such country; and

(iv) by *** if the units of such Generic Product(s) sold during the applicable three (3) month period exceed *** of the aggregate units of all such Generic Product(s) and Licensed Product sold in such country.

Such reduction shall be first applied with respect to such country starting with sales in the calendar month following the first three (3) calendar month period where the sales of the Generic Product(s) in such country exceed the applicable level noted above of the unit sales volume of the applicable Licensed Product, and shall expire on the day after the last day of the calendar month in which such Generic Competition ceases to exist or, if earlier, the expiration of the Royalty Term. For the

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avoidance of doubt, if both Section 8.4(a) and this Section 8.4(c) apply, the section that provides the greater royalty reduction shall take precedence.

(e) Royalty Reports and Payments . Within sixty (60) days following the end of each Calendar Quarter, commencing with the Calendar Quarter in which the First Commercial Sale of any Licensed Product is made anywhere in the Territory, Allergan shall provide Molecular Partners with a report containing the following information for the applicable Calendar Quarter, on a country-by-country and Licensed Product-by- Licensed Product basis: (i) the amount of gross sales of Licensed Product in the Territory, (ii) an itemized calculation of Royalty-Bearing Sales in the Territory showing deductions provided for in the definition of “Net Sales,” (iii) a calculation of the royalty payment due on such sales, and (iv) the exchange rate for such country. Concurrent with the delivery of the applicable quarterly report, Allergan shall pay in Dollars all amounts due to Molecular Partners pursuant to Section 8.4 with respect to Royalty-Bearing Sales in such Calendar Quarter.

8.5 Third Party Payments .

(a) If either Party determines that it needs to obtain one or more Necessary Licenses, such Party will notify the other Party. Molecular Partners will have the first right (but not the obligation) to elect to negotiate the Necessary License. Molecular Partners will notify Allergan within fifteen (15) days after such notice if it elects not to negotiate such Necessary License. If Molecular Partners elects not to obtain such Necessary License, or is unsuccessful in doing so, then Allergan will have the right (but not the obligation) to negotiate and obtain such Necessary License at its sole discretion and expense. The negotiating Party will obtain such Necessary License, with the right to sublicense, in order to permit Allergan to exercise its rights and to perform its obligations under this Agreement. Subject to the foregoing, the terms and conditions involved in obtaining such Necessary License shall be determined at such negotiating Party’s sole discretion.

(b) Molecular Partners will be solely responsible for all amounts owed to Third Parties pursuant to (i) the license agreements listed on Exhibit E and (ii) any other license obtained by *** (each, a “Necessary License” ). In the event Allergan enters into a Necessary License, Allergan shall have the right to offset, against amounts payable to Molecular Partners under this Agreement, any and all amounts payable by Allergan to a Third Party under any such Necessary License (other than payments potentially due pursuant to any of the agreements listed on Exhibit E , which shall be borne solely by Molecular Partners); provided that the amounts payable to Molecular Partners under this Agreement may not be reduced by more than *** of those otherwise due to Molecular Partners pursuant to this Agreement in any Calendar Quarter as a result of such offset. Any unused offset earned in a Calendar Quarter may be carried forward from such Calendar Quarter to the subsequent Calendar Quarters and may be used in such subsequent Calendar Quarters, subject to the *** limitation set forth in the immediately preceding sentence.

(c) Except as provided in subsection (b) above, Allergan will be solely responsible for all amounts owed to Third Parties on account of Allergan’s manufacture, use, sale, offer for sale, or import of Licensed Products and Licensed Compounds, including any rights to exploit any Allergan Modification or any formulation technology or Drug Delivery System for a Licensed Product.

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(d) Except as provided in subsection (b) above, the Molecular Partners Technology licensed to Allergan in Section 2.1(a) will include Patents or Information licensed to Molecular Partners by a Third Party after the Effective Date only if the following conditions are met:

(i) Molecular Partners discloses to Allergan for review, reasonably in advance of Molecular Partners’ anticipated entry into the applicable agreement between Molecular Partners and such Third Party, the substantive terms of such license agreement (which Molecular Partners hereby covenants to do); and

(ii) Allergan provides Molecular Partners with written notice, prior to Molecular Partners’ entry into such license agreement, in which (A) Allergan assumes all payment obligations under such license agreement to the extent arising out of the use, Development or Manufacture of any Licensed Compound or Licensed Product or Commercialization of any Licensed Product by or on behalf of Allergan, as well as all other obligations of such license agreement that are applicable to Allergan, and (B) Allergan acknowledges in writing that its sublicense under such license agreement is subject to the terms and conditions of such license agreement.

Any applicable Patents and Information for which the above conditions are not met shall be excluded from the scope of Molecular Partners Technology and not licensed to Allergan under this Agreement.

8.6 Blocked Currency . In each country in the Territory where the local currency is blocked and cannot be removed from the country, at the election of Allergan, royalties accrued on Net Sales in such country shall be paid to Molecular Partners in local currency by deposit in a local bank in such country designated by Molecular Partners.

8.7 Currency of Payments . All payments under this Agreement shall be made in Dollars by wire transfer of immediately available funds into an account designated by Molecular Partners. Net Sales outside of the U.S. shall be first determined in the currency in which they are earned and shall then be converted into an amount in Dollars using Allergan’s customary and usual conversion procedures used in preparing its financial statements pursuant to GAAP for the applicable reporting period.

8.8 Late Payments . If Molecular Partners does not receive payment of any sum due to it on or before the due date, then any portions thereof due hereunder which are not paid on the date such payments are due under this Agreement will bear interest at the lower of (i) two (2) percentage points over the overnight LIBOR rate in effect on the due date, or (ii) the maximum rate permitted by Law, calculated on the number of days such payment is delinquent, compounded monthly.

8.9 Records; Audits . Allergan and its Affiliates will, and Allergan will cause each of its Sublicensees, if any, to, maintain complete and accurate records in sufficient detail to confirm the accuracy of the calculation of royalty payments and the achievement of milestone events, for a period of five (5) years after the Calendar Year in which such sales or events occurred. Upon reasonable prior notice, such records of Allergan and its Affiliates shall be made available during regular business hours for a period of five (5) years from the end of the Calendar Year to which

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they pertain for examination, and not more often than once each Calendar Year, by an independent certified public accountant selected by Molecular Partners and reasonably acceptable to Allergan, for the sole purpose of and only to the extent necessary for verifying the accuracy of the financial reports furnished by Allergan pursuant to this Agreement. Such independent accountant shall disclose to Molecular Partners only the amounts that such independent accountant believes to be due and payable hereunder to Molecular Partners, details concerning any discrepancy from the amount paid and the amount due, and shall disclose no other information revealed in such audit. Any periods previously audited may be re-audited one (1) additional time if Molecular Partners discovers a discrepancy or other issue in a subsequent audit. Any and all records examined by such independent accountant shall be deemed Allergan’s Confidential Information which may not be disclosed by such independent accountant to any Third Party, and Allergan may require such independent accountant to enter into an appropriate written agreement obligating it to be bound by obligations of confidentiality and restrictions on use of such Confidential Information that are no less protective than those set forth in Article 12. If, as a result of any inspection of the books and records of Allergan, it is shown that payments under this Agreement were less than the amount which should have been paid, then Allergan shall make all payments required to be made plus interest (as set forth in Section 8.8) from the original due date to eliminate any discrepancy revealed by such inspection within thirty (30) days. If, as a result of any inspection of the books and records of Allergan, it is shown that payments under this Agreement were more than the amount which should have been paid, then Molecular Partners shall, at Allergan’s election, either make all payments required to be made to eliminate any discrepancy revealed by such inspection within ninety (90) days or credit such amounts to Allergan against future payments. Molecular Partners shall pay for such audits, except that in the event that the audited amounts were underpaid by Allergan by more than *** of the undisputed amounts that should have been paid during the period in question as per the audit, Allergan shall pay the costs of the audit.

8.10 Consolidated Accounting . If during the Term, Allergan is required, as a company that reports its financial results to the U.S. Securities and Exchange Commission ( “SEC” ) in accordance with GAAP, to include certain financial results of Molecular Partners in Allergan’s consolidated financial statements, Molecular Partners shall provide to Allergan on a timely basis Molecular Partners’ financial statements reasonably requested by Allergan, which may include quarterly (unaudited) and yearly (audited) income statements, balance sheets, and statements of cash flows (the “Financial Statements” ) and related supplemental information, in each case solely to the extent required for appropriate GAAP footnote disclosures by Allergan. All Financial Statements and related supplemental information shall be prepared in accordance with GAAP. Any information provided by Molecular Partners to Allergan under this Section will be treated as Molecular Partners’ Confidential Information, subject to Allergan’s right to disclose any such information that is required by GAAP to be disclosed as part of Allergan’s Financial Statements filed with the SEC.

8.11 Taxes .

(a) Taxes on Income . Each Party shall be solely responsible for the payment of all taxes imposed on its share of income arising directly or indirectly from the efforts of the Parties under this Agreement.

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(b) Cooperation . The Parties agree to cooperate with one another and use reasonable efforts to reduce or eliminate tax withholding or similar obligations in respect of royalties, milestone payments, and other payments made by Allergan to Molecular Partners under this Agreement. To the extent Allergan is required under the Internal Revenue Code of 1986, as amended (the “Code” ), or any other tax Laws to deduct and withhold taxes on any payment to Molecular Partners, Allergan shall pay the amounts of such taxes to the proper Governmental Authority in a timely manner and promptly transmit to Molecular Partners an official tax certificate or other evidence of such withholding sufficient to enable Molecular Partners to claim such payment of taxes. Except as otherwise provided in Section 8.11(c), if any taxes are so deducted or withheld, such deducted or withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Molecular Partners. Upon Allergan’s reasonable request, Molecular Partners shall provide Allergan any tax forms (including Internal Revenue Service Form W-8BEN or W-8ECI or other applicable Internal Revenue Service Form) that may be reasonably necessary in order for Allergan to determine whether to withhold tax on any such payments or to withhold tax on such payments at a reduced rate under the Code or any other tax Laws, including any applicable bilateral income tax treaty. Allergan shall give reasonable support so that any withholding tax or value added tax may be minimized or avoided to the extent permitted under the applicable Laws and treaties. Each Party shall provide the other with reasonable assistance to enable the recovery, as permitted by applicable Laws, of withholding taxes, value added taxes, or similar obligations resulting from payments made under this Agreement, such recovery to be for the benefit of the Party bearing such withholding tax or value added tax. Allergan shall require its sublicensees in the Territory to cooperate with Molecular Partners in a manner consistent with this Section 8.11(b).

(c) Taxes Resulting From Allergan Action . If Allergan is required to make a payment to Molecular Partners that is subject to increased deduction or withholding of tax as a result of any willful action by Allergan, such as an assignment or sublicense by Allergan, or any failure on the part of Allergan to comply with applicable Laws or filing or record retention requirements (an “Allergan Withholding Tax Action” ), then the sum payable by Allergan (in respect of which such increased deduction or withholding is required to be made) shall be increased to the extent necessary to ensure that Molecular Partners receives a sum equal to the sum which it would have received had no such Allergan Withholding Tax Action occurred. Notwithstanding the foregoing, any assignment or sublicense by Allergan that is agreed or consented to by Molecular Partners in advance in writing shall not constitute an Allergan Withholding Tax Action. To the extent that Molecular Partners actually realizes a tax benefit in any jurisdiction as a result of any such withholding taxes paid by Allergan pursuant to this Section 8.11(c), Molecular Partners shall cooperate with Allergan to convey the additional tax benefit, if possible, to Allergan.

ARTICLE 9
INTELLECTUAL PROPERTY MATTERS

9.1 Inventions . Any inventions, whether or not patentable, and whether (a) invented solely by a Party’s own employees, agents, consultants, or independent contractors or (b) invented by a Party’s own employees, agents, consultants, or independent contractors jointly with employees, agents, consultants, or independent contractors of the other Party, in each case in the course of conducting a Party’s activities under this Agreement, together with all intellectual property rights

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therein, shall be referred to herein as an “Invention” . Inventorship shall be determined in accordance with U.S. patent laws.

9.2 Disclosure . Each Party will disclose to the other Party any Inventions for any Sequence Modifications made pursuant to Section 4.7.

9.3 Ownership . Except as otherwise set forth in this Agreement, (a) if an Invention is solely invented by one or more employees, agents, consultants, or independent contractors of a Party, such Invention, and any and all intellectual property rights therein, shall be solely owned by such Party, and (b) if an Invention is jointly invented by one or more employees, agents, consultants, or independent contractors of each Party, such Invention (a “Joint Invention” ), and any and all intellectual property rights therein including any Patent (each, a “Joint Patent” ), shall be jointly owned by the Parties. Subject to the terms of this Agreement and except as otherwise licensed to the other Party under this Agreement, each Party shall be entitled to practice and exploit the Joint Inventions and Joint Patents, subject to the licenses granted under Article 2, without the duty of accounting or seeking consent from the other Party. Each Party agrees to be named as a party, if necessary, to bring or maintain a lawsuit involving a Joint Invention or Joint Patent.

9.4 Prosecution of Patents .

(a) Molecular Partners Patents .

(i) Subject to Section 9.4(a)(iii), as between the Parties, Molecular Partners shall have the sole right to prepare, file, prosecute and maintain all Molecular Partners Patents (A) listed as “Platform Patents” on Exhibits F and G and (B) all Molecular Partners Patents filed after the Effective Date except for any Patents that solely claim or cover Licensed Products, in each case including all Patents that claim priority, directly or indirectly, from such Patents; and any Patent from which such Patents claim priority, directly or indirectly (collectively, the “Molecular Partners Platform Patents” ), ***. On a Calendar Quarter basis, Molecular Partners shall update Allergan on the status of the prosecution and maintenance of all Molecular Partners Platform Patents and shall provide Allergan with copies of material filings with and communication from patent authorities with respect to such Patents to the extent applicable to Licensed Products. Molecular Partners shall respond to all reasonable requests of Allergan for additional Information with respect to all such prosecution and maintenance efforts. Molecular Partners agrees to reasonably implement any recommendations of Allergan toward the objective of optimizing overall patent protection for Licensed Compounds, Licensed Products, and other DARPin Compounds.

(ii) As between the Parties, Molecular Partners shall have the first right to prepare, file, prosecute and maintain all Molecular Partners Patents other than the Molecular Partners Platform Patents (collectively, the “Molecular Partners Product Patents” ) in the Territory, at Molecular Partners’ cost and expense. Molecular Partners shall reasonably inform and consult with Allergan, and shall take Allergan’s comments into good faith consideration, with respect to the preparation, prosecution and maintenance of such Molecular Partners Product Patents. Molecular Partners shall provide to Allergan copies of any papers relating to the filing, prosecution or maintenance of such Molecular Partners Product Patents reasonably in advance of their being filed or promptly upon their being received, including draft filings, reasonably in advance of their

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being filed, so that Allergan can comment and provide input with respect to such draft filings. Molecular Partners agrees to discuss in good faith any changes reasonably requested by Allergan to such papers, including draft filings, promptly upon their being received. Molecular Partners agrees to reasonably implement any such recommended changes toward the objective of optimizing overall patent protection for Licensed Compounds or Licensed Products.

(iii) If Molecular Partners decides to cease the prosecution or maintenance of a Molecular Partners Product Patent, it shall notify Allergan in writing sufficiently in advance so that Allergan may, at its discretion, assume the responsibility for the prosecution or maintenance of such Molecular Partners Product Patents at Allergan’s cost and expense. If Allergan assumes such responsibility, then no such claim shall be deemed a Valid Claim. If Molecular Partners decides to cease the prosecution or maintenance of all claims in a Molecular Partners Platform Patent that covers the Development, Manufacture or Commercialization of a Licensed Compound or Licensed Product in the Field and Territory, it shall notify Allergan in writing sufficiently in advance so that Allergan may, at its discretion, assume the responsibility for the prosecution or maintenance of such Molecular Partners Platform Patent to the extent claiming the Development, Manufacture or Commercialization of a Licensed Compound or Licensed Product in the Field and Territory, at Allergan’s cost and expense. If Allergan assumes such responsibility, then no such claim shall be deemed a Valid Claim.

(iv) Following the Effective Date, the Parties shall meet and discuss the extent to which it is feasible to allocate certain claims covered in the Molecular Partners Platform Patents to the Molecular Partners Product Patents. At the reasonable request of Allergan, Molecular Partners shall make such filings as the Parties reasonably agree to allocate claims solely covering Licensed Compounds in the Field to the Molecular Partners Product Patents. *** the costs associated with such actions reasonably requested by Allergan.

(b) Joint Patents . The Parties shall mutually agree upon which Party shall prosecute Joint Patents, ***. The prosecuting Party shall reasonably inform and consult with the other Party, and shall take such other Party’s comments into good faith consideration, with respect to the preparation, prosecution and maintenance of such Joint Patents. The prosecuting Party shall provide to the other Party copies of any papers relating to the filing, prosecution or maintenance of such Joint Patents reasonably in advance of their being filed or promptly upon their being received, including draft filings, reasonably in advance of their being filed so that such other Party can comment and provide input with respect to such draft filings. The prosecuting Party agrees to discuss in good faith any changes reasonably requested by the other Party to such papers, including draft filings, promptly upon their being received. The prosecuting Party agrees to reasonably implement any such recommended changes toward the objective of optimizing overall patent protection for Licensed Compounds, Licensed Products, and other DARPin Compounds. In any event, neither Party will finally abandon, disclaim, or dedicate to the public any claims or limit any claims specific to DARPin Compounds, Licensed Compounds or Licensed Products without the other Party’s prior written consent.

(c) Cooperation. Each Party shall provide the other Party all reasonable assistance and cooperation, at the other Party’s request and expense, in the patent prosecution efforts

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provided above in this Section 9.4, including providing any necessary powers of attorney and executing any other required documents or instruments for such prosecution. Each Party shall execute and deliver to the other assignments with respect to any Joint Inventions, in a mutually agreeable form and will take whatever actions reasonably necessary, including the appointment of the other Party as its attorney in fact solely to make such assignment) to effect such assignment. The prosecuting Party under this Section 9.4 agrees to conduct such prosecution toward the objective of optimizing overall patent protection for Licensed Compounds, Licensed Products, and other DARPin Compounds.

9.5 Enforcement of Molecular Partners Patents and Joint Patents .

(a) Notification . If either Party become aware of any existing or threatened infringement of the Molecular Partners Patents or Joint Patents in the Field in the Territory, which infringing activity involves the using, making, importing, offering for sale or selling Licensed Compounds or Licensed Products or a product containing an Exclusive DARPin, in each case in the Field and in the Territory, or any such Molecular Partners Patent or Joint Patent is challenged in any action or proceeding to the extent directly relating to Licensed Compounds or Licensed Products or a product containing an Exclusive DARPin, in each case in the Field and in the Territory (other than any oppositions, cancellations, interferences, reissue proceedings or reexaminations, which are addressed in Section 9.8) (a “Product Infringement” ), it shall promptly notify the other Party in writing to that effect and the Parties will consult with each other regarding any actions to be taken with respect to such Product Infringement. Each Party shall share with the other Party all Information available to it regarding such alleged Product Infringement.

(b) Enforcement .

(i) Molecular Partners shall have the first right, but not the obligation, to bring an appropriate suit or other action against any person or entity engaged in a Product Infringement of the Molecular Partners Platform Patents. Molecular Partners shall keep Allergan regularly informed of the status and progress of such enforcement efforts, shall reasonably consider Allergan’s comments on any such efforts, and shall seek consent of Allergan in any important aspects of such enforcement, including determination of litigation strategy and filing of material papers to the competent court, which consent shall not be unreasonably withheld or delayed. In addition, Molecular Partners shall provide Allergan with drafts of all material papers to be filed with the court and shall in good faith incorporate all reasonable comments thereto by Allergan before filing such papers. Allergan shall provide to Molecular Partners reasonable assistance in such enforcement pursuant to this subsection (b)(i), at Molecular Partners’ request and expense, including joining such action as a party plaintiff if required by applicable Laws to pursue such action.

(ii) Molecular Partners shall have a period of ninety (90) days after its receipt or delivery of notice under Section 9.5(a) to elect to so enforce the Molecular Partners Platform Patents in the Field in the Territory (or to settle or otherwise secure the abatement of such Product Infringement). If Molecular Partners fails to commence a suit to enforce the applicable Molecular Partners Platform Patents or to settle or otherwise secure the abatement of such Product Infringement within such period, then Allergan shall have the right, but not the obligation, to commence a suit or take action to enforce such Molecular Partners Platform Patents against such

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Product Infringement in the Field in the Territory at its own cost and expense. In such event, promptly after the expiration of the applicable ninety (90)-day period, or Molecular Partners’ notice to Allergan that it does not elect to enforce such Molecular Partners Platform Patents, the Parties shall meet to discuss in good faith and determine the strategy for enforcing such Molecular Partners Platform Patents. Allergan shall not take any action with respect to such enforcement that is inconsistent with the strategy agreed by the Parties. Allergan acknowledges and agrees that the Molecular Partners Platform Patents may be licensed to Third Parties who have rights with respect to the enforcement of such Patents, and that Allergan’s rights to conduct any enforcement activities are subject to such rights. In any event, Molecular Partners shall have the right to consult with such Third Party licensees prior to making any decisions with respect to enforcement activities under this Section 9.5(b)(ii). In addition, Allergan shall provide Molecular Partners with drafts of all material papers to be filed with the court and shall incorporate all reasonable comments thereto by Molecular Partners before filing such papers. Molecular Partners shall be entitled to separate representation in such matter by counsel of its own choice and at its own expense.

(iii) Allergan shall have the first right, but not the obligation, to bring and control an appropriate suit or other action against any person or entity engaged in a Product Infringement of the Molecular Partners Product Patents or Joint Patents, in its own name and entirely under its own direction and control, subject to the following. Allergan shall keep Molecular Partners regularly informed of the status and progress of such enforcement efforts. Allergan shall consult with Molecular Partners and take any Molecular Partners comments into good faith consideration with respect to the infringement, claim construction, or defense of the validity or enforceability of any claim in any Molecular Partners Product Patent or Joint Patent. In addition, Allergan shall provide Molecular Partners with drafts of all material papers to be filed with the court and shall incorporate all reasonable comments thereto by Molecular Partners before filing such papers. Molecular Partners shall provide to Allergan reasonable assistance in such enforcement pursuant to this Section 9.5(b)(iii), at Allergan’s request and expense, including joining such action as a party plaintiff if requested by Allergan or required by applicable Laws to pursue such action. Molecular Partners shall be entitled to separate representation in such matter by counsel of its own choice and at its own expense.

(iv) If Allergan elects not to settle, or bring any action or proceeding as described in Section 9.5(b)(iii) within ninety (90) days after first notifying Molecular Partners or being notified by Molecular Partners with respect thereto, then at any time during the Term, Molecular Partners may bring such suit or other action against any person or entity engaged in a Product Infringement of the Molecular Partners Product Patents or Joint Patents, in its own name and entirely under its own direction and control, subject to the following. Molecular Partners shall consult with Allergan and take any Allergan comments into good faith consideration with respect to the infringement, claim construction, or defense of the validity or enforceability of any claim in any Molecular Partners Product Patent or Joint Patent. Allergan shall provide to Molecular Partners reasonable assistance in such enforcement pursuant to this Section 9.5(b)(ii), at Molecular Partners’ request and expense, including joining such action as a party plaintiff if requested by Molecular Partners or required by applicable Laws to pursue such action. Allergan shall have the right to participate and be represented in any such suit by its own counsel at its own expense with respect to a Product Infringement. No settlement of any such action or proceeding which restricts the scope,

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or adversely affects the enforceability, of any Molecular Partners Product Patent or Joint Patent shall be entered into by Molecular Partners without the prior written consent of Allergan, which consent shall not be unreasonably withheld, conditioned, or delayed. Molecular Partners shall not knowingly take any action during such litigation of any Molecular Partners Product Patent or Joint Patent that would materially adversely affect them, without Allergan’s prior written consent, which shall not be unreasonably withheld, delayed, or conditioned.

(v) Notwithstanding Section 9.5(b)(ii) or (iv), if a Third Party submits an application to the appropriate Regulatory Authority for approval to sell a biological or drug product, and supports the application with any safety, efficacy, or other data that either Party has generated in Developing a Licensed Product, then the following will apply:

(A) if a Party receives from the Third Party a notice alleging that the Third Party’s manufacture, use, or sale of the biological or drug product does not infringe a Molecular Partners Patent, or that such Patent is invalid or unenforceable (such as a certification under 21 U.S.C. §§ 355(b)(2)(A)(iv) or 355(j)(2)(A)(vii)(IV), 21 C.F.R. §§ 314.94 or 314.95, 42 U.S.C. § 262(l), or under any other law anywhere in the world that by its effect permits a Third Party to support its application for approval with any safety, efficacy, or other data that Allergan generates in Developing a Licensed Product), then the Party receiving the notice will provide it to the other Party via facsimile and overnight courier as soon as practicable and at least within five (5) days after receiving the notice.

(B) Molecular Partners will have the first right, but not the obligation, to institute and control (where Molecular Partners is a plaintiff) or defend and control (where Molecular Partners is a defendant) an action before any government or private tribunal against the Third Party concerning the infringement, validity, and enforceability of any Molecular Partners Platform Patent and to settle any claims in connection with such Patents. Allergan will have the first right, but not the obligation, to institute and control (where Allergan is a plaintiff) or defend and control (where Allergan is a defendant) an action before any government or private tribunal against the Third Party concerning the infringement, validity, and enforceability of any Molecular Partners Product Patent and to settle any claims in connection with such Patents. If the applicable Party decides not to institute (or defend, as applicable) such action, such Party will give notice to the other Party of its decision within twenty (20) days of the deadline for initiating the action (or, if such Party is defending the action, within twenty (20) days of any deadline required to maintain the action); if such Party consents in writing (such consent not to be unreasonably withheld, conditioned, or delayed), then the other Party may institute (or defend, as applicable) and control such action. Each Party will cooperate fully with the other Party in such actions and will provide reasonable assistance (including making available to such other Party documents possessed by such Party that are reasonably required by such other Party and making available personnel for interviews and testimony) in any actions undertaken in accordance with this Section 9.5(b)(iii). At the controlling Party’s request, the other Party agrees to join any such action, or, in the case of Molecular Partners, to use reasonable efforts to cause any Third Party licensor under any license agreement between Molecular Partners and such Third Party pursuant to which Molecular Partners has obtained rights to any Molecular Partners Technology, including the agreements set forth on Exhibit E , to join any such action, for the purpose of establishing standing. Each Party will have the right to

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approve any settlement that would adversely affect the Molecular Partners Patents or result in any liability or admission on behalf of such Party, such approval not to be unreasonably withheld, conditioned, or delayed. Any recovery, by settlement or otherwise, realized as a result of such litigation will be allocated in accordance with Section 9.5(d).

(c) Settlement . Neither Party shall settle any claim, suit or action that it brought under Section 9.5(b) without the prior written consent of the other Party, not to be unreasonably withheld, delayed, or conditioned. Nothing in this Article 9 shall require such other Party to consent to any settlement that is reasonably anticipated by such other Party to have a materially adverse impact upon any Molecular Partners Patents or Joint Patents.

(d) Expenses and Recoveries . The enforcing Party bringing a claim, suit or action under Section 9.5(b) shall be solely responsible for any expenses incurred by such Party as a result of such claim, suit or action. If such Party recovers monetary damages in such claim, suit or action, such recovery shall first be allocated to the reimbursement of any expenses incurred by the Parties in such litigation (including, for this purpose, a reasonable allocation of expenses of internal counsel). If such recovery is insufficient to cover all such costs and expenses of both Parties, it shall be shared in proportion to the total of such costs and expenses incurred by each Party. If after such reimbursement any funds remain from such damages or other sums recovered, if Allergan brought such suit, such remaining funds shall be included in Net Sales subject to the royalty payment by Allergan to Molecular Partners pursuant to Section 8.4, and if Molecular Partners brought such suit, *** of such funds shall be retained by Molecular Partners and Allergan shall receive *** of such funds.

(e) Infringement Other Than a Product Infringement . For any and all infringement of any Molecular Partners Patents or Joint Patents other than a Product Infringement, as between the Parties, (i) Molecular Partners shall have the sole and exclusive right to bring an appropriate suit or other action against any person or entity engaged in such other infringement of a Molecular Partners Patent, in its sole discretion, and shall bear all related expenses and retain all related recoveries, and (ii) each Party shall have the right to bring an appropriate suit or other action against any person or entity engaged in such other infringement of a Joint Patent, in its sole discretion, and shall bear all related expenses and retain all related recoveries.

9.6 Patents Licensed From Third Parties. Each Party’s rights under this Article 9 with respect to the prosecution, maintenance and enforcement of any Molecular Partners Patent that is licensed by Molecular Partners from a Third Party shall be subject to the rights of such Third Party to prosecute, maintain and enforce such Patent.

9.7 Infringement of Third Party Rights in the Territory . If any Licensed Product used or sold by Allergan, its Affiliates or sublicensees becomes the subject of a Third Party’s claim or assertion of infringement of a Patent granted by a jurisdiction within the Territory, Allergan shall promptly notify Molecular Partners and the Parties shall agree on and enter into a “common interest agreement” wherein the Parties agree to their shared, mutual interest in the outcome of such potential dispute, and thereafter, the Parties shall promptly meet to consider the claim or assertion and the appropriate course of action. Allergan shall be solely responsible for the defense of any such infringement claims, provided that Allergan shall provide to Molecular Partners the ability to join

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such action, at Molecular Partners’ request and expense, to pursue such action in which a patent asserted by a Party under this Section 9.7 claims or covers the composition of matter (including the nucleic acid or amino acid sequence), use or sale of the Initial Licensed Compounds or the manufacture of the Licensed Compounds using the process employed by Molecular Partners as of the Effective Date (any such patent, a “Subject Patent” ). To the extent directly related to the Subject Patent, Allergan shall keep Molecular Partners regularly informed of the status and progress of any action to the extent involving a Subject Patent, shall reasonably consider Molecular Partners’ comments on any such action with respect to such Subject Patent, and shall seek consent of Molecular Partners in any important aspects of such action with respect to such Subject Patent, including determination of litigation strategy and filing of material papers to the competent court, which consent shall not be unreasonably withheld or delayed. In addition, Allergan shall provide Molecular Partners with drafts of all material papers to be filed with the court to the extent directly related to the Subject Patent and shall in good faith incorporate all reasonable comments thereto by Molecular Partners before filing such papers. In connection with any settlement agreement or court order, made in accordance with the provisions of Section 8.5(b) for a Subject Patent, ***. Allergan shall not settle any claim, suit or action under this Section 9.7 to the extent involving a Subject Patent without the prior written consent of Molecular Partners, not to be unreasonably withheld, delayed, or conditioned.

9.8 Parties’ Patent Rights. If any Molecular Partners Patent or Joint Patent becomes the subject of any proceeding commenced by a Third Party within the Territory in connection with an opposition, reexamination request, action for declaratory judgment, nullity action, interference or other attack upon the validity, title or enforceability thereof (except insofar as such action is a counterclaim to or defense of, or accompanies a defense of, an action for infringement against a Third Party under Section 9.5, in which case the provisions of Section 9.5 shall govern), then Molecular Partners shall control such defense with respect to the Molecular Partners Patents and Allergan shall control such defense with respect to the Joint Patents. The defending Party shall be responsible for all reasonable and documented costs and expenses incurred by such Party under this Section 9.8. The defending Party shall provide to the other Party copies of any papers relating to any such opposition, reexamination request, action for declaratory judgment, nullity action, interference or other attack upon any Molecular Partners Patents or Joint Patents, as applicable, reasonably in advance of their being filed or promptly upon their being received, including draft filings reasonably in advance of their being filed so that the other Party can comment and provide input with respect to such draft filings. The defending Party agrees to discuss in good faith any changes reasonably requested by the other Party to such papers, including draft filings, promptly upon their being received. The defending Party agrees in good faith to implement any reasonable recommended changes toward the objective of optimizing overall patent protection for Licensed Compounds or Licensed Products and DARPin Compounds other than Licensed Compounds in the Field. The defending Party shall permit the other Party to participate in the proceeding for a Molecular Partners Product Patent or Joint Patent, as applicable, to the extent permissible under applicable Laws, and to be represented by its own counsel in such proceeding, at such other Party’s expense. If the defending Party decides that it does not wish to defend against such action, then the other Party shall have a backup right to assume defense of such Third Party action at its own expense. Any awards or amounts received in defending any such Third Party action shall be allocated between the Parties as provided in Section 9.5(d).

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9.9 Patent Term Extension. Upon Allergan’s request, with respect to any Molecular Partners Product Patent specified by Allergan, Molecular Partners shall seek a patent term extension (including any pediatric exclusivity extensions as may be available) or supplemental protection certificates or their equivalents in any country with respect to such Molecular Partners Patents, as applicable. In the event Allergan desires to seek any of the foregoing extensions for any Molecular Partners Platform Patent, then the Parties shall meet and discuss such request in good faith and Molecular Partners will not unreasonably withhold consent to such extension, provided that it shall not be unreasonable for Molecular Partners to withhold its consent if such extension would materially adversely effect such Molecular Partners Platform Patent. For clarity, if elections with respect to obtaining such patent term extensions are to be made, Allergan shall have the right to elect to specify the Molecular Partners Patent for which patent term extension or supplemental protection will be sought. Molecular Partners shall not have the right to seek any patent term extension or supplemental protection for any Molecular Partners Product Patent without the prior written consent of Allergan; provided that Allergan will not withold such consent primarily for the purpose of limiting the Royalty Term.

9.10 Regulatory Data Protection. To the extent required by or permitted by Law, Allergan will, at its sole discretion, decide whether to list with the applicable Regulatory Authorities during the Term any applicable Molecular Partners Product Patents covering any Licensed Product that Allergan intends to, or has begun to Commercialize, and that has become the subject of a Regulatory Approval Application submitted to FDA. In the event Allergan desires to include in such listing any Molecular Partners Platform Patent, then the Parties shall meet and discuss such request in good faith and Molecular Partners will not unreasonably withhold consent to such listing, provided that it shall not be unreasonable for Molecular Partners to withhold its consent if such extension would materially adversely effect such Molecular Partners Platform Patent. Such listings may include all so called “Orange Book” listings required under the Hatch-Waxman Act or listing of Patents as provided in the patent dispute resolution procedures of the Biologics Price Competition and Innovation Act of 2009 or under 42 U.S.C. § 262(l) or similar provisions in the Territory during the Term. Prior to such decision on listings, the Parties will meet to evaluate and identify all applicable Patents to be listed and Allergan shall reasonably incorporate and address suggestions provided by Molecular Partners as to the listing or non-listing of any applicable Patents.

9.11 Trademarks and Domain Names .

(a) Allergan shall be responsible for the selection, registration and maintenance of all Trademarks which it employs in connection with the Commercialization of any Licensed Product under this Agreement ( “Licensed Product Marks” ). Allergan shall own and control such Licensed Product Marks and pay all relevant costs relating thereto. Allergan shall have the right to brand the Licensed Products in the Territory using Licensed Product Marks it determines appropriate for the Licensed Products, which may vary by country or within a country, provided that Allergan shall not, and shall ensure that its Affiliates and Sublicensees will not, (a) make any use of the Trademarks or house marks of Molecular Partners (including Molecular Partners’ corporate name) or any trademark confusingly similar thereto, or (b) include any Allergan Trademarks or house marks in the Licensed Product Marks. Allergan shall own all rights in the

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Licensed Product Marks and shall register and maintain, at its own cost and expense, the Licensed Product Marks in the countries and regions in the Territory that it determines reasonably necessary.

(b) Molecular Partners recognizes the exclusive ownership by Allergan of all Licensed Product Marks. Molecular Partners shall not, either while this Agreement is in effect, or at any time thereafter, register, use or challenge or assist others to challenge the Licensed Product Marks. Molecular Partners shall not attempt to obtain any right in or to any name, logotype, trademark or trade dress confusingly similar for the marketing, sale or distribution of any goods or products, notwithstanding whether such goods or products have a different use or are dissimilar to the Licensed Products.

(c) Only Allergan will be authorized to initiate at its own discretion legal proceedings against any infringement or threatened infringement of any Trademarks.

(d) Allergan shall be responsible for the registration, hosting, maintenance and defense of any Domain Name. Allergan may at its sole and absolute discretion register in its own name or in name of others, host on its own servers or on Third Party servers, maintain and defend such Domain Names and use them for websites.

ARTICLE 10
REPRESENTATIONS AND WARRANTIES; COVENANTS; DISCLAIMERS

10.1 Mutual Representations and Warranties . Each Party hereby represents and warrants to the other Party as follows:

(a) as of the Effective Date, it is a company or corporation duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is organized or incorporated; and

(b) as of the Effective Date, (i) it has the corporate power and authority and the legal right to enter into this Agreement and perform its obligations hereunder; (ii) it has taken all necessary corporate action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder; and (iii) this Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding obligation of such Party that is enforceable against it in accordance with its terms.

10.2 Additional Representations and Warranties of Molecular Partners . Molecular Partners represents and warrants to Allergan, as of the Effective Date, as follows:

(a) Molecular Partners has (i) the right under the Molecular Partners Technology to grant the licenses to Allergan as purported to be granted pursuant to this Agreement, (ii) sufficient legal or beneficial title in the Molecular Partners Technology to grant the licenses to Allergan as purported to be granted pursuant to this Agreement, and (iii) not granted any right or license to any Third Party under the Molecular Partners Technology that would conflict or interfere with any of the rights or licenses granted to Allergan hereunder;

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(b) Molecular Partners owns all right, title, and interest in the Molecular Partners Patents set forth on Exhibit F , and Molecular Partners has licensed rights to the Molecular Partners Patents set forth on Exhibit G pursuant to the corresponding agreements set forth on Exhibit G sufficient to grant the rights purported to be granted to Allergan under this Agreement, and all Patents owned or otherwise Controlled by Molecular Partners that cover or claim the Initial Licensed Compounds are set forth on Exhibits F and G ;

(c) ***, (i) Molecular Partners has not received any written notice from any Third Party asserting or alleging that any research, Development, Manufacturing, or Commercialization of the Licensed Compounds or Licensed Products or practice of the Molecular Partners Technology prior to the Effective Date has infringed or misappropriated the intellectual property rights of such Third Party, (ii) to the Knowledge (as defined in Section 10.6) of Molecular Partners, the manufacture, use, offer for sale, sale or importation of Licensed Compounds or Licensed Products in the Territory, including Development, Manufacture, or Commercialization of Licensed Compounds or Licensed Products, has not infringed any Patent of any Third Party or misappropriated any technology of any Third Party, (iii) to the Knowledge of Molecular Partners based on facts in existence as of the Effective Date, the manufacture, use, offer for sale, sale or importation of the Initial Licensed Compounds in the Territory, as contemplated by this Agreement or described in the Exhibits, including the Initial Development Plan, will not infringe any Patent of any Third Party or misappropriate any technology of any Third Party, and (iv) there are no pending, and to the Knowledge of Molecular Partners no threatened, adverse actions, suits, arbitrations, litigations, or proceedings of any nature, civil, criminal, regulatory or otherwise, in law or in equity, against Molecular Partners or any of its Affiliates involving the Molecular Partners Technology, the Licensed Compounds or the Licensed Product or the Agreements set forth on Exhibit G , including any that alleges that Molecular Partners’ activities conducted prior to the Effective Date with respect to Licensed Compounds or Licensed Products or practice of the Molecular Partners Technology has infringed or misappropriated any intellectual property rights of any Third Party;

(d) no lien, encumbrance, or security interest (including in connection with any indebtedness) exists as of the Effective Date in the Molecular Partners Patents in favor of any creditor;

(e) (i) all agreements between Molecular Partners and any Third Party as of the Effective Date under which Molecular Partners receives a license under any intellectual property rights relating to the Molecular Partners Technology covering Licensed Products Licensed Compounds are listed in Exhibit E , (ii) all agreements between Molecular Partners and any Third Party as of the Effective Date covering the performance of any Clinical Trials or the Manufacture of Licensed Products or Licensed Compounds are listed on Exhibit C and D , respectively, (iii) such agreements were made available to Allergan by Molecular Partners, and were true, accurate and complete copies of such agreements, and have not been modified, supplemented or amended since the date they were made available to Allergan; (iv) each of such agreements is in full force and effect as of the Effective Date; and (v) as of the Effective Date, Molecular Partners is not in material breach of any such agreements, and, to its Knowledge, no other party to any such agreements is in material breach thereof, in each respect in, any manner that would give such other party the right to terminate such agreements;

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(f) no oral or written communications have been received by Molecular Partners from any Third Parties as of the Effective Date that allege, and there is no pending litigation as of the Effective Date that alleges, either that any Molecular Partners Patent is, or for any patent application included in the Molecular Partners Patents, if issued, would be, invalid or unenforceable, and, to the Knowledge of Molecular Partners, no Third Party (i) is infringing any Molecular Partners Patents or has misappropriated any Molecular Partners Know-How or (ii) has challenged the ownership, scope, duration, validity, enforceability, priority or right to use any Molecular Partners Patents (including, by way of example, through the institution of or written threat of institution of interference, reexamination, protest, opposition, nullity or similar invalidity proceeding before the U.S. Patent and Trademark Office or any analogous foreign entity) or any Molecular Partners Know-How;

(g) each of the issued Patents, and any currently pending Patent application or Patent application from which any such Patent has issued, in each case within the Molecular Partners Patents that is owned by Molecular Partners, (i) has been prosecuted in compliance with all applicable rules, policies, and procedures of the U.S. Patent and Trademark Office in all material respects, and (ii) is subsisting;

(h) *** all Third Party issued Patents identified as material by counsel to Molecular Partners in any freedom to operate or patentability searches or opinions relating to the Molecular Partners Technology or Initial Licensed Compounds in the Territory;

(i) all of Molecular Partners’ employees and officers involved in development of the Molecular Partners Technology, Licensed Compounds, or Licensed Products have been obligated to assign to Molecular Partners all inventions claimed in such Molecular Partners Patents and to maintain as confidential the Confidential Information of Molecular Partners;

(j) as of the Effective Date, all inventors of any inventions included within the Molecular Partners Patents owned by Molecular Partners have assigned their entire right, title, and interest in and to such inventions and the corresponding Patents to Molecular Partners and have been listed in the Molecular Partners Patents as inventors;

(k) to the Knowledge of Molecular Partners, prior to the Effective Date, any and all Initial Licensed Compounds have been developed, manufactured, stored, labeled, distributed and tested by Molecular Partners, its Affiliates and any Third Parties acting on behalf of Molecular Partners, in compliance in all material respects with all applicable Laws;

(l) Molecular Partners has made available to Allergan a true, accurate and complete copy of the Existing IND, as updated as of the Effective Date;

(m) Molecular Partners has made available to Allergan all material written correspondence exchanged between Molecular Partners and any Regulatory Authority prior to the Effective Date regarding Licensed Compounds or Licensed Products in the Territory;

(n) as of the Effective Date, neither Molecular Partners, nor any of its employees, officers, subcontractors, or consultants who have rendered or will render services relating to the

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Licensed Compounds or Licensed Products, has ever been debarred or is subject or debarment or convicted of a crime for which an entity or person could be debarred (including by the FDA under 21 U.S.C. § 335a (or subject to a similar sanction of any other Governmental Authority)); and

(o) neither the execution and delivery of this Agreement nor the performance hereof by Molecular Partners requires Molecular Partners to obtain any permits, authorizations or consents from any Governmental Authority or from any other person, firm or corporation, and such execution, delivery and performance will not result in the breach of or give rise to any right of termination, rescission, renegotiation or acceleration under, or trigger any other rights under, any agreement or contract to which Molecular Partners is a party or to which it may be subject that relates to the Molecular Partners Technology, Licensed Compounds, or Licensed Products.

10.3 Mutual Covenants .

(a) No Debarment . In the course of the Development of the Licensed Product, each Party shall not use any employee or consultant who has ever been debarred or is the subject of debarment or convicted of a crime for which an entity or person could be debarred (including by the FDA under 21 U.S.C. § 335a (or subject to a similar sanction of any other Governmental Authority)). Each Party shall notify the other Party promptly upon becoming aware that any of its employees or consultants has been debarred or is the subject of debarment proceedings by any Regulatory Authority.

(b) Compliance . Except as provided in Section 7.4 with respect to Molecular Partner’s obligations with respect to the Manufacture of Licensed Compound, each Party and its Affiliates shall comply in all material respects with all applicable Laws in the Development, Manufacture, and Commercialization of Licensed Products performed under this Agreement, including the statutes, regulations and written directives of the FDA, the EMA and any Regulatory Authority having jurisdiction in the Territory, the FD&C Act, the Prescription Drug Marketing Act, the Federal Health Care Programs Anti-Kickback Law, 42 U.S.C. § 1320a-7b(b), the statutes, regulations and written directives of Medicare, Medicaid and all other health care programs, as defined in 42 U.S.C. § 1320a-7b(f), and the Foreign Corrupt Practices Act of 1977, each as may be amended from time to time.

10.4 Additional Covenants .

(a) Molecular Partners represents and warrants to Allergan that all of Molecular Partners’ employees and officers involved in development of the Molecular Partners Technology, Licensed Compounds, or Licensed Products shall be obligated to assign to Molecular Partners all inventions relating to such Molecular Partners Technology, Licensed Compounds, or Licensed Products and to maintain as confidential the Confidential Information of Molecular Partners;

(b) Allergan represents and warrants to Molecular Partners that all of Allergan’s employees and officers involved in development of the Licensed Compounds or Licensed Products shall be obligated to assign to Allergan all inventions relating to such Licensed Compounds or Licensed Products and to maintain as confidential the Confidential Information of Allergan;

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(c) Molecular Partners represents and warrants to Allergan that Molecular Partners shall not sell, assign, or otherwise transfer to any person (other than any Affiliate of Molecular Partners) any Molecular Partners Patent Rights (or agree to do any of the foregoing) in any manner that would be inconsistent with the rights and licenses granted to Allergan under this Agreement, except to the extent permitted by, and in compliance with, Section 15.6; and

(d) Molecular Partners represents and warrants to Allergan that Molecular Partners shall not grant to any Third Party any right or license under the Molecular Partners Technology that is within the scope of licenses granted to Allergan under Section 2.1 or would breach Section 2.6.

10.5 Disclaimer . Allergan understands that the Licensed Compounds or Licensed Products are the subject of ongoing clinical research and development and that Molecular Partners cannot assure the safety or usefulness of any Licensed Compound or Licensed Product. In addition, Molecular Partners makes no warranties except as set forth in this Article 10 concerning the Molecular Partners Technology. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY, AND ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED.

10.6 Knowledge Standard . “Knowledge” means, as applied to a Party in this Article 10, the actual knowledge of a Party’s executive officers or personnel with primary responsibility for the applicable subject matter exercising reasonably diligent inquiry.

ARTICLE 11
INDEMNIFICATION

11.1 Indemnification by Molecular Partners . Molecular Partners shall defend, indemnify, and hold Allergan and its Affiliates and their respective officers, directors, employees, and agents (the “Allergan Indemnitees” ) harmless from and against any and all Third Party claims, suits, proceedings, damages, expenses (including court costs and reasonable attorneys’ fees and expenses) and recoveries (collectively, “Claims” ) to the extent that such Claims arise out of, are based on, or result from (a) the performance of its activities under the Handover Plan, (b) the Development, Manufacture, or Commercialization of Terminated Products by Molecular Partners, its Affiliates or licensees, including Claims based upon product liability, (c) development, manufacture, or commercialization by Molecular Partners, its Affiliates or licensees (other than Allergan, its Affiliates or Sublicensees) of products (other than Licensed Products) to the extent such Claim is based on the use of the Molecular Partners Technology (excluding in all cases Claims covered by the scope of 11.2), (d) the breach of any of Molecular Partners’ obligations under this Agreement, including Molecular Partners’ representations, warranties, and covenants set forth herein, or (e) the willful misconduct or negligent acts of Molecular Partners, its Affiliates, or the officers, directors, employees, or agents of Molecular Partners or its Affiliates. The foregoing

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indemnity obligation shall not apply to the extent that (i) the Allergan Indemnitees fail to comply with the indemnification procedures set forth in Section 11.3 and Molecular Partners’ defense of the relevant Claims is prejudiced by such failure, or (ii) any Claim arises from, is based on, or results from any activity set forth in Section 11.2(b) or 11.2(c) for which Allergan is obligated to indemnify the Molecular Partners Indemnitees under Section 11.2.

11.2 Indemnification by Allergan . Allergan shall defend, indemnify, and hold Molecular Partners and its Affiliates and their respective officers, directors, employees, and agents (the “Molecular Partners Indemnitees” ) harmless from and against any and all Claims to the extent that such Claims arise out of, are based on, or result from (a) the Development, Manufacture or Commercialization of Licensed Compounds or Licensed Products by or on behalf of Allergan or its Affiliates or Sublicensees, including Claims based upon product liability and patent infringement (excluding any amounts for which Molecular Partners is responsible under Section 9.7 with respect to Claims relating to Subject Patents), or (b) the breach of any of Allergan’s obligations under this Agreement, including Allergan’s representations, warranties, and covenants set forth herein, or (c) the willful misconduct or negligent acts of Allergan, its Affiliates, or its Sublicensees or the officers, directors, employees, or agents of Allergan, its Affiliates or its Sublicensees. The foregoing indemnity obligation shall not apply to the extent that (i) the Molecular Partners Indemnitees fail to comply with the indemnification procedures set forth in Section 11.3 and Allergan’s defense of the relevant Claims is prejudiced by such failure, or (ii) any Claim arises from, is based on, or results from any activity set forth in Section 11.1(a) or 11.1(b) for which Molecular Partners is obligated to indemnify the Allergan Indemnitees under Section 11.1.

11.3 Indemnification Procedures . The Party claiming indemnity under this Article 11 (the “Indemnified Party” ) shall give written notice to the Party from whom indemnity is being sought (the “Indemnifying Party” ) promptly after learning of such Claim. The Indemnified Party shall provide the Indemnifying Party with reasonable assistance, at the Indemnifying Party’s expense, in connection with the defense of the Claim for which indemnity is being sought. The Indemnified Party may participate in and monitor such defense with counsel of its own choosing at its sole expense; provided, however, the Indemnifying Party shall have the right to assume and conduct the defense of the Claim with counsel of its choice. The Indemnifying Party shall not settle any Claim without the prior written consent of the Indemnified Party, not to be unreasonably withheld. So long as the Indemnifying Party is actively defending the Claim in good faith, the Indemnified Party shall not settle or compromise any such Claim without the prior written consent of the Indemnifying Party. If the Indemnifying Party does not assume and conduct the defense of the Claim as provided above, (a) the Indemnified Party may defend against, consent to the entry of any judgment, or enter into any settlement with respect to such Claim in any manner the Indemnified Party may deem reasonably appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith), and (b) the Indemnifying Party shall remain responsible to indemnify the Indemnified Party as provided in this Article 11.

11.4 Limitation of Liability . NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.

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NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 11.4 IS INTENDED TO OR SHALL LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION 11.1 OR 11.2, OR DAMAGES AVAILABLE FOR A PARTY’S BREACH OF CONFIDENTIALITY OBLIGATIONS IN ARTICLE 12.

11.5 Insurance . Each Party shall procure and maintain insurance, including Commercial General Liability having product/completed operations coverage adequate to cover its obligations hereunder and consistent with normal business practices of prudent companies similarly situated at all times during which any Licensed Product is being clinically tested in human subjects or commercially distributed or sold by such Party and for a five (5) year period thereafter; provided that the foregoing obligation with respect to clinical activities shall apply to Molecular Partners with respect to any Clinical Trial conducted by Molecular Partners. It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article 11. Each Party shall provide the other Party with written evidence of such insurance upon request. Each Party shall provide the other Party with written notice at least thirty (30) days prior to the cancellation, non‑renewal or material change in such insurance.

ARTICLE 12
CONFIDENTIALITY

12.1 Confidentiality . Each Party agrees that, during the Term and for a period of *** thereafter, it shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose other than as provided for in this Agreement (which includes the exercise of any rights or the performance of any obligations hereunder) any Confidential Information furnished to it by the other Party pursuant to this Agreement, except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the Parties. The foregoing confidentiality and non-use obligations shall not apply to any portion of the other Party’s Confidential Information that the receiving Party can demonstrate by competent written proof:

(a) was already known to the receiving Party or its Affiliate, other than under an obligation of confidentiality, at the time of disclosure by the other Party;

(b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;

(c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;

(d) was disclosed to the receiving Party or its Affiliate on a non-confidential basis by a Third Party who has a legal right to make such disclosure and who did not obtain such information directly or indirectly from the other Party; or

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(e) was independently discovered or developed by the receiving Party or its Affiliate without access to or aid, application or use of the other Party’s Confidential Information, as evidenced by a contemporaneous writing.

Notwithstanding the definition of “Confidential Information” in Article 1, all Information generated in connection with Development activities under this Agreement, whether generated by one or both Parties, shall be deemed to be Confidential Information of Allergan and Allergan shall be deemed to be the disclosing Party with respect to such Confidential Information. In addition, the exceptions set forth in subsections (a) and (e) shall not apply to Information generated during or resulting from the Development activities, which Information shall be deemed Confidential Information regardless of whether such Information satisfies the criteria set forth in one or both subsections.

12.2 Authorized Disclosure . Notwithstanding the obligations set forth in Section 12.1, a Party may disclose the other Party’s Confidential Information and the terms of this Agreement to the extent:

(a) such disclosure is reasonably necessary (i) to comply with the requirements of Regulatory Authorities with respect to obtaining and maintaining Regulatory Approval of a Licensed Product; or (ii) for prosecuting or defending litigation as contemplated by this Agreement;

(b) such disclosure is reasonably necessary to its employees, agents, consultants, contractors, licensees or sublicensees on a need-to-know basis for the sole purpose of performing its obligations or exercising its rights under this Agreement; provided that in each case, the disclosees are bound by written obligations of confidentiality and non-use consistent with those contained in this Agreement;

(c) such disclosure is reasonably necessary to any bona fide potential or actual investor, acquiror, merger partner, licensee, sublicensee, or other financial or commercial partner for the sole purpose of evaluating an actual or potential investment, acquisition or other business relationship; provided that in connection with such disclosure, such Party shall use all reasonable efforts to inform each disclosee of the confidential nature of such Confidential Information and, in each case, the disclosees are bound by written obligations of confidentiality and non-use consistent with those contained in this Agreement; or

(d) such disclosure is reasonably necessary to comply with applicable Laws, including regulations promulgated by applicable security exchanges, court order, administrative subpoena or order.

Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information pursuant to Section 12.2(a) or 12.2(d), such Party shall promptly notify the other Party of such required disclosure and shall use reasonable efforts to obtain, or to assist the other Party in obtaining, a protective order preventing or limiting the required disclosure.

12.3 Technical Publication . Neither Party may publish peer reviewed manuscripts, or give other forms of public disclosure such as abstracts and presentations, of results of studies carried

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out under this Agreement, without the opportunity for prior review by the other Party, and subject to this Section 12.3, below, except to the extent required by applicable Laws. No publication shall include the other Party’s Confidential Information without the prior written consent of such other Party. A Party seeking publication shall provide the other Party the opportunity to review and comment on any proposed publication that relates to a Licensed Compound or Licensed Product at least thirty (30) days prior to its intended submission for publication. The other Party shall provide the Party seeking publication with its comments in writing, if any, within thirty (30) days after receipt of such proposed publication. The Party seeking publication shall consider in good faith any comments thereto provided by the other Party and shall comply with the other Party’s request to remove any and all of such other Party’s Confidential Information from the proposed publication. In addition, the Party seeking publication shall delay the submission for a period up to sixty (60) days in the event that the other Party can demonstrate reasonable need for such delay, including the preparation and filing of a patent application. If the other Party fails to provide its comments to the Party seeking publication within such thirty (30)-day period, such other Party shall be deemed not to have any comments, and the Party seeking publication shall be free to publish in accordance with this Section 12.3 after the thirty (30)-day period has elapsed; provided that such publication does not include Confidential Information of the other Party. The Party seeking publication shall provide the other Party a copy of the manuscript at the time of the submission. Each Party agrees to acknowledge the contributions of the other Party and its employees in all publications as scientifically appropriate.

12.4 Publicity; Terms of this Agreement .

(a) The Parties agree that the material terms of this Agreement are the Confidential Information of both Parties, subject to the special authorized disclosure provisions set forth in this Section 12.4.

(b) The Parties shall make a joint public announcement of the execution of this Agreement in the form attached as Exhibit H , which shall be issued on or promptly after the Effective Date.

(c) After release of such press release, if either Party desires to make a public announcement concerning the material terms of this Agreement, such Party shall give reasonable prior advance notice of the proposed text of such announcement to the other Party for its prior review and approval (except as otherwise provided herein). A Party commenting on such a proposed press release shall provide its comments, if any, within three (3) Business Days after receiving the press release for review. Notwithstanding the foregoing, a Party shall have the right to make a public announcement or press release announcing the achievement of each Regulatory Approval development milestone event set forth in Section 8.2 (excluding, for clarity, the Initiation of Phase 3 Clinical Trial milestones for any Indication) as it is achieved, and the achievement of other Regulatory Approvals in the Territory as they occur either (i) with the consent of the other Party (not to be unreasonably withheld); (ii) where required by applicable Laws or regulations promulgated by an applicable security exchange; or (iii) as permitted under Section 12.2. Except as provided in this subsection (c) or permitted under Section 12.2, no press release shall include the other Party’s Confidential Information without the prior written consent of such other Party. In

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relation to the other Party’s review of such an announcement, such other Party may make specific, reasonable comments on such proposed press release within the prescribed time for commentary. Neither Party shall be required to seek the permission of the other Party to repeat any information regarding the terms of this Agreement that has already been publicly disclosed by such Party, or by the other Party, in accordance with this Section 12.4, provided such information remains accurate as of such time.

(d) The Parties acknowledge that either or both Parties may be obligated to file a copy of this Agreement and summaries of the terms hereof with the U.S. Securities and Exchange Commission or other Governmental Authority as reasonably required to comply with applicable Laws or the rules of a nationally-recognized securities exchange. Each Party shall be entitled to make such filings, provided that it requests confidential treatment of the commercial terms and sensitive technical terms hereof and thereof to the extent such confidential treatment is reasonably available to such Party; provided that the foregoing obligation to request confidential treatment shall not apply with respect to any disclosure of this Agreement by either Party to the U.S. Internal Revenue Service or similar Governmental Authority outside the U.S. In the event of any such filing, each Party will provide the other Party with a copy of this Agreement and related filings marked to show provisions for which such Party intends to seek confidential treatment and shall reasonably consider and incorporate the other Party’s comments thereon to the extent consistent with the legal requirements and the rules of any nationally recognized securities exchange, with respect to the filing Party, governing disclosure of material agreements and material information to be publicly filed.

12.5 Equitable Relief . Each Party acknowledges that its breach of this Article 12 may cause irreparable harm to the other Party, which cannot be reasonably or adequately compensated in damages in an action at law. By reasons thereof, each Party agrees that the other Party shall be entitled, in addition to any other remedies it may have under this Agreement or otherwise, to seek preliminary and permanent injunctive and other equitable relief to prevent or curtail any actual or threatened breach of the obligations relating to Confidential Information set forth in this Article 12 by the other Party.

ARTICLE 13
TERM AND TERMINATION

13.1 Term . This Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to this Article 13, shall remain in effect on a Licensed Product-by- Licensed Product and country-by-country basis, until the expiration of the Royalty Term for such Licensed Product in such country (the “Term” ). Upon the expiration of the Royalty Term for a Licensed Product in a particular country, the licenses granted by Molecular Partners to Allergan under Section 2.1 with respect to such Licensed Product and such country shall become fully paid-up, sublicenseable, irrevocable, and perpetual.

13.2 Termination by Allergan for Convenience . Allergan may terminate this Agreement in its entirety for any reason (a) upon at least ninety (90) days prior written notice to Molecular Partners if such notice is delivered prior to the First Commercial Sale of a Licensed Product anywhere in the Territory, or (b) upon at least one hundred eighty (180) days prior written

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notice to Molecular Partners if such notice is delivered after the First Commercial Sale of a Licensed Product anywhere in the Territory. In the event of any significant adverse clinical events or the termination of a Clinical Trial for safety reasons and Allergan terminates this Agreement under this Section 13.2, the foregoing notice periods shall be reduced to forty-five (45) days and ninety (90) days, respectively.

13.3 Termination for Breach . Each Party (the “Non-Breaching Party” ) shall have the right, without prejudice to any other remedies available to it at law or in equity, to terminate this Agreement in its entirety upon written notice to the other Party if the other Party materially breaches its obligations under this Agreement and, after receiving written notice identifying such material breach in reasonable detail, fails to cure such material breach, or if such material breach is not susceptible to cure within the Cure Period, fails to deliver to the Non-Breaching Party a written plan that is reasonably calculated to resolve such material breach, within ninety (90) days from the date of such notice (or within thirty (30) days from the date of such notice in the event such material breach is solely based on the breaching Party’s failure to pay any undisputed amounts due hereunder) (the “Cure Period” ). If the Parties reasonably and in good faith disagree as to whether there has been a material breach, the Party that disputes that there has been a material breach may contest the allegation in accordance with Article 14. It is understood and acknowledged that, during the pendency of such a Dispute, the Cure Period shall be extended by the period of time of such pendency, all of the terms and conditions of this Agreement shall remain in effect, and the Parties shall continue to perform all of their respective obligations under this Agreement. If in connection with such Dispute brought under Article 14, an arbitrator determines that Allergan has materially breached its obligations under Section 4.2 or 6.2 or asserts a patent challenge pursuant to Section 13.4 that is not permitted under Section 13.4, then this Agreement shall terminate and the consequences of Section 13.5 shall apply. In the case of material breach of this Agreement by Allergan other that covered by the foregoing sentence, then the arbitrator may terminate this Agreement if Molecular Partners does not have a reasonable remedy for all damages resulting from such material breach or the character, frequency, nature and extent of such breach (including the culpability of the Parties) supports termination of this Agreement as an appropriate remedy. Nothing in this Section 13.3 shall limit a Party’s ability to seek remedies available under this Agreement in law or equity.

13.4 Termination by Molecular Partners for Patent Challenge. Molecular Partners may terminate this Agreement in its entirety immediately upon written notice to Allergan if Allergan or its Affiliates or Sublicensees (directly or indirectly, individually or in association with any other person or entity) challenges the validity, enforceability or scope of any Molecular Partners Patent anywhere in the world. Notwithstanding the foregoing, in the event that Molecular Partners (directly or indirectly) first initiates or participates in a legal proceeding against Allergan, its Affiliates or Sublicensees in which the Patents within the Molecular Partners Patents are asserted against Allergan, its Affiliates or Sublicensees, then Allergan its Affiliates or Sublicensees, as applicable, shall have the right to participate in such actions including by challenging the validity, enforceability or scope of any Molecular Partners Patent, and no such challenge by Allergan, its Affiliates or Sublicensees shall give Molecular Partners the right to terminate this Agreement under this Section 13.4.

13.5 Consequences of Termination .

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(a) Upon any termination of this Agreement, except as otherwise set forth in Section 13.6, all licenses and rights granted by either Party under this Agreement shall terminate.

(b) Upon termination of this Agreement by Allergan pursuant to Section 13.2, or by Molecular Partners pursuant to Section 13.3 in the event an arbitrator determines pursuant to Section 13.3 that Allergan has materially breached its obligations under Section 4.2 or 6.2 or asserts a patent challenge pursuant to Section 13.4 that is not permitted under Section 13.4, except to the extent Allergan has sublicensed rights with respect to a Terminated Product to a Sublicensee pursuant to Section 2.3:

(i) to the extent permitted by applicable Laws, Allergan shall transfer and assign to Molecular Partners all Regulatory Materials (including all Information and clinical data referenced therein or generated under this Agreement) and Regulatory Approvals for Licensed Compounds and Licensed Products Controlled by Allergan and shall treat the foregoing as “Confidential Information” of Molecular Partners (and not of Allergan) under Article 12; provided that Allergan will be allowed to retain a copy of any such Regulatory Materials that a Regulatory Authority requires Allergan to retain under applicable Laws;

(ii) Allergan hereby grants to Molecular Partners, effective upon such termination, ***, license *** under (A) all Patents Controlled by Allergan and Licensed Product Marks (excluding, for clarity, any Trademarks that include, in whole or part, any corporate name or logo of Allergan) in each case solely to the extent claiming or covering for the continued clinical development, Manufacture or Commercialization of the applicable Terminated Products, (B) all Information (including Inventions) Controlled by Allergan solely to the extent reasonably necessary for the continued clinical development, Manufacture or Commercialization of the applicable Terminated Products, and (C) any Joint Patents, solely to make, sell, offer for sale, and import such Terminated Products; provided that Molecular Partners shall be responsible for any payments to Third Parties for any Patent or Information owned by such Third Party and licensed to Molecular Partners from Allergan under this subsection (ii) to the extent such payments result from Molecular Partner’s development, manufacture or commercialization of such Terminated Products. Notwithstanding anything to the contrary in this Agreement, the foregoing license shall not extend to any modification of a Terminated Product;

(iii) Allergan shall use reasonable efforts to transfer the then-current Manufacturing process for the Terminated Products, including using reasonable efforts to transfer any applicable Third Party agreements covering such Manufacture, to Molecular Partners or its designee (which will be designated as soon as reasonably practical but in no event later than *** following the effective date of the termination of this Agreement). Molecular Partners shall have the right to use such Manufacturing process solely for the purpose of Manufacturing such Terminated Product. Such assistance shall be provided at Allergan’s then current FTE rates, subject to a pre-approved budget therefor. At Molecular Partners’ request, Allergan shall use reasonable efforts to supply, or cause to be supplied, to Molecular Partners sufficient quantities of Terminated Products to satisfy Molecular Partners’ and its sublicensees’ requirements for Terminated Products for a period of the earlier of ***; provided that Molecular Partners shall use reasonable efforts to be able to Manufacture Terminated Products as promptly as practicable. Any such supply will be made

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pursuant to a mutually acceptable supply agreement between the Parties that provides for supply at a price equal to *** of Allergan’s fully-burdened cost to manufacture Terminated Products;

(iv) Allergan shall provide such assistance, at Allergan’s then current FTE rates, subject to a pre-approved budget therefor, as may be reasonably necessary or useful for Molecular Partners to continue Developing or Commercializing Terminated Products, to the extent Allergan is then performing or having performed such activities, including assigning or amending as appropriate, upon request of Molecular Partners, any agreements or arrangements with Third Party vendors to Develop or Commercialize Terminated Products. To the extent that any such contract between Allergan and a Third Party is not assignable to Molecular Partners, Allergan shall reasonably cooperate with Molecular Partners to arrange to continue to provide such services for a reasonable time after termination, at Molecular Partner’s cost;

(v) Allergan shall, at the request of Molecular Partners, either transfer to Molecular Partners the management and continued performance of all Clinical Trials for Terminated Products ongoing or terminate one or more of such Clinical Trials. Notwithstanding, Allergan may perform any Clinical Trial requested to be terminated by Molecular Partners (for clarity, including following the effective date of termination of this Agreement) that may not be terminated under applicable Law or ethical clinical practices;

(vi) Allergan shall pay Molecular Partners any and all payments that have accrued prior to the effective date of such termination;

(vii) Allergan shall continue to perform all obligations under this Agreement with respect to the Development, Manufacture and Commercialization of Licensed Products until the effective date of termination and shall not modify in any material respects such activities from past practices during such period; and

(viii) Solely in the case of any termination of this Agreement by Allergan for convenience under Section 13.2, in consideration for the rights granted and the Information and items provided to Molecular Partners under Section 13.5(a), Molecular Partners will pay Allergan a royalty on post-termination Net Sales of Terminated Products. The royalty rate will be based upon the effective date of termination as follows: ***. The determination of royalties shall be determined using the definition of Net Sales applied mutatis mutandis to sales by Molecular Partners, its Affiliates and sublicensees and the terms of such royalty (including the Royalty Term and any deductions thereto) shall be as set forth in Section 8.4 (except for subsection (a)), 8.7, 8.8, and 8.9 as applied mutatis mutandis to Molecular Partners its Affiliates and sublicensees.

13.6 Survival . Termination or expiration of this Agreement shall not affect any rights or obligations of the Parties under this Agreement that have accrued prior to the date of termination or expiration. Notwithstanding anything to the contrary, the following provisions shall survive any expiration or termination of this Agreement: Articles 1, 11, 12 (for the period set forth in Section 12.1), 14, and 15 and Sections 2.1(b), 2.4, 2.5, 4.7(f), 8.4 (except for subsection (a)), 8.7, 8.8, and 8.9 (each such listed section in Article 8 to the extent applicable to payments (a) accrued prior to the effective date of such termination or expiration and payable by Allergan under Article 8 or (b)

52.

payable under Section 13.5(b)(viii), as applicable), 9.1, 9.3, 9.4(b), 10.5, 13.5 (as applicable), 13.6, and 13.7.

13.7 No Limitation on Remedies . Notwithstanding anything to the contrary in this Agreement, termination or expiration of this Agreement shall not relieve the Parties of any liability or obligation which accrued hereunder prior to the effective date of such termination or expiration nor prejudice either Party’s right to obtain performance of any obligation. Subject to the terms and conditions of this Agreement, each Party shall be free to seek (without restriction as to the number of times it may seek) damages, costs and remedies that may be available at Law or in equity and shall be entitled to offset the amount of any damages and costs obtained in a final, non-appealable judgment (or judgment from which no appeal was taken within the allowable time period) of monetary damages or costs (as permitted by this Agreement) against the other Party against any amounts otherwise due to such other Party under this Agreement.

ARTICLE 14
DISPUTE RESOLUTION

14.1 Disputes . The Parties recognize that controversies or claims arising out of, relating to or in connection with any provision of this Agreement as to certain matters may from time to time arise that relate to either Party’s rights or obligations hereunder (collectively, “Disputes” ). It is the objective of the Parties to establish procedures to facilitate the resolution of Disputes in an expedient manner by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this Article 14 to resolve any Dispute.

14.2 Internal Resolution . With respect to all Disputes, including any alleged breach under this Agreement or any issue relating to the interpretation or application of this Agreement, if the Parties are unable to resolve such Dispute within thirty (30) days after such Dispute is first identified by either Party in writing to the other, the Parties shall refer such Dispute to the Executive Officers of the Parties for attempted resolution by good faith negotiations within thirty (30) days after such notice is received, including at least one (1) in-person meeting of the Executive Officers within twenty (20) days after such notice is received. Each Party may, in its sole discretion, seek resolution of any and all Disputes that are not resolved under this Section 14.2 within such thirty (30) day period in accordance with Section 14.3.

14.3 Submission to Arbitration for Resolution . If the Executive Officers are not able to resolve such dispute referred to them under Section 14.2 within such thirty (30) day period, then such dispute shall be finally resolved by final and binding arbitration conducted in accordance with the terms of this Section 14.3. The arbitration will be held in New York, New York, USA according to the American Arbitration Association (“ AAA ”) Commercial Arbitration Rules then in effect. The arbitration will be conducted by a panel of three (3) independent arbitrators with significant experience in the pharmaceutical industry, unless otherwise agreed by the Parties, appointed in accordance with applicable AAA rules. Any arbitration herewith will be conducted in the English language to the maximum extent possible. The arbitrators will be instructed not to award any punitive or special damages and the Parties will take all reasonable actions (including to an expedited discovery and hearing schedule) to conclude the arbitration as promptly as possible. The arbitrator shall be required to render a written decision no later than twelve (12) months following the selection

53.

of the arbitrator, including a basis for any damages awarded and a statement of how the damages were calculated; provided that such time period may be extended by the Parties or upon petition to extend such time period to avoid manifest injustice. Any award will be immediately paid in Dollars free of any tax, deduction or offset. Each Party agrees to abide by the award rendered in any arbitration conducted pursuant to this Section 14.3. With respect to money damages, nothing contained herein will be construed to permit the arbitrator or any court or any other forum to award punitive or exemplary damages. By entering into this agreement to arbitrate, the Parties expressly waive any claim for punitive or exemplary damages. Each Party will pay its legal fees and costs related to the arbitration (including witness and expert fees). Judgment on the award so rendered will be final and may be entered in any court having jurisdiction thereof. The Parties further hereby irrevocably and unconditionally waive any objection to the laying of venue of an arbitration proceeding initiated under this Section 14.3 in New York, New York, U.S., and hereby further irrevocably and unconditionally waive and agree not to plead or claim that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. Each Party further agrees that service of any process, summons, notice or document by registered mail to its address set forth in Section 15.4 shall be effective service of process for any action, suit or proceeding brought against it under this Agreement in any such court.

14.4 Preliminary Injunctions . Notwithstanding anything in this Agreement to the contrary, a Party may, at any time, seek a temporary restraining order or a preliminary injunction from any court of competent jurisdiction in order to prevent immediate and irreparable injury, loss, or damage on a provisional basis, pending the decision of the arbitrator(s) on the ultimate merits of any dispute.

14.5 Patent Disputes . Notwithstanding anything in this Agreement to the contrary, any and all issues regarding the validity and enforceability of any patent in a country within the Territory ( “Patent Matters” ) shall be determined in a court or other tribunal, as the case may be, of competent jurisdiction under the applicable patent laws of such country. If such Dispute involves both Patent Matters and other matters, the arbitrators will have the right to stay the arbitration until determination of Patent Matters material to the resolution of the Dispute as to other matters is resolved.

14.6 Confidentiality . Any and all activities conducted under Sections 14.1 through 14.3, including without limitation any and all proceedings and decisions of arbitrator(s) under Section 14.3, shall be deemed Confidential Information of each of the Parties, and shall be subject to Article 12.

ARTICLE 15
MISCELLANEOUS

15.1 English Language; Governing Law . This Agreement was prepared in the English language, which language shall govern the interpretation of, and any dispute regarding, the terms of this Agreement. This Agreement and all disputes arising out of or related to this Agreement or any breach hereof shall be governed by and construed under the laws of the State of New York, USA (as permitted by Section 5-1401 of the New York General Obligations Law, or any similar successor provision), without giving effect to any choice of law principles that would require the application of the laws of a different jurisdiction.

54.

15.2 Entire Agreement; Amendment . This Agreement, including the Exhibits hereto, sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties with respect to the subject matter hereof and supersedes, as of the Effective Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matter hereof, including the Confidentiality Agreement (as defined in Section 1.19). No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.

15.3 Force Majeure . Both Parties shall be excused from the performance of their obligations under this Agreement to the extent that such performance is prevented by force majeure and the nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse shall be continued so long as the condition constituting force majeure continues and the nonperforming Party takes reasonable efforts to remove the condition. For purposes of this Agreement, force majeure shall include conditions beyond the control of the Parties, including an act of God, war, terrorist act, labor strike or lock-out, epidemic, and fire, earthquake, storm, release of radioactive material into the environment, or like catastrophe. Notwithstanding the foregoing, a Party shall not be excused from making payments owed hereunder because of a force majeure affecting such Party. If a force majeure persists for more than ninety (90) days, then the Parties will discuss in good faith the modification of the Parties’ obligations under this Agreement in order to mitigate the delays caused by such force majeure.

15.4 Notices . Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically refer to this Agreement, and shall be addressed to the appropriate Party at the address specified below or such other address as may be specified by such Party in writing in accordance with this Section 15.4, and shall be deemed to have been given for all purposes (a) when received, if hand-delivered or sent by confirmed facsimile or a reputable courier service, or (b) five (5) Business Days after mailing, if mailed by first class certified or registered airmail, postage prepaid, return receipt requested.


If to Molecular Partners:	Molecular Partners AG Wagistrasse 11a 8952 Zürich-Schlieren, Switzerland

Attn: Kinga Frater

Fax: +41 44 755 57 95

With a copy to (which shall not constitute notice):

Cooley LLP

One Freedom Square

Reston Town Center

11951 Freedom Drive

Reston, VA 20190-5656

Attn: Kenneth J. Krisko

Fax: 703/456-8100

55.


If to Allergan:	Allergan, Inc. 2525 Dupont Drive

Irvine, CA 92612

Attn: General Counsel

Fax: (714) 246-4774

With a copy to (which shall not constitute notice):


	Latham & Watkins LLP

650 Town Center Drive

20th Floor

Costa Mesa, CA 92626-1925

Attn: Cary K. Hyden

Fax: (714) 755-8290

15.5 No Strict Construction; Headings . This Agreement has been prepared jointly by the Parties and shall not be strictly construed against either Party. Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision. The headings of each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section. The use of any gender shall be applicable to all genders. The word “or” is used in the inclusive sense (and/or). The term “including” means “including without limitation,” without limiting the generality of any description preceding such term. The term “shall” means “will”.

15.6 Assignment .

(a) Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other, except that a Party may make such an assignment without the other Party’s consent to (i) an Affiliate (for so long as such entity remains an Affiliate) or (ii) a Third Party in connection with a Change of Control of such Party (such Third Party, an “Acquiror” ). Any successor or assignee of rights or obligations permitted hereunder shall, in writing to the other Party, expressly assume performance of such rights or obligations. Any permitted assignment shall be binding on the successors of the assigning Party. Any assignment or attempted assignment by either Party in violation of the terms of this Section 15.6 shall be null, void and of no legal effect.

(b) In the event of any such assignment under subsection (ii) above, all intellectual property rights owned or otherwise controlled by an Acquiror or its Affiliates (except for Molecular Partners if remaining as a separate Affiliate or otherwise the successor entity thereto) shall be excluded from the licenses granted under this Agreement (including any such intellectual property owned or otherwise controlled by such Acquiror as of the date of consummation of such transaction), except for any Invention generated by the Acquiror or its Affiliates in performing any activity under this Agreement.

56.

15.7 Performance by Affiliates . Each Party may discharge any obligations and exercise any right hereunder through any of its Affiliates. Each Party hereby guarantees the performance by its Affiliates of such Party’s obligations under this Agreement, and shall cause its Affiliates to comply with the provisions of this Agreement in connection with such performance. Any breach by a Party’s Affiliate of any of such Party’s obligations under this Agreement shall be deemed a breach by such Party, and the other Party may proceed directly against such Party without any obligation to first proceed against such Party’s Affiliate. Without limiting the generality of this Section 15.7, each of Allergan, Inc. and Allergan Sales, LLC covenant as follows: (i) Allergan Sales, LLC shall be the entity responsible for the discharge and performance of the obligations of Allergan under this Agreement, (ii) the liability of each of Allergan, Inc. and Allergan Sales, LLC shall be joint and several; (iii) Allergan, Inc. unconditionally guarantees the payment and performance of Allergan Sales, LLC; (iv) all obligations of Molecular Partners shall be performed and discharged to Allergan Sales, LLC for the benefit of both of Allergan, Inc. and Allergan Sales, LLC.; and (v) Allergan Sales, LLC shall be terminated as a Party to this Agreement without the need for further action of the Parties in the event and as of the date that Allergan Sales, LLC shall cease to be an Affiliate of Allergan, Inc. Allergan, Inc. represents and warrants, as of the Effective Date, that Allergan Sales, LLC is a wholly-owned Affiliate of Allergan, Inc.

15.8 Further Actions . Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

15.9 Rights in Bankruptcy . All rights and licenses granted under or pursuant to this Agreement by Molecular Partners are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, and foreign equivalents thereof (the “Bankruptcy Code” ), licenses of right to “intellectual property” as defined under Section 61 of the U.S. Bankruptcy Code. The Parties agree that Allergan, as licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against Molecular Partners under the Bankruptcy Code, Allergan shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, which, if not already in the Allergan’s possession, shall be promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon Allergan’s written request therefor, unless Molecular Partners elects to continue to perform all of its obligations under this Agreement, or (b) if not delivered under Section 15.9(a), following the rejection of this Agreement by or on behalf of Molecular Partners upon written request therefor by Allergan.

15.10 Severability . If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.

57.

15.11 No Waiver . Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement, except with respect to an express written and signed waiver relating to a particular matter for a particular period of time.

15.12 Independent Contractors . Each Party shall act solely as an independent contractor, and nothing in this Agreement shall be construed to give either Party the power or authority to act for, bind, or commit the other Party in any way. Nothing herein shall be construed to create the relationship of partners, principal and agent, or joint-venture partners between the Parties.

15.13 Counterparts; Electronic Delivery . This Agreement may be executed in one (1) or more counterparts, by original, facsimile or PDF signature, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures to this Agreement transmitted by facsimile, by email in “portable document format” (“.pdf”), or by any other electronic means intended to preserve the original graphic and pictorial appearance of this Agreement shall have the same effect as physical delivery of the paper document bearing original signature.

{Signature page follows}

58.

IN WITNESS WHEREOF, the Parties have executed this Agreement by their duly authorized officers as of the Effective Date.



ALLERGAN, INC.	MOLECULAR PARTNERS AG
By: /s/ DAVID E.I. PYOTT	By: /s/ CHRISTIAN ZAHND
Name: David E.I. Pyott	Name: Christian Zahnd
Title: Chairman of the Board, President and Chief Executive Officer	Title: Chief Executive Officer

ALLERGAN SALES, LLC	MOLECULAR PARTNERS AG
By: /s/ DAVID M. LAWRENCE	By: /s/ PATRICK AMSTUTZ
Name: David M. Lawrence	Name: Patrick Amstutz
Title: Vice President	Title: Chief Business Officer

[Signature Page to License and Collaboration Agreement]

LIST OF EXHIBITS:

Exhibit A: Initial Licensed Compounds (MP0112 and backup DARPin Compounds)

Exhibit B: Initial Development Plan

Exhibit C: Handover Plan

Exhibit D: Third Party Manufacturing Agreements

Exhibit E: Third Party License Agreements

Exhibit F: Molecular Partners Owned Patents

Exhibit G: Molecular Partners Licensed Patents

Exhibit H: Joint Press Release

Exhibit A

Initial Licensed Compounds (MP0112 and backup DARPin Compounds)

“MP0112” means a compound consisting of ***.

***.

Exhibit B

Initial Development Plan

Entire Exhibit has been Redacted***

Exhibit C

Handover Plan

Entire Exhibit has been Redacted***

Exhibit D

Third Party Manufacturing Agreements

Master Development and Manufacturing Agreement between Molecular Partners AG and ***, effective as of ***

Exhibit E

Third Party License Agreements

License Agreement between the University of Zurich and Molecular Partners AG effective as of ***.

Exhibit F

Molecular Partners Owned Patents

Entire Exhibit has been Redacted***

Exhibit G

Molecular Partners Licensed Patents

Entire Exhibit has been Redacted***

Exhibit H

Joint Press Release

Press Release

Allergan and Molecular Partners enter into an exclusive license agreement for MP0112 for the treatment of retinal diseases

Irvine, California US / Zurich-Schlieren, Switzerland, May 4, 2011. Allergan, Inc. (NYSE: AGN) and Molecular Partners AG today announced that they have entered into a license agreement for MP0112, a phase II proprietary therapeutic DARPin ® protein targeting VEGF under investigation for the treatment of retinal diseases.

Under the agreement, Allergan obtains exclusive global rights for MP0112 for ophthalmic indications. The parties will work together during phase IIb development and, Allergan will be responsible for phase III development and commercialization activities. Molecular Partners will receive an up-front payment of USD $45 million and is further entitled to receive additional payments of up to an aggregate of USD $375 million upon meeting certain development, regulatory and sales milestones. In addition, Molecular Partners will receive tiered double-digit royalties on any future sales of MP0112.

Scott M. Whitcup, M.D., Executive Vice President, Chief Scientific Officer of Allergan commented: “This agreement aligns with Allergan’s strategy to become a leader in developing new treatments for retinal disease. The goal of this program is to develop a potentially more effective treatment for diseases like neovascular age-related macular degeneration with the possibility for less frequent intravitreal injections.”

Data on MP0112 from two separate phase I/IIa trials in wet age-related macular degeneration (wetAMD) and diabetic macular edema (DME) were presented at the meeting of the Association for Research in Vision and Ophthalmology (ARVO) in Fort Lauderdale, FL earlier this week (May 1-5, 2011). The studies showed that MP0112 is well tolerated and has a potentially long lasting effect on vision gain after a single injection. In the studies, for most patients in the cohorts treated with the higher dose of the investigational compound, the potential beneficial effect on visual acuity lasted for approximately 16 weeks.

Christian Zahnd, Ph.D., Chief Executive Officer of Molecular Partners commented: “This is a transformational deal for Molecular Partners, and Allergan is the ideal partner for MP0112 to build the most value out of our lead product. Further, this agreement strengthens our ability to execute on the progression of our substantial internal systemic pipeline.”

Patrick Amstutz, Ph.D., Chief Business Officer of Molecular Partners added: “This deal validates our DARPin ® platform in a clinical setting and sets the stage for additional clinical stage strategic collaborations in the near future.”

- ends -

For further details please contact:

For Molecular Partners:



Media relations	Molecular Partners
Nicole Yost College Hill Life Sciences Tel: +44 (0) 20 7866 7855 nicole.yost@collegehill.com	Dr. Christian Zahnd, CEO Dr. Patrick Amstutz, CBO Tel: +41 (0) 44 755 77 00 info@molecularpartners.com

Notes to editors:

About MP0112

MP0112 is a DARPin®-based, small therapeutic protein, which inhibits all relevant forms of vascular endothelial growth factor A (VEGF-A) with high potency and selectivity. The molecule is currently under development for the treatment of wet age-related macular degeneration (AMD) and diabetic macular edema (DME). Its high efficacy has been demonstrated in various preclinical models. MP0112 has shown the potential to show significantly longer therapeutic effects in various animal models potentially leading to a drug with the need for less frequent dosing as compared to standard of care.

About Allergan, Inc. (www.allergan.com)

Allergan is a multi-specialty health care company established more than 60 years ago with a commitment to uncover the best of science and develop and deliver innovative and meaningful treatments to help people reach their life's potential. Today, we have more than 9,000 highly dedicated and talented employees, global marketing and sales capabilities with a presence in more than 100 countries, a rich and ever-evolving portfolio of pharmaceuticals, biologics, medical devices and over-the-counter consumer products, and state-of-the-art resources in R&D, manufacturing and safety surveillance that help millions of patients see more clearly, move more freely and express themselves more fully. From our beginnings as an eye care company to our focus today on several medical specialties, including ophthalmology, neurosciences, medical aesthetics, medical dermatology, breast aesthetics, obesity intervention and urologics, Allergan is proud to celebrate 60 years of medical advances and proud to support the patients and physicians who rely on our products and the employees and communities in which we live and work.

About Molecular Partners AG (www.molecularpartners.com):

Molecular Partners is a privately-owned biotech company focusing on the research, development and commercialization of a novel class of biological drugs known as DARPins®. The company is committed to create medicines for diseases with unmet medical need and to dramatically improve existing therapies. DARPins® combine the high specificity, selectivity and safety of monoclonal antibodies with many advantages of small molecules, including high stability and low-cost production.

Molecular Partners has established a strong DARPin® pipeline which is well differentiated from standard therapeutic approaches. Next to MP0112, Molecular Partners is focusing on DARPin® drugs in inflammation, oncology and other disease areas. The internal pipeline is expanded by partnered programs with leading pharmaceutical companies. Molecular Partners has established collaborations with F. Hoffmann-la Roche, Centocor Research & Development Inc. and Bayer Schering Pharma. The company is backed by a strong syndicate of investors and holds a strong patent estate covering all DARPin® applications.

Allergan Forward-Looking Statements

This press release contains "forward-looking statements," including, but not limited to, the statements by Drs. Whitcup, Zahnd and Amstutz and other statements regarding the development of MP0112 as well as the safety, effectiveness, approvals, adverse events and market potential of MP0112. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from Allergan's expectations and projections. Risks and uncertainties include, among other things, general industry and pharmaceutical market conditions; technological advances and patents attained by competitors; challenges inherent in the research and development and regulatory processes; challenges related to product marketing, such as the unpredictability of market acceptance for new products and/or the acceptance of new indications for such products; inconsistency of treatment results among patients; general economic conditions; and governmental laws and regulations affecting domestic and foreign operations. Allergan expressly disclaims any intent or obligation to update these forward-looking statements except as required by law. Additional information concerning the above-referenced risk factors and other risk factors can be found in Allergan's public periodic filings with the Securities and Exchange Commission, including the discussion under the heading "Risk Factors" in Allergan's 2010 Annual Report on Form 10-K. Additional information about Allergan is available at www.allergan.com or you can contact the Allergan Investor Relations Department by calling 714-246-4636.

EXHIBIT 21

ENTITIES OF ALLERGAN, INC.



TAB	NAME OF SUBSIDIARY	PLACE OF INCORPORATION OR ORGANIZATION
1	Allergan Productos Farmaceuticos S.A.	Argentina
2	Allergan Australia Pty Limited	Australia
3	Allergan Medical Pty Ltd	Australia
4	Allergan N.V.	Belgium
5	Collagen Aesthetics Benelux S.A.	Belgium
6	Allergan Holdings B Ltd.	Bermuda
7	Allergan Holdings B1, Unltd.	Bermuda
8	Allergan Holdings B2, Unltd.	Bermuda
9	Allergan Produtos Farmacêuticos Ltda.	Brazil
10	Inamed do Brasil Ltda	Brazil
11	Allergan Inc.	Canada
12	Allergan Pharmaceuticals Ireland	Cayman Islands
13	Allergan Holdings C, Ltd.	Cayman Islands
14	Allergan Laboratorios Limitada	Chile
15	Allergan Information Consulting (Shanghai) Co., Ltd.	China
16	Allergan de Colombia S.A.	Colombia
17	Allergan Costa Rica, S.R.L.	Costa Rica
18	Allergan Services Costa Rica, S.R.L.	Costa Rica
19	Allergan ApS	Denmark
20	Allergan France S.A.S.	France
21	Allergan Holdings France SAS	France
22	Allergan Industrie S.A.S.	France
23	Pharm-Allergan GmbH	Germany
24	Allergan Hellas Pharmaceuticals Societe Anonyme	Greece
25	Allergan Asia Limited	Hong Kong
26	Allergan Hong Kong Limited	Hong Kong
27	Allergan Healthcare India Private Limited	India
28	Allergan India Private Limited*	India
29	Allergan Botox	Ireland
30	Allergan Development I	Ireland
31	Allergan Development II	Ireland
32	Allergan Pharmaceuticals Ireland	Ireland
33	Allergan Pharmaceuticals Holdings (Ireland)	Ireland
34	Allergan Services International, Limited	Ireland
35	McGhan Ireland Holdings Ltd.	Ireland
36	McGhan Limited	Ireland
37	Seabreeze Silicone	Ireland
38	The Seabreeze Holdings LLC AGN Seabreeze LLC Limited Partnership	Ireland
39	Allergan Israel Ltd.	Israel
40	Allergan S.p.A.	Italy
41	Allergan International YK	Japan
42	Allergan Japan K.K.	Japan



TAB	NAME OF SUBSIDIARY	PLACE OF INCORPORATION OR ORGANIZATION
43	Allergan K.K.	Japan
44	Allergan NK	Japan
45	Allergan Korea Limited	Korea
46	Samil Allergan Limited*	Korea
47	Allergan Luxembourg S.à r.l.	Luxembourg
48	Collagen Luxembourg S.A.	Luxembourg
49	Allergan Malaysia Sdn. Bhd.	Malaysia
50	Allergan, S.A. de C.V.	Mexico
51	Allergan Servicios Profesionales, S. de R.L. de C.V.	Mexico
52	Allergan B.V.	Netherlands
53	Allergan Services B.V.	Netherlands
54	McGhan Medical B.V.	Netherlands
55	Allergan Holdings B.V.	Netherlands Antilles
56	Allergan New Zealand Limited	New Zealand
57	Allergan AS	Norway
58	Allergan Healthcare Philippines, Inc.	Philippines (Republic of)
59	Allergan Spółka z ograniczoną odpowiedzialnością	Poland
60	Allergan C.I.S. SARL	Russia
61	Allergan Singapore Pte. Ltd.	Singapore
62	Allergan Pharmaceuticals (Proprietary) Limited	South Africa
63	Allergan, S.A.	Spain
64	Allergan Norden AB	Sweden
65	Allergan AG	Switzerland
66	Allergan Medical Sàrl	Switzerland
67	Allergan Pharmaceuticals Taiwan Co. Ltd.	Taiwan
68	Allergan (Thailand) Limited.	Thailand
69	Allergan Ilaçlari Ticaret Anonim Şirketi	Turkey
70	Allergan de Venezuela, C.A.	Venezuela
71	Allergan Holdings Limited	United Kingdom
72	Allergan Limited	United Kingdom
73	Allergan Optical Irvine, Inc.	United States/CA
74	Allergan Sales Puerto Rico, Inc.	United States/CA
75	CUI Corporation	United States/CA
76	Herbert Laboratories	United States/CA
77	Inamed Development Company	United States/CA
78	Silicone Engineering, Inc.	United States/CA
79	Oculex Pharmaceuticals, Inc.	United States/CA
80	AGN Seabreeze, LLC	United States/DE
81	Allergan Holdings, Inc.	United States/DE
82	Allergan Property Holdings, LLC	United States/DE
83	Allergan Puerto Rico Holdings, Inc.	United States/DE
84	Allergan Sales, LLC	United States/DE
85	Allergan Specialty Therapeutics, Inc.	United States/DE



TAB	NAME OF SUBSIDIARY	PLACE OF INCORPORATION OR ORGANIZATION
86	Allergan USA, Inc.	United States/DE
87	Inamed, LLC	United States/DE
88	Inamed Corporation	United States/DE
89	Pacific Pharma, Inc.	United States/DE
90	Precision Light, Inc.	United States/DE
91	Seabreeze LP Holdings, LLC	United States/DE
92	SkinMedica, Inc.	United States/DE
93	SkinMedica Aesthetics, Inc.	United States/DE
94	SkinMedica Pharmaceuticals, Inc.	United States/DE
95	Vicept Therapeutics, Inc.	United States/DE
96	Flowmatrix Corporation	United States/NV
97	TotalSkinCare.com Corporation	United States/NV


*	Except for Allergan India Private Limited and Samil Allergan Limited, all of the above-named subsidiaries are 100% owned by the Registrant. Allergan India Private Limited is 51% owned by the Registrant and Samil Allergan Limited is 50.0001% owned by Registrant.

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S-3 Nos. 333-157613, 333-136188, 333-102425, 333-99219, 333-50524, 33-55061, 333-183092; Form S-4 Nos. 333-136189, 333-129871; and Form S-8 Nos. 333-174025, 333-158925, 333-150668, 333-133817, 333-117939, 333-117937, 333-117936, 333-117935, 333-65176, 333-43584, 333-43580, 333-94157, 333-94155, 333-70407, 333-64559, 333-25891, 333-04859, 333-09091, 33-66874, 33-48908, 33-44770, 33-29528, 33-29527) of Allergan, Inc. and in the related Prospectuses of our reports dated February 26, 2013, with respect to the consolidated financial statements and schedule of Allergan, Inc., and the effectiveness of internal control over financial reporting of Allergan, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2012.



/s/ Ernst & Young LLP
Irvine, California
February 26, 2013

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, David E.I. Pyott, certify that:


1.	I have reviewed this annual report on Form 10-K of Allergan, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



			/s/ DAVID E.I. PYOTT
			David E.I. Pyott Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

Date: February 22 , 2013

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Jeffrey L. Edwards, certify that:


1.	I have reviewed this annual report on Form 10-K of Allergan, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



	/s/ JEFFREY L. EDWARDS
	Jeffrey L. Edwards Executive Vice President, Finance and Business Development, Chief Financial Officer (Principal Financial Officer)

Date: February 22 , 2013

EXHIBIT 32

The following certifications are being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350 and in accordance with SEC Release No. 33-8238. These certifications shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Certification of Principal Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Allergan, Inc., a Delaware corporation (the “Company”), hereby certifies, to his knowledge, that:


(i)	the accompanying Annual Report on Form 10-K of the Company for the period ended December 31, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and


(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



			/s/ DAVID E.I. PYOTT
			David E.I. Pyott Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

Date: February 22 , 2013

A signed original of this written statement required by Section 906 has been provided to Allergan, Inc. and will be retained by Allergan, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Certification of Principal Financial Officer


(i)	the accompanying Annual Report on Form 10-K of the Company for the period ended December 31, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and


(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



			/s/ JEFFREY L. EDWARDS
			Jeffrey L. Edwards Executive Vice President, Finance and Business Development, Chief Financial Officer (Principal Financial Officer)

Date: February 22 , 2013