<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sections 240.14a-11(c) or 240.14a-12
Allergan Specialty Therapeutics, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
ALLERGAN SPECIALTY THERAPEUTICS, INC.
2525 DUPONT DRIVE
IRVINE, CA 92612
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 2000
TO THE STOCKHOLDERS OF ALLERGAN SPECIALTY THERAPEUTICS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Allergan
Specialty Therapeutics, Inc., a Delaware corporation (the "Company" or "ASTI"),
will be held on April 28, 2000 at 10:00 a.m., local time, at 2525 Dupont Drive,
Irvine, California 92612 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To ratify the selection of KPMG LLP as independent auditors of the
Company for its fiscal year ending December 31, 2000.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 15, 2000 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ WILLIAM C. SHEPHERD
William C. Shepherd
Chairman of the Board,
President and Chief Executive Officer
Irvine, California
March 24, 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
ALLERGAN SPECIALTY THERAPEUTICS, INC.
2525 DUPONT DRIVE
IRVINE, CA 92612
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 28, 2000
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Allergan Specialty Therapeutics, Inc., a Delaware corporation ("ASTI" or the
"Company"), for use at the Annual Meeting of Stockholders to be held on April
28, 2000, at 10:00 a.m., local time, or at any adjournment or postponement
thereof (the "Annual Meeting"), for the purposes set forth herein and in the
accompanying Notice of Annual Meeting. The Annual Meeting will be held at 2525
Dupont Drive, Irvine, California 92612. The Company intends to mail this proxy
statement and accompanying proxy card on or about March 24, 2000, to all
stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Class A Common Stock beneficially
owned by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Class A Common Stock for their costs
of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors or officers. No additional compensation will
be paid to directors or officers for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only stockholders of record at the close of business on March 15, 2000 will
be entitled to notice of and to vote at the Annual Meeting. At the close of
business on March 15, 2000 the Company had outstanding and entitled to vote
3,272,690 shares of Class A Common Stock and 1,000 shares of Class B Common
Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
As more specifically set forth below, the holders of the Class A and Class B
Common Stock will vote separately as a class on Proposal 1 (Election of
Directors), and together as a single class on Proposal 2 (ratification of the
selection of independent auditors).
All votes will be tabulated by the inspector of elections appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 2525
Dupont Drive, Irvine, California 92612, a written notice of revocation or a duly
executed proxy
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bearing a later date, or it may be revoked by attending the meeting and voting
in person. Attendance at the meeting will not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2001 annual
meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is November 26, 2000. The deadline for submitting a stockholder
proposal or a nomination for director that is not to be included in such proxy
statement and proxy is sixty days in advance of the 2001 annual meeting of
stockholders or ten days after the date on which notice of the meeting is first
given to the stockholders, whichever is later. Stockholders are also advised to
review the Company's Bylaws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that, until
the expiration of the Purchase Option (described below under the caption
"Certain Relationships and Related Transactions -- Relationship Between the
Company and Allergan, Inc."), with respect to the election of directors, the
holders of the Class A Common Stock, voting as a separate class, are entitled to
elect up to four directors, and Allergan, Inc., the sole holder of the Class B
Common Stock, voting as a separate class, is entitled to elect one director.
There are five nominees for the five Board positions presently authorized
in the Company's Bylaws. Each director to be elected will hold office until the
next annual meeting of stockholders and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal. Each
nominee listed below is currently a director of the Company.
Of the five persons named below as nominees for the position of director of
the Company, William C. Shepherd, Alan J. Lewis, Ph.D., Gary L. Neil, Ph.D., and
Marvin E. Rosenthale, Ph.D., have been designated as nominees to be elected by
holders of the Class A Common Stock. Lester J. Kaplan, Ph.D. has been designated
as the nominee to be elected by the holder of the Class B Common Stock. Each
share of Class A Common Stock and Class B Common Stock has one vote in the
election of the directors to be elected by that class.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the nominees named below. In the event that
any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has agreed
to serve if elected, and management has no reason to believe that any nominee
will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
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<PAGE> 5
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
DIRECTORS TO BE
ELECTED BY HOLDERS OF PRINCIPAL OCCUPATION/
CLASS A COMMON STOCK AGE POSITION HELD WITH THE COMPANY
--------------------- --- ------------------------------
<S> <C> <C>
William C. Shepherd.......... 61 Chairman of the Board of Directors, President
and Chief Executive Officer
Alan J. Lewis, Ph.D.(1)...... 54 Chief Executive Officer of Signal
Pharmaceuticals, Inc.
Gary L. Neil, Ph.D.(1)....... 59 President and Chief Executive Officer of
Crescendo Pharmaceuticals Corporation
Marvin E. Rosenthale, 66 Member, Board of Directors
Ph.D. .....................
</TABLE>
- ---------------
(1) Member of the Audit Committee.
William C. Shepherd, 61, has been President and Chief Executive Officer of
the Company since March 1998. He also served as Chairman of the Board of
Allergan, Inc., a technology-driven, global health care company ("Allergan"),
from January 1996, and as Allergan's President and Chief Executive Officer from
1992, until his retirement effective January 1, 1998. Since his retirement, Mr.
Shepherd has served as a consultant to Allergan. Mr. Shepherd first joined
Allergan in 1966 and from 1984 to 1991, was its President and Chief Operating
Officer. He is a director of ANSYS Diagnostics, Inc., a private company engaged
in the development, manufacture and marketing of disposable medical diagnostic
products. Mr. Shepherd was elected to the ASTI Board of Directors in 1998.
Alan J. Lewis, Ph.D., 54, has served as Chief Executive Officer and
director of Signal Pharmaceuticals, Inc., an integrated target and drug
discovery company ("Signal"), since 1996 and as President of Signal since 1994.
Prior to joining Signal, Dr. Lewis served for 15 years at the Wyeth-Ayerst
Research division of Wyeth Laboratories, Inc., a subsidiary of American Home
Products, where he held a variety of positions, including Vice President of
Research from 1990 to 1994. At Wyeth-Ayerst, Dr. Lewis was responsible for
research efforts in CNS, cardiovascular, inflammatory, allergy and bone
metabolism diseases. Dr. Lewis is also a member of BIO (Biotech Industrial
Organization). Dr. Lewis was elected to the ASTI Board in 1998 and is a member
of its Audit Committee.
Gary L. Neil, Ph.D., 59, has served as President and Chief Executive
Officer and a director of Crescendo Pharmaceuticals Corporation, a
pharmaceutical development and commercialization company, since 1997. From 1993
to 1997, Dr. Neil was President and Chief Executive Officer and a director of
Therapeutic Discovery Corporation. From 1990 to 1993, Dr. Neil served as
Executive Vice President of the Wyeth-Ayerst Research division of Wyeth
Laboratories, Inc., a subsidiary of American Home Products. From 1966 to 1989,
he served at The Upjohn Company in various positions, including Director, Cancer
Research, Vice President, Biotechnology and Basic Research Support and Vice
President, Discovery Research. Dr. Neil is also a member of the Board of
Directors and the Audit Committee of Geron Corporation, a publicly-held
corporation, and of Calydon, Inc., Camitro, Inc., Pharsight Corporation and
Signal Pharmaceuticals, Inc., each of which is a privately-held company. He is
also a member of the Compensation Committee of Calydon, Inc. and Pharsight
Corporation. Dr. Neil was elected to the Board of ASTI in 1998 and is a member
of its Audit Committee.
Marvin E. Rosenthale, Ph.D., 66, served as President and Chief Executive
Officer of Allergan Ligand Retinoid Therapeutics., Inc. ("ALRT") from December
1994 until November 1997. ALRT was formed by Allergan and Ligand Pharmaceuticals
Incorporated ("Ligand") in 1994 to accelerate development of retinoid products
previously being pursued in the Allergan/Ligand joint venture (the "Joint
Venture"), of which Dr. Rosenthale was Vice President from August 1993 until the
formation of ALRT. Prior to joining the Joint Venture, Dr. Rosenthale served as
Vice President, Drug Discovery Worldwide, at R. W. Johnson Pharmaceu-
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<PAGE> 6
tical Research Institute from 1990 to 1993. From 1977 to 1990, Dr. Rosenthale
served in a variety of positions in drug discovery research for Ortho
Pharmaceutical Corporation, including director of the divisions of pharmacology
and of biological research and executive director of drug discovery research.
From 1960 to 1977, he served in various positions with Wyeth Laboratories, Inc.
Dr. Rosenthale is a member of the Board of Directors and the Compensation
Committee of Discovery Laboratories, Inc. (formerly known as Acute Therapeutics
Inc.), a publicly-held company. Dr. Rosenthale was elected to the ASTI Board in
1998.
<TABLE>
<CAPTION>
DIRECTOR TO BE
ELECTED BY THE HOLDER OF PRINCIPAL OCCUPATION/
CLASS B COMMON STOCK AGE POSITION HELD WITH THE COMPANY
- ------------------------ --- ------------------------------
<S> <C> <C>
Lester J. Kaplan, 49 Corporate Vice President and President, Research &
Ph.D. ................. Development and Global BOTOX(R) of Allergan, Inc.
</TABLE>
Lester J. Kaplan, Ph.D., 49, has served as Corporate Vice President and
President, Research & Development and Global Botox(R) of Allergan since May 1998
and, from July 1996 to May 1998, was Corporate Vice President, Science and
Technology of Allergan. From 1992 to 1996, he was Corporate Vice President,
Research and Development of Allergan. He served as Senior Vice President,
Pharmaceutical Research and Development of Allergan from 1991 to 1992, and as
Senior Vice President, Research and Development of Allergan from 1989 to 1991.
Dr. Kaplan is an Advisory Board Member to the Pediatric Cancer Research
Foundation (PCRF) and Healthcare Ventures. He is also a member of the Board of
Directors of the Orange County Performing Arts Center. He first joined Allergan
in 1983 and was elected to the Allergan Board of Directors in 1994. Dr. Kaplan
has been a director of ASTI since its formation in November 1997 and, from
November 1997 until March 1998, was its President and Chief Executive Officer.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1999, the Board of Directors held
four meetings. The Board has an Audit Committee. There are no other Committees
of the Board of Directors, and the full Board of Directors served all functions
other than those functions served by the Audit Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the accountants' comments as to internal controls,
adequacy of staff and management performance and procedures in connection with
performance of the annual audit. The Audit Committee is composed of two
non-employee directors: Drs. Lewis and Neil. The Audit Committee met once during
the fiscal year ended December 31, 1999. During the fiscal year ended December
31, 1999, each Board member attended 75% or more of the aggregate of the
meetings of the Board and of the committees on which he served, held during the
period for which he was a director or committee member, respectively.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP as the Company's independent
auditors for the fiscal year ending December 31, 2000 and has further directed
that management submit the selection of independent auditors for ratification by
the stockholders at the Annual Meeting. KPMG LLP has audited the Company's
financial statements since its inception in November 1997. Representatives of
KPMG LLP are expected to be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of KPMG LLP as the Company's
independent auditors is not required by the Company's Bylaws or otherwise.
However, the Board is submitting the selection of KPMG LLP to the stockholders
for ratification as a matter of good corporate practice. If the stockholders
fail to ratify the selection, the Audit Committee and the Board will reconsider
whether or not to retain that firm. Even if the selection is ratified, the Audit
Committee and the Board in their discretion may direct the appointment of
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<PAGE> 7
different independent auditors at any time during the year if they determine
that such a change would be in the best interests of the Company and its
stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting, with
the holders of the Class A and Class B Common Stock voting together as a single
class, will be required to ratify the selection of KPMG LLP. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
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<PAGE> 8
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the ownership
of the Company's Class A Common Stock and Class B Common Stock as of March 1,
2000 (unless otherwise indicated in a footnote) by: (i) each nominee for
director; (ii) each of the executive officers named below under "Executive
Compensation and Other Information"; (iii) all executive officers and directors
of the Company as a group; and (iv) all those known by the Company to be
beneficial owners of more than five percent of its Class A Common Stock or Class
B Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
OF
CLASS A COMMON STOCK
-----------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNERS OF CLASS A COMMON STOCK SHARES TOTAL
----------------------------------------- --------- ----------
<S> <C> <C>
Lester J. Kaplan, Ph.D.(2).................................. 579 *
Alan J. Lewis, Ph.D......................................... 0 0
Gary L. Neil, Ph.D.(3)...................................... 5,000 *
Marvin E. Rosenthale, Ph.D.................................. 0 0
William C. Shepherd(4)...................................... 1,830 *
Douglas S. Ingram........................................... 232 *
Dwight J. Yoder............................................. 181 *
Farallon Capital Partners, L.P.(5).......................... 1,134,921 34.7%
One Maritime Plaza, Suite 1325
San Francisco, California 94111
Lourde John Constable....................................... 455,200 13.9%
5 Radnor Corp. Center
100 Matsonford Road, Suite 520
Radnor, Pennsylvania 19087
Woodbourne Partners, L.P.(6)................................ 327,900 10.0%
200 N. Broadway, Suite 825
St. Louis, Missouri 63102
Wellington Management Company, LLP(7)....................... 186,330 5.69%
75 State Street
Boston, Massachusetts 02109
All executive officers and directors as a group (7
persons)(8)............................................... 7,822 *
</TABLE>
- ---------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and upon Schedules 13D and 13G filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise indicated
in the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in this
table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
3,272,690 shares of Class A Common Stock outstanding on March 1, 2000,
adjusted as required by rules promulgated by the SEC.
(2) Shares held by the Lester J. Kaplan Trust dated October 23, 1998, Lester J.
Kaplan, Trustee.
(3) Shares held by the Beverly M. Neil and Gary L. Neil Family Trust dated
December 16, 1994, Beverly M. Neil and Gary L. Neil, Trustees.
(4) Shares held by the Shepherd Family Trust dated April 4, 1995, William Clark
Shepherd and Sandra Harper Shepherd, Trustees.
(5) Based upon Amendment No. 17 to Schedule 13D dated February 8, 2000, which
reported shares owned as of January 31, 2000 and which was filed jointly by
Andrew B. Fremder, David I. Cohen, Enrique H. Boilini, Fleur E. Fairman,
Jason M. Fish, Joseph F. Downes, Meridee A. Moore, Stephen L. Millham,
Thomas F. Steyer, William F. Mellin, William F. Duhamel, Richard B. Fried,
Mark C. Wehrly, Farallon
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<PAGE> 9
Capital Partners, L.P. ("FCP"), Farallon Partners, L.L.C. ("FPLLC"),
Farallon Capital Institutional Partners, L.P. ("FCIP"), Farallon Capital
Institutional Partners II, L.P. ("FCIPII"), Farallon Capital Institutional
Partners III, L.P. ("FCIPIII"), Farallon Capital Management LLC ("FCMLLC")
and Tinicum Partners, L.P. ("Tinicum"). FPLLC has shared voting and
dispositive power as to 664,621 shares, which includes 256,721 shares as to
which FCP has shared voting and dispositive power, 263,900 as to which FCIP
has shared voting and dispositive power, 53,400 shares as to which FCIPII
has shared voting and dispositive power, 67,000 shares as to which FCIPIII
has shared voting and dispositive power and 23,600 as to which Tinicum has
shared voting and dispositive power. FCMLLC has shared voting and
dispositive power as to 470,300 shares. All of the individuals (other than
Ms. Fairman) have shared voting and dispositive power as to 1,134,921
shares. Ms. Fairman has shared voting and dispositive power as to 664,621
shares.
(6) Based upon Amendment No. 2 to Schedule 13G dated February 14, 2000, a joint
filing by the entities and persons named below, which reported shares owned
as of December 31, 1999. Clayton Management Company and John D. Weil have
sole voting and dispositive power as to 327,900 shares, which includes
264,600 shares beneficially owned by Woodbourne Partners and 63,300 shares
beneficially owned by Forsyth Joint Venture.
(7) Based upon Amendment No. 1 to Schedule 13G dated February 9, 2000, which
reported shares owned as of December 31, 1999. Wellington Management LLP has
shared voting and dispositive power as to 186,330 shares.
(8) See footnotes (2), (3) and (4).
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF
CLASS B COMMON STOCK
-----------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNERS OF CLASS B COMMON STOCK SHARES TOTAL
----------------------------------------- --------- ----------
<S> <C> <C>
Allergan, Inc. ........................................ 1,000 100%
2525 Dupont Drive
Irvine, California 92612
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION OF DIRECTORS
Each director of the Company other than Dr. Lester J. Kaplan receives an
annual retainer of $10,000 plus a per meeting fee of $1,000. In the fiscal year
ended December 31, 1999, the total compensation paid to each director other than
Dr. Kaplan was $14,000. The members of the Board of Directors are eligible for
reimbursement for their expenses incurred in connection with attendance at Board
meetings in accordance with Company policy.
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EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
William C. Shepherd.................. 61 President and Chief Executive Officer
Douglas S. Ingram.................... 37 General Counsel and Secretary
Dwight J. Yoder...................... 54 Chief Financial Officer
</TABLE>
Officers are appointed by and hold office at the pleasure of the Board of
Directors.
Mr. Shepherd's biography is set forth in Proposal 1 under the heading
"Election of Directors -- Nominees."
Mr. Ingram has been the General Counsel and Secretary of the Company since
October 1998. He has also been the Associate General Counsel of Allergan since
August 1998, and its Assistant Secretary since November 1998. Prior to that, Mr.
Ingram was Allergan's Assistant General Counsel from January 1998 and Senior
Attorney and Chief Litigation Counsel of Allergan from March 1996, when he first
joined Allergan. Prior to joining Allergan, Mr. Ingram was, from August 1988 to
March 1996, an attorney with the Orange County office of the law firm of Gibson,
Dunn & Crutcher.
Mr. Yoder has been the Chief Financial Officer of the Company since its
formation in November 1997 and had been the Chief Financial Officer of Allergan
Ligand Retinoid Therapeutics, Inc. from July 1995 until November 1997. Mr. Yoder
has been Senior Vice President of Allergan from January 2000. Mr. Yoder was
Senior Vice President and Controller of Allergan from July 1996 to January 2000
and was its Vice President and Controller from 1990, when he first joined
Allergan. Mr. Yoder is a member of the Board of Directors of the Southern
California Chapter of the Arthritis Foundation.
COMPENSATION OF EXECUTIVE OFFICERS
The executive officers did not receive compensation for services rendered
in any capacity to the Company for the fiscal years ended December 31, 1997,
1998 and 1999.
STOCK OPTION, STOCK APPRECIATION RIGHTS, EXERCISES AND HOLDINGS
The Company does not currently maintain an option program for its employees
and is prevented by its Certificate of Incorporation from issuing any additional
shares, class or series of stock without the affirmative vote of the holders of
a majority of the issued and outstanding shares of the Class B Common Stock, all
of which are held by Allergan. The Company did not grant any stock options or
stock appreciation rights to any of its executive officers during the year ended
December 31, 1999.
EMPLOYMENT AGREEMENT
William C. Shepherd provides services to ASTI pursuant to the terms of a
letter agreement between Mr. Shepherd and Allergan regarding Mr. Shepherd's
retirement from Allergan, which was effective January 1, 1998. Pursuant to the
terms of the letter agreement, Allergan has agreed to pay Mr. Shepherd severance
payments totaling $3,210,000, on a semi-monthly basis, during the period
commencing January 1, 1998 and ending 36 months following such date (the
"Severance Pay Period"). In partial consideration of such severance payments,
Mr. Shepherd has agreed to provide consulting services to Allergan as requested
by Allergan's Chief Executive Officer for up to a maximum of 50 days per year
during the Severance Pay Period. In addition, pursuant to the terms of the
letter agreement, the vesting of all of Mr. Shepherd's outstanding unvested
Allergan options was accelerated as of January 1, 1998. Such options are
exercisable by Mr. Shepherd at any time prior to the earlier of (a) January 1,
2003 or (b) the expiration of any such options in accordance with their terms.
Under the terms of the letter agreement, Allergan has also agreed to provide Mr.
Shepherd with continued medical, dental, group term life, disability and
flexible spending account benefits, continued pension benefit accruals and other
miscellaneous perquisites and benefits during the Severance Pay Period.
8
<PAGE> 11
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION(1)
All of the Company's officers are affiliated with Allergan and are not
separately compensated by the Company. Accordingly, the Board has not
established any policies governing executive officer compensation, and
compensation of such executive officers by Allergan is not directly related to
their performance as executive officers of the Company.
BOARD OF DIRECTORS
Lester J. Kaplan, Ph.D.
Alan J. Lewis, Ph.D.
Gary L. Neil, Ph.D.
Marvin E. Rosenthale, Ph.D.
William C. Shepherd
- ---------------
(1) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any
filing of the Company under the 1933 Act or the 1934 Act, whether made
before or after the date hereof and irrespective of any general
incorporation language contained in such filing.
9
<PAGE> 12
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on March 10, 1998 (the date of which the Company's Class A Common
Stock was first traded on the Nasdaq National Market) for (i) the Company's
Class A Common Stock, (ii) the weighted average return of stock companies
included in the Nasdaq Stock Market Total Return Index (US) ("Market Index") and
(iii) the Nasdaq Pharmaceutical Stocks Index ("Industry Index"). All values
assume reinvestment of the full amount of all dividends and are calculated as of
December 31 of each year.
The stockholder return shown on the graph below is not necessarily
indicative of future performance and the Company will not make or endorse any
predictions as to future stockholder returns:
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT
<TABLE>
<CAPTION>
ASTI MARKET INDEX INDUSTRY INDEX
---- ------------ --------------
<S> <C> <C> <C>
3/10/98 100 100 100
12/31/98 103 127 122
12/31/99 140 230 227
</TABLE>
- ---------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP BETWEEN THE COMPANY AND ALLERGAN, INC.
In connection with the distribution by Allergan of all of the Class A
Common Stock to its stockholders in March 1998 (the "Distribution"), the Company
and Allergan entered into the following agreements, each of which agreements is
described in the Prospectus dated March 6, 1998 and in the Company's most recent
Annual Report on Form 10-K:
Technology License Agreement. Pursuant to the Technology License Agreement,
Allergan granted to ASTI an exclusive (subject to certain pre-existing rights),
perpetual license, with certain rights to sublicense, to use certain Allergan
technology (the "Allergan Technology") solely to conduct research and
development with respect to products proposed by Allergan and approved by the
Company's Board (the "ASTI Products")
10
<PAGE> 13
and to conduct related activities, and to commercialize such products. Until a
product candidate becomes an ASTI Product, Allergan will have full rights to
exploit such product, subject only to its obligations to pay royalties on net
sales of products (other than ASTI Products) covered by technology developed or
otherwise obtained by ASTI pursuant to the Research and Development Agreement
("Developed Technology Products") and products ("Pre-Selection Products")
resulting from other research and pre-clinical development work undertaken by
ASTI to determine the suitability of other lead compounds and product candidates
for research and development ("Pre-Selection Work").
In exchange for the license to use the existing Allergan Technology
relating to the ASTI Products and Allergan's commitment to make specified
payments on sales of certain products, ASTI will pay a technology fee (the
"Technology Fee") to Allergan and has granted Allergan the License Option and
the option to independently develop Pre-Selection Products. The Technology Fee
is payable monthly over a period of four years and was $833,333 per month for
the first 12 months following October 23, 1997, $558,333 per month for the
following 12 months, $275,000 per month for the following 12 months and $166,667
per month for the following 12 months; provided that the Technology Fee will no
longer be payable at such time as fewer than two of the ASTI Products are being
developed by ASTI and/or have been licensed by Allergan pursuant to Allergan's
exercise of its option to commercialize an ASTI Product pursuant to the License
Option Agreement described below (the "License Option").
Research and Development Agreement. Under the Research and Development
Agreement, Allergan has agreed to perform diligently all work necessary to
conduct the activities agreed upon by Allergan and ASTI. Activities under the
Research and Development Agreement, which include the research and development
of ASTI Products and agreed upon Pre-Selection Work, are undertaken pursuant to
work plans and cost estimates proposed by Allergan and accepted by ASTI.
Under the Research and Development Agreement, ASTI is expected to utilize
substantially all of the $200 million contributed to it by Allergan in
connection with the Distribution, plus any investment income earned thereon,
less certain research and development costs, ASTI's administrative expenses and
certain technology fee payments to reimburse Allergan for its fully-burdened
cost of activities undertaken pursuant to the Research and Development
Agreement.
The Research and Development Agreement will terminate upon the exercise or
expiration of the Purchase Option; provided, however, that Allergan's obligation
to pay certain developed technology royalties and Pre-Selection Product payments
will continue if the Purchase Option expires unexercised.
License Option Agreement. Pursuant to the License Option Agreement, ASTI
has granted the License Option to Allergan pursuant to which Allergan may, on a
product-by-product and country-by-country basis, obtain from ASTI a perpetual,
exclusive license (with the right to sublicense) to research, develop, make,
have made and use an ASTI Product and to sell and have sold such product (a
"Licensed Product") in the country or countries as to which the License Option
is exercised (the "Territory"). Allergan may exercise the License Option with
respect to any ASTI Product on a country-by-country basis at any time until (i)
with respect to the United States, 30 days after FDA clearance to market such
ASTI Product in the United States and (ii) with respect to all other countries,
90 days after the earlier of (a) clearance by the appropriate regulatory agency
to market such ASTI Product in such country, or (b) clearance by the FDA to
market the ASTI Product in the United States. The License Option will expire, to
the extent not previously exercised, 30 days after the expiration of the
Purchase Option.
Allergan will make payments (the "Product Payments") to ASTI with respect
to each Licensed Product as follows: (a) if the Licensed Product is sold by
Allergan, royalties of up to a maximum of 6% of Net Sales of the Licensed
Product determined as follows: (i) 1% of Net Sales of the Licensed Product, plus
(ii) an additional 0.1% of such Net Sales for each full $1 million of Research
and Development Costs of the Licensed Product paid by ASTI; and (b) if the
Licensed Product is sold by a third party, sublicensing fees of up to a maximum
of 50% of Sublicensing Revenues with respect to such Licensed Product determined
as follows: (i) 10% of such Sublicensing Revenues, plus (ii) an additional 1% of
Sublicensing Revenues for each full $1 million of Research and Development Costs
of the Licensed Product paid by ASTI.
11
<PAGE> 14
Allergan has the option to buy out ASTI's right to receive Product Payments
for any Licensed Product on either a country-by-country or global basis. To the
extent Allergan does not exercise the License Option with respect to any ASTI
Product, ASTI will retain exclusive rights to develop and commercialize such
ASTI Product.
Purchase Option. Under ASTI's Restated Certificate of Incorporation,
Allergan has an exclusive, irrevocable option to purchase all, but not less than
all, of the issued and outstanding Class A Common Stock (the "Purchase Option").
Allergan may exercise the Purchase Option by written notice to ASTI at any time
during the period beginning immediately after the Distribution and ending on
December 31, 2002; provided that such date will be extended for successive six
month periods if, as of any June 30 or December 31 beginning with June 30, 2001,
ASTI has not paid or accrued expenses for at least 95% of all Available Funds
pursuant to the Research and Development Agreement. The Purchase Option will in
any case terminate on the 90th day after the date (the "Statement Date") on
which Allergan receives notice that the amount of cash and marketable securities
held by ASTI is less than $15 million. All certificates evidencing Class A
Common Stock will bear a legend indicating that such shares are subject to the
Purchase Option. If the Purchase Option is exercised, the exercise price (the
"Purchase Option Exercise Price") will be the greatest of:
(a) (i) 25 times the aggregate of (a) all worldwide payments made by
and all worldwide payments due to be made by Allergan to ASTI with respect
to all Licensed Products, Developed Technology Products and Pre-Selection
Products for the four calendar quarters immediately preceding the quarter
in which the Purchase Option is exercised (the "Base Period") and (b) all
payments that would have been made and all payments due to be made by
Allergan to ASTI during the Base Period if Allergan had not previously
exercised its payment buy-out option with respect to any product; provided,
however, that, for the purposes of the foregoing calculation, for any
product which has not been commercially sold during each of the four
calendar quarters in the Base Period, Allergan will be deemed to have made
Product Payments, Developed Technology Royalties and Pre-Selection Product
Payments to ASTI for each such quarter equal to the average of the payments
made during each of such calendar quarters during which such product was
commercially sold, less (ii) any amounts previously paid to exercise any
payment buy-out option for any product;
(b) the fair market value of 1,000,000 shares of Allergan Common Stock
determined as of the date Allergan provides notice of its intention to
exercise its Purchase Option;
(c) $250 million less the aggregate amount of all Technology Fee
payments and Research and Development Costs paid or incurred by ASTI as of
the date the Purchase Option is exercised; or
(d) $60 million.
In each case, the amount payable as the Purchase Option Exercise Price will
be reduced to the extent, if any, that ASTI's liabilities at the time of
exercise (other than liabilities under the Research and Development Agreement,
the Services Agreement and the Technology License Agreement) exceed ASTI's cash
and cash equivalents and short-term and long-term investments (excluding the
amount of Available Funds remaining at such time). For this purpose, liabilities
will include, in addition to liabilities required to be reflected on ASTI's
financial statements under generally accepted accounting principles, certain
contingent liabilities relating to guarantees and similar arrangements.
Allergan must pay the Purchase Option Exercise Price in cash. For the
purpose of determining the Purchase Option Exercise Price, the fair market value
of Allergan Common Stock shall be deemed to be the average of the closing sales
price of Allergan Common Stock on the New York Stock Exchange for the 20 trading
days ending with the trading day that is two trading days prior to the date of
determination.
Distribution Agreement. Under the Distribution Agreement, Allergan
contributed $200 million in cash to ASTI prior to the Distribution, and
distributed the Class A Common Stock to the Holders. Under the Distribution
Agreement, Allergan has agreed to indemnify ASTI's officers and directors to the
same extent such persons are entitled to indemnification under ASTI's Restated
Certificate of Incorporation if Allergan exercises the Purchase Option.
12
<PAGE> 15
Services Agreement. ASTI and Allergan have entered into a Services
Agreement pursuant to which Allergan has agreed to provide ASTI with
administrative services, including accounting and legal services, and other
services as mutually agreed on a fully-burdened cost reimbursement basis. The
initial term of the Services Agreement expired on December 31, 1998, but such
agreement was renewed and will continue to be renewed automatically for
successive one-year terms during the term of the Research and Development
Agreement, until six months after the expiration of the Purchase Option. ASTI
may terminate the Services Agreement at any time upon 60 days' written notice.
OTHER RELATIONSHIPS AND TRANSACTIONS
Mr. Shepherd provides services to the Company pursuant to the terms of a
letter agreement between Mr. Shepherd and Allergan regarding Mr. Shepherd's
retirement from Allergan, as described under the caption "Executive
Compensation -- Employment Agreements."
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party be
reason of his position as a director, officer or other agent of the Company, and
otherwise to the full extent permitted under Delaware law and the Company's
Bylaws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ WILLIAM C. SHEPHERD
William C. Shepherd
Chairman of the Board,
President and Chief Executive Officer
March 24, 2000
13
<PAGE> 16
ALLERGAN SPECIALTY THERAPEUTICS, INC.
P PROXY SOLICITED BY THE BOARD OF DIRECTORS
R FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 28, 2000
O
X The undersigned hereby appoints Douglas S. Ingram and Dwight
Y J. Yoder, and each of them, as attorneys and proxies of the
undersigned, with full power of substitution, to vote all of the
shares of the Class A Common Stock of Allergan Specialty
Therapeutics, Inc. (the "Company") which the undersigned may be
entitled to vote at the Annual Meeting of Stockholders of the
Company to be held at the offices of the Company, located at 2525
Dupont Drive, Irvine, CA 92612, on Friday, April 28, 2000, at 10:00
a.m., local time, and at any and all continuations, adjournments or
postponements thereof, with all powers that the undersigned would
possess if personally present, upon and in respect of the following
matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may
properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS
MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC
INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH.
------------
SEE REVERSE
SIDE
------------
= FOLD AND DETACH HERE =
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------ -------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2.
LISTED BELOW.
- ------------------------------------------------------------------ -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. To elect FOR WITHHELD NOMINEES: Alan J. 2. To ratify the FOR AGAINST ABSTAIN
directors to [ ] [ ] Lewis, Ph.D., Gary selection of [ ] [ ] [ ]
hold office L. Neil, Ph.D., KPMG LLP as
until the next Marvin E. independent
Annual Meeting Rosenthale, Ph.D. auditors of
of Stockholders and William C. the Company
and until their Shepherd for its fiscal
successors are year ending
elected. December 31, 2000.
To withhold authority to vote for any nominee(s), write such nominee(s) name(s)
below:
- ---------------------------------------------
- ------------------------------------------------------------------ -------------------------------------------------
</TABLE>
Please sign exactly as name appears hereon. If the
stock is registered in the names of two or more
persons, each should sign. Executors,
administrators, trustees, guardians and
attorneys-in-fact should add their titles. If
signer is a corporation, please give full
corporate name and have a duly authorized officer
sign, stating title. If signer is a partnership,
please sign in partnership name by authorized
person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY
IN THE ENCLOSED RETURN ENVELOPE WHICH IS POSTAGE
PREPAID IF MAILED IN THE UNITED STATES.
-------------------------------------------------
-------------------------------------------------
SIGNATURE(S) DATE
= FOLD AND DETACH HERE =
