Exhibit 10.56
CELGENE CORPORATION
MANAGEMENT INCENTIVE PLAN (MIP) AND PERFORMANCE PLAN
PLAN YEAR 2006
INTERPRETATION
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This Plan document, which is voluntarily established by the Company, exclusively
applies in respect of the MIP and Performance Plan in Plan Year 2006, which runs
from 1 January to 31 December 2006. This Plan will expire at the end of 2006. A
new plan, if any, may be issued for each year in which the MIP operates, which
may contain different terms, including but not limited to different terms as to
criteria weighting and/or levels of Target Bonus as set out in Appendix 2. In
the absence of a new Plan, no plan will apply and the employees will not be
entitled to any bonus or incentive payment during the subsequent year.
Therefore, this Plan does not create any vested rights for the eligible
employees to receive any similar payments in the future even if such payments
have been granted repeatedly in the past. This Plan is issued by Celgene (as
defined below).
In this Plan document, the following terms are defined as follows:
"CELGENE" or "THE COMPANY" means, in respect of the employee, his or her Celgene
Group employer as listed in Appendix 1.
"ACTIVE EMPLOYEE" refers to an employee whilst in Active Employment.
"ACTIVE EMPLOYMENT" means remunerated performance of work duties for Celgene
and, to avoid doubt, does not include sick leave, family leave or other leaves
of absence whether remunerated or otherwise.
"CELGENE GROUP" means Celgene Corporation and its subsidiaries.
"EXECUTIVE TEAM" means Celgene Group's Chief Executive Officer and Chief
Operating Officer.
"PLAN YEAR" means 1 January to 31 December 2006.
PURPOSE
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The purpose of the Celgene Management Incentive Plan the ("MIP" or the "Plan")
is to annually drive the attainment of key, quantifiable, objectives, while
rewarding performance based upon the achievement of those key objectives
critical to the success of the Celgene Group. It also aims to assist Celgene in
motivating and retaining key staff.
ELIGIBILITY
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Celgene employees in positions Salary Grades 8 and higher are eligible to
participate in the Management Incentive Plan ("MIP" or the "PLAN") (other than
employees who participate in Sales Bonus Programs). Employment must have
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commenced on or before November 1st of the Plan Year and an employee must be
Actively Employed through December 31st of the Plan Year to participate in the
program as specified in further detail below. Employees who are terminated by
the Company with or without cause or who voluntarily resign prior to December
31st of the Plan Year will not be entitled to any pro-rated bonus amount for the
Plan Year, except as otherwise expressly foreseen in this Plan document.
Employees employed in salary grades 8 and higher who are on approved Leave of
Absence (LOA), and employees who retire during the Plan Year are eligible to
participate on the basis set out in the "Award Payment" section of this
document.
OBJECTIVES
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The 2006 achievements of employees who participate in the MIP are measured,
assessed and scored against key corporate, division and individual objectives.
Objectives used to measure performance are those that ultimately drive the
achievement of our financial and business performance. Individual objectives are
set by Celgene following discussion between the employee and his or her manager
and following approval by the manager's own manager. Corporate (including
divisional) objectives are set by the Executive Team subject to the approval of
the Board of Directors of Celgene Corporation.
PLAN FEATURES
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The plan is designed to reward employees with a cash bonus based upon the
achievement of objectives established at around the start of the Plan Year.
Participation is determined on the basis of an employee's position and grade
within the organization, and payout is then determined by the employee's MIP
score and the corporate (including divisional scores). The 2006 Bonus Target
structure is set out at Appendix 2.
Employees' bonus payouts may be higher or lower than their Bonus Target as set
out in Appendix 2, based on individual MIP scores and business performance.
Individual MIP scores and business achievements above 100% will translate into
MIP payouts greater than target, just as scores and achievements that are lower
will result in lower than target payouts. Refer to the "Award Payment" section
of this document for examples.
Maximum gross amount of the total bonus payout under the Plan for this Plan Year
is 200% of Bonus Target (calculated as a percentage of the applicable annual
base salary as indicated hereafter).
CORPORATE AND INTERNATIONAL POSITIONS
The Bonus Target is further broken down into two components for corporate
positions. Corporate positions are classified as those positions in which an
employee provides services that can impact the wider Celgene Group rather than a
single specific division.
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GRADE WEIGHT OF WEIGHT OF
CORPORATE INDIVIDUAL
OBJECTIVES OBJECTIVES
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8 60% 40%
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9 60% 40%
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10 60% 40%
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11 70% 30%
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12 70% 30%
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13 70% 30%
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14 70% 30%
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15 70% 30%
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G 80% 20%
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F 80% 20%
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E 80% 20%
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D 80% 20%
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The weightings above reflect the principle that the greater impact the employee
may potentially have on achieving the corporate goal, the greater the weighting
will be placed on corporate objectives.
DIVISIONAL POSITIONS (INCLUDING SAN DIEGO AND CCT)
Divisional positions are classified as those positions in which an employee
provides services that primarily impact upon a specific division rather than to
the Celgene Group as a whole. Divisional employees will be measured on the
achievement of the divisional objectives in the division to which they provide
services, together with achievements against corporate and individual
objectives.
The weighting of the individual element remains the same as for the corporate
positions, but the corporate element in the divisional positions is further
divided into Corporate and Division objectives. The weighting of these
objectives depends on individual grade, as set out below.
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GRADE WEIGHT OF WEIGHT OF WEIGHT OF
CORPORATE DIVISION INDIVIDUAL
OBJECTIVES OBJECTIVES OBJECTIVES
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8 30% 30% 40%
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9 35% 25% 40%
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10 35% 25% 40%
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11 35% 25% 40%
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12 40% 30% 30%
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13 40% 30% 30%
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14 40% 30% 30%
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15 40% 30% 30%
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GRADE WEIGHT OF WEIGHT OF WEIGHT OF
CORPORATE DIVISION INDIVIDUAL
OBJECTIVES OBJECTIVES OBJECTIVES
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G 40% 40% 20%
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F 40% 40% 20%
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E 40% 40% 20%
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D 40% 40% 20%
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DETERMINING THE INDIVIDUAL MIP SCORE
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Each objective will be scored based upon the individual achievement of
objectives set by Celgene following discussion between the employee and their
manager, and approval by the manager's own manager. In addition to establishing
the objectives relevant to the employee, the specific results required to
achieve target will be determined. The Management Incentive & Performance
Objectives form below, which may be found on the Celgene Group Intranet under
Human Resources/Performance Management, should be used to record the finalized
objectives.
The employee's manager and his/her manager are required to carry out final
assessment of each score. Each objective is scored individually utilizing a
range of 0 - 200 points. Each weighting is then multiplied by the points
achieved by the objective. These numbers are then added to determine the final
individual MIP score, capped at maximum 2.0 for purposes of calculating the
Award as per the examples set forth below.
Senior management will approve the final scoring against individual objectives
for each participant which is then subject to approval by the Executive Team.
DETERMINING THE CORPORATE AWARD
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Based upon input from the Chief Executive Officer and the Executive Chairman,
the Compensation Committee will, in its business discretion, determine the
degree of corporate (including divisional) objectives attained for the Plan
Year. The corporate score is capped at maximum 2.0 for purposes of calculating
the Award as per the examples set forth below.
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Complete and return to supervisors by 1/20/2007
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Management Incentive & Performance Objectives
for bonus eligible employees
covering the period 1/1/2006 - 12/31/2006
EMPLOYEE NAME DIVISION / SUBSIDIARY SOCIAL SECURITY NUMBER
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Enter Name (Last, First) Here CEL - HQ
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Manager's Name...
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GOALS RESULTS EXPECTED / ACHIEVED HOW MEASURED TARGET SCORE
AWARD 0-200
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DETERMINING THE AWARD
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In most instances the target MIP award is calculated as a percent of full year
actual base salary earnings. Eligible employees who may receive payouts
pro-rated to reflect the proportion of the year in Active Employment in the
bonus eligible role include employees on LOAs, transfers, new hires, and
promoted employees. Eligible base salary earnings are defined as annual base
salary earned as an Active Employee between January 1st and December 31st of the
Plan Year. "Base salary" for these purposes means the eligible employee's fixed
cash salary, including extraordinary fixed cash salary payments, but excluding
any variable salary, any salary in kind, any performance-related pay or
benefits, any mandatory "13th month" salary, and any holiday pay if holiday pay
is not included within fixed cash salary. If an employee transfers from one
division to another, or from corporate to a division, or to/from a non-MIP
eligible sales position, during the Plan Year, any MIP award will also be
prorated to reflect the proportion of the Plan Year in the bonus eligible role
accordingly as specified below. If an employee was promoted from a MIP eligible
position that attracted different target bonus or to which different objectives
applied during the Plan Year, he/she will receive a prorated award based on time
spent in each role during the Plan Year as specified below.
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CALCULATING THE AWARD -
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CORPORATE-BASED EMPLOYEE CALCULATION - FOR EXAMPLE PURPOSES ONLY
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o Example: Assume a Salary Grade 9 Corporate participant with a 10% incentive
target and annual base salary earnings of $100,000. The MIP Award will be
calculated as follows:
Corporate Score: 1.10 (where Target would be 1)
Determined by the Compensation Committee based on business results
against approved corporate objectives, capped at 2.0
Individual Score: 1.20 (where Target would be 1)
Determined by management as set out above, and capped at 2.0.
70/30 Split - Corporate/Individual
TARGET PAYOUT: Annual Base Salary Earnings X Bonus Target = Bonus Payout
@ Target
o $100,000 X 10% = $10,000 (Target Award)
ACTUAL PAYOUT: Annual Base Salary Earnings X Bonus Target X Corporate
Score X Corporate Weight + Individual Score X Individual Weight = Bonus
Payout
o $100,000 X 10% = $10,000 X .70 X 1.10 = $ 7,700
o $100,000 X 10% = $10,000 X .30 X 1.20 = $ 3,600
Total Payout = $11,300
DIVISION-BASED EMPLOYEE CALCULATION - FOR EXAMPLE PURPOSES ONLY
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o Example: Assume a Salary Grade 12 division participant with a 20% incentive
target and annual base salary earnings of $100,000. The MIP award is
calculated as follows:
Corporate Score: 1.10 (where Target would be 1)
Division Score: 1.05 (where Target would be 1)
Each determined by the Compensation Committee based on business results
against approved corporate objectives, capped at 2.0
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Individual Score: 1.20 (where Target would be 1)
Determined by management as set out above, and capped at 2.0.
70/30 Split - Corporate/Individual
TARGET PAYOUT: Annual Base Salary Earnings X Bonus Target = Bonus Payout
@ Target
o $100,000 X 20% = $20,000 (Target Award)
ACTUAL PAYOUT: Annual Base Salary Earnings X Bonus Target X Corporate
Score X Corporate Weight + Divisional Score X Divisional Weight +
Individual Score X Individual Weight = Bonus Payout
o $100,000 X 20% = $20,000 X .40 X 1.10 = $ 8,800
o $100,000 X 20% = $20,000 X .30 X 1.05 = $ 6,300
o $100,000 X 20% = $20,000 X .30 X 1.20 = $ 7,200
Total Payout = $22,300
Due to over achievement of the corporate and individual objectives in Example 2
above, the corporate, division and individual scores exceed target of 100% and
so the example shows a $2,300 payout above a target of $20,000 or $22,300.
ACCRUAL AND INDIVIDUAL PERFORMANCE BELOW REQUIRED STANDARDS
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The ability of each participant to focus on the achievement of the corporate,
divisional and individual objectives is critical to Celgene achieving its key
milestones. Individual performance therefore impacts the potential payout based
upon achievement or over achievement of goals.
If an individual's performance is below required standards including but not
limited to being subject to a Performance Improvement Plan during the Plan Year,
whether or not individual objectives are met, an award may not be earned in
respect of any bonus element, individual or corporate
AWARD PAYMENT
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Our target payout date is the last payroll payment in February following the
Plan Year, although payout may be delayed as a result of business needs. MIP
awards, less the appropriate legal deductions, will be paid in the manner in
which the employee has elected to receive his or her monthly or bi-monthly
salary, subject to the Company's approval. If an employee transfers from one
incentive
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eligible position to another, to which different objectives and/or weightings
apply, on or before November 1st of the Plan Year, the award will be pro-rated.
If an employee transfers from one incentive position to another after November
1st of the Plan Year, the full year award is based on the position prior to
November 1st. Participants who transfer to a position that is not eligible for
an annual incentive award will receive a pro-rated award based on their annual
base salary earnings of that eligible position. Employees joining the Company
during the Plan Year but prior to November 1st will receive a pro-rated award as
well.
If an employee transfers and/or their remuneration changes (i.e., salary grade,
incentive target %, full-time to part-time) during January and February the
change will be deemed to have taken effect on January 1st for incentive
calculation purposes. Transfers and/or remuneration changes after November 1st
will not impact the current year incentive award. More than one incentive salary
may be used for award calculation purposes (e.g. where there is a status change,
or where the employee's salary changes during their period of eligibility during
the Plan Year, in which case any bonus payout will be paid in the currency in
which salary is payable at the date of such bonus payout).
If an employee retires (i.e. leaves Celgene's employment at the end of their
career) or has any extended period of absence, such as sick leave or personal
leave during the Plan Year, any MIP award will be pro-rated based on earned
annual base salary as an Active Employee during the Plan Year. Special rules may
apply to periods of family leave - employees should speak to their local HR
representative to determine if these apply to them. In the event of an
employee's death during the Plan Year, a pro-rated award will be paid out to
their estate, where corporate objectives have been achieved and/or individual
objectives would have been achieved had the employee lived.
Employees must be in Active Employment on December 31st in the relevant Plan
Year to receive an award under the MIP. Except where the law of the jurisdiction
in which the employee is based requires otherwise, an employee may not be
eligible to participate in the MIP and receive bonus payment if he or she is
under notice of termination as at December 31st in the Plan Year. Whether
payment is made in these circumstances is at the sole discretion of management.
SETTING OBJECTIVES
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o Corporate objectives are set by the Executive Team and approved by the Board
of Directors in around December prior to the Plan Year.
o The individual objectives must be established and agreed for each
participant based upon discussions between the employee and his or her
manager. The Company reserves the right to determine the individual
objectives if agreement is not reached following these discussions.
o The individual objectives will typically be derived from the annual business
plans and may incorporate both financial and non-financial goals viewed by
the Company as critical to its performance.
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o Individual objectives must be based on Key Performance results. Activities
or tasks are not considered bonus eligible "objectives". All participants
should ensure that their MIP objectives are "impact" and "results" focused
against key, critical deliverables.
o Individual objectives must be approved by each employee's manager and
his/her manager and should be reviewed on an informal basis to monitor
achievement at around the mid-year point. At this point in the year the
manager and/or his/her manager may make modifications to individual
objectives to reflect changes in the business or its operating environment.
Changes in participant objectives, which have a significant impact upon the
corporate objectives, may only be made during the Plan Year with written
approval from the CEO.
ADMINISTRATION
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The Celgene Group Management Compensation and Development Committee has the
authority to interpret, administer and implement the Plan subject to the
approval of the Compensation Committee of the Board of Directors of Celgene
Corporation. The Executive Team may make variations to an individual's level of
participation, changes of targets, weights and payouts, excluding changes to
their own eligibility, for example to reflect changes in an individual's role or
to the Celgene Group's organization.
The Committee may, in its business discretion, make adjustments to the Plan
during the Plan Year deemed advisable in order to give consideration to changes
in accounting rules, principles or methods, or extraordinary events, and make
adjustments to financial performance measures in recognition of such
occurrences, including varying or withdrawing the Plan.
Any bonus paid shall not form part of salary for purposes of pension or other
benefits plans calculations. It is understood that any bonus paid is already
inclusive of any additional monthly wages and holiday entitlement that are due
to the employee.
Eligibility to participate in the MIP in this Plan Year constitutes neither a
guarantee of employment, nor a guarantee of an award for the entire Plan Year or
any portion thereof, nor a guarantee of entitlement to participate in MIP or any
other similar Plan in future years.
The rights and interests of a participant under the Plan are personal to the
individual and may not be assigned encumbered or transferred except by
assignment to successors of the Company.
PERFORMANCE PLAN
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All MIP-eligible employees will also be assessed against a non-bonus Performance
Component. Assessment against the performance component is not relevant to MIP
award but will be the primary determinant for each MIP participant's merit
salary award (if any) in each year. The performance plan
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component is designed to reward each MIP participant based upon strategic
departmental results against objectives and/or individual objectives that drive
results (what and how things are accomplished) and/or competency-based upon
development/performance need (areas of strength/improvement).
Key performance areas, focusing on people, process, culture, organizational
values and financial governance are core non-bonus components as they align with
building our Human Capital and Organizational discipline critical for high
performance.
Below is the performance grid to be used when assessing the Performance
Objectives in the Performance Plan. An overall performance assessment rating
(i.e. S, EE, AE, etc.) should also be produced.
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PERFORMANCE RATING DEFINITIONS
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SUPERIOR (S) PERFORMS SIGNIFICANTLY BEYOND JOB REQUIREMENTS IN
VIRTUALLY ALL ASPECTS OF THE POSITION. DEMONSTRATES
EXCEPTIONAL ACHIEVEMENT IN KEY AREAS OF
RESPONSIBILITY. WORK IS EXCELLENT IN BOTH QUALITY AND
QUANTITY.
o Produces outstanding results on the majority of
objectives and achieves favorable results on all
others.
o Consistently takes the best approach to get the
job done.
o Requires little to no direction.
o Problem solving skills are exceptional and
consistently result in superior achievement.
o Identifies necessary extra projects and tasks and
completes without defaulting on any previously
assigned responsibilities.
o Exceeds expectations of internal and external
clients.
Developmental recommendations will usually relate to
general business, cross-functional and/or future
career opportunities.
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EXCEEDS PERFORMS BEYOND JOB REQUIREMENTS IN MANY ASPECTS OF
EXPECTATIONS THE POSITION. COMPLETES MANY PROJECTS AHEAD OF
(EE) SCHEDULE. QUALITY AND QUANTITY OF WORK EXCEED
EXPECTATIONS IN MANY AREAS.
o Produces exceptional results on several
objectives and satisfactorily achieves results on
all others.
o Anticipates problems and takes appropriate action
to produce high level results.
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PERFORMANCE RATING DEFINITIONS
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o Requires limited supervision.
o Thinks beyond the job and contributes to the
overall objectives of the department.
o Takes on extra assigned projects and tasks
without defaulting on any previously assigned
responsibilities.
o Internal and external clients are extremely
satisfied with the work performed.
Developmental recommendations will usually relate to
general business, performance enhancement and/or
future career opportunities.
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ACHIEVES FULFILLS JOB REQUIREMENTS AND GOES BEYOND EXPECTATIONS
EXPECTATIONS IN SOME AREAS. COMPLETES WORK AND PROJECTS ON
(AE) SCHEDULE. WORK MEETS ALL STANDARDS IN TERMS OF QUALITY
AND QUANTITY.
o Completes established objectives.
o Does a complete job using effective planning and
organizing skills.
o Requires some supervision and follow-up.
o Performs well on some of the more difficult and
complex parts of the job.
o Internal and external clients are satisfied with
the work performed.
Developmental recommendations will usually relate to
areas that support performance enhancement and/or
future career opportunities.
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BELOW MEETS THE MINIMUM JOB REQUIREMENTS AND EXPECTATIONS IN
EXPECTATIONS MOST AREAS BUT NEEDS TO IMPROVE IN OTHERS. CARRIES OUT
(BE) MANY RESPONSIBILITIES IN A SATISFACTORY MANNER.
QUALITY AND/OR QUANTITY OF WORK NEED IMPROVEMENT IN
SOME KEY AREAS.
o Completes most objectives, but fails to complete
others.
o Produces required work the majority of the time,
but needs improvement in some areas.
o Requires close supervision and follow-up.
o Internal and external clients are satisfied with
the work performed most of the time.
Developmental recommendations will usually relate to
specific areas or encourage improvement in this
position. A corrective action plan may be used.
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PERFORMANCE RATING DEFINITIONS
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NEEDS DOES NOT MEET JOB REQUIREMENTS IN A SATISFACTORY
IMPROVEMENT (NI) MANNER. FAILS TO CARRY OUT KEY RESPONSIBILITIES.
QUALITY AND/OR QUANTITY OF WORK ARE BELOW
EXPECTATIONS. CONTINUING IN THE POSITION AT THIS
PERFORMANCE LEVEL IS NOT ACCEPTABLE. SIGNIFICANT
IMPROVEMENT IN THE NEAR FUTURE IS REQUIRED OR ACTION
MAY BE TAKEN UP TO AND INCLUDING TERMINATION.
o Does not accomplish objectives on time or up to
the standards established at the beginning of the
performance period.
o Requires constant supervision and follow-up.
o Clients are dissatisfied with the work performed.
Any developmental recommendations that management
considers advisable should be directed toward
immediate attainment of minimum job performance levels
and may be documented in a corrective action plan if
management considers it appropriate.
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