<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:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
ALLERGAN, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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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(4) Date Filed:
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<PAGE> 2
[LOGO]
2525 DUPONT DRIVE, IRVINE, CA 92715 (714) 752-4500
March 23, 1995
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders to
be held at the corporate headquarters of Allergan, Inc., 2525 Dupont Drive,
Irvine, California, on Tuesday, April 25, 1995 at 10:00 A.M. We hope you will be
present to hear management's report to stockholders.
The attached notice of meeting and proxy statement describe the matters to
be acted upon. If you plan to attend the meeting in person, please mark the
designated box on the proxy card. We will then send you an admission card, which
you should present upon entering the meeting.
Whether or not you plan to attend personally, and regardless of the number
of shares you own, it is important that your shares be represented at the
meeting. Accordingly, we urge you to complete the enclosed proxy and return it
to our vote tabulators promptly in the postage prepaid envelope provided. If you
do attend the meeting and wish to vote in person, you may withdraw your proxy at
that time.
GAVIN S. HERBERT WILLIAM C. SHEPHERD
--------------------- -------------------------------------
Gavin S. Herbert William C. Shepherd
Chairman of the Board President and Chief Executive Officer
<PAGE> 3
[LOGO]
2525 DUPONT DRIVE, IRVINE, CA 92715
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 25, 1995
TO OUR STOCKHOLDERS:
The annual meeting of stockholders of Allergan, Inc., a Delaware
corporation, will be held at the corporate headquarters of Allergan, Inc., 2525
Dupont Drive, Irvine, California, on Tuesday, April 25, 1995 at 10:00 A.M. for
the following purposes:
1. To elect four Class III directors to serve for three-year terms ending
in 1998 and until their successors are elected and qualified.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed March 6, 1995 as the record date for
determining the stockholders entitled to notice of and to vote at the meeting
and, consequently, only stockholders of record at the close of business on March
6, 1995 will be entitled to notice of and to vote at the meeting and any
adjournment thereof.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. Even
though a stockholder may now plan to attend the meeting, he or she is urged to
complete, sign and date the enclosed proxy card and to mail it promptly in the
enclosed postage-paid envelope. Any stockholder present at the meeting may
withdraw his or her proxy and vote personally on each matter brought before the
meeting. Stockholders attending the meeting whose shares are held in the name of
a broker or other nominee should bring with them a proxy or letter from that
firm confirming their ownership of shares.
By Order of the Board of Directors
FRANCIS R. TUNNEY, JR.
----------------------------------
Francis R. Tunney, Jr.
Secretary
March 23, 1995
<PAGE> 4
[LOGO]
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS -- APRIL 25, 1995
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of Allergan,
Inc. ("Allergan" or the "Company"), 2525 Dupont Drive, Irvine, California 92715
for use at the Annual Meeting of the Company's stockholders to be held on April
25, 1995, and at any adjournment thereof, pursuant to the accompanying Notice of
annual meeting. This proxy statement and the accompanying proxy card are being
mailed to all stockholders on or about March 23, 1995.
The expense of this solicitation will be paid by the Company. In addition
to solicitation by mail, officers and employees of the Company may solicit
proxies by telephone, by facsimile or in person. The Company will also reimburse
brokers, nominees, fiduciaries and other custodians for reasonable expenses
incurred by them in sending proxy soliciting material to the beneficial owners
of Allergan stock.
GENERAL INFORMATION REGARDING VOTING, CONFIDENTIALITY AND PROXIES
The persons named in the accompanying proxy will vote FOR the election of
the nominees for directors, unless otherwise directed in the proxy. The proxy
may be revoked by the stockholder at any time prior to its use by giving notice
of such revocation to the independent vote tabulators. As to any other business
which may properly come before the meeting, the persons named in the
accompanying proxy card will vote in accordance with their best judgment,
although the Company does not presently know of any other business.
Holders of record of the Company's common stock at the close of business on
March 6, 1995 are entitled to vote at the meeting. On that date Allergan had
63,935,883 shares of common stock outstanding. Each stockholder has one vote per
share on all business to be voted upon at the meeting. A majority of the
outstanding shares will constitute a quorum at the meeting. Abstentions and
broker non-votes are counted for purposes of determining the presence or absence
of a quorum for the transaction of business. Abstentions are counted as if they
were "no" votes in tabulations of the votes cast on proposals presented to
stockholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
It is the Company's policy that all proxies, ballots and voting materials
that identify the particular vote of a stockholder be kept confidential, except
in the following circumstances: (1) to allow the independent election inspectors
to certify the results of the vote; (2) as necessary to meet applicable legal
requirements, including the pursuit or defense of a judicial action; (3) where
the Company concludes in good faith that a bona fide dispute exists as to the
authenticity of one or more proxies, ballots, or votes, or as to the accuracy of
the tabulation of such proxies, ballots, or votes; (4) where a stockholder
expressly requests disclosure or has made a written comment on a proxy card; (5)
where contacting stockholders by the Company is necessary to obtain a quorum,
the names of stockholders who have or have not voted (but not how they voted)
may be disclosed to the Company by the independent election inspectors; (6)
aggregate vote totals may be disclosed to the Company from time to time and
publicly announced at the meeting of stockholders at which they are relevant;
and (7) in the event of any solicitation of proxies or written consents with
respect to any of the
<PAGE> 5
securities of the Company by a person other than the Company of which
solicitation the Company has actual notice.
ELECTION OF DIRECTORS
PROPOSAL 1
The Company's Restated Certificate of Incorporation provides for three
classes of directors, each class consisting, as nearly as may be possible, of
one third of the whole number of the Board of Directors. At each annual meeting
the directors elected by stockholders to succeed directors whose terms are
expiring are identified as being of the same class as those directors they
succeed and are elected for a term to expire at the third annual meeting of
stockholders after their election and until their successors are duly elected
and qualified. The Board of Directors elects directors to fill vacancies on the
Board, as they occur, as well as newly created directorships. A director elected
to fill a vacancy is elected to the same class as the director he or she
succeeds, and a director elected to fill a newly created directorship holds
office until the next election by the stockholders of the class to which such
director is elected. The Board of Directors currently consists of 13 directors
and currently four each serve as Class I and Class III directors and five serve
as Class II directors.
UNLESS OTHERWISE DIRECTED IN THE PROXY, THE PERSONS NAMED IN THE
ACCOMPANYING PROXY INTEND TO VOTE THE SHARES REPRESENTED BY THE PROXY FOR THE
ELECTION AS DIRECTORS OF THE FOUR NOMINEES NAMED BELOW, ALL OF WHOM ARE, AT
PRESENT, CLASS III DIRECTORS OF THE COMPANY.
Directors are to be elected by a plurality of the votes cast at the meeting
in person or by proxy by the holders of shares entitled to vote in the election.
The Board of Directors is informed that all the nominees are willing to serve as
directors, but if any of them should decline or be unable to act as a director,
the persons named in the proxy will vote for such substitute nominee or nominees
as may be designated by the Board of Directors unless the Board reduces the
number of directors accordingly.
NOMINEES FOR DIRECTORS
CLASS III -- TERM EXPIRES 1998:
HANDEL E. EVANS, 60, has been Executive Chairman of Walsh International
Inc., an international supplier of market information and communication services
to the pharmaceutical industry, since 1986 and Chairman of the Board of its
affiliate, Pharmaceutical Marketing Services Inc., a supplier of specialized
marketing products and services to pharmaceutical companies in the United
States, Europe and Japan, since 1991. He was elected to the Board in 1989 and is
a member of the Board's Audit, and Organization and Compensation Committees.
GAVIN S. HERBERT, 62, has been Chairman of the Company since 1977 and was
also Chief Executive Officer from 1977 to 1991. Prior thereto, Mr. Herbert had
been President and Chief Executive Officer of the Company since 1961. He was
Executive Vice President of SmithKline Beckman Corporation from 1986 to 1989 and
President of SmithKline Beckman Corporation's Eye and Skin Care Products
Operations from 1981 to 1989. He is also a director of Beckman Instruments, Inc.
Mr. Herbert is a trustee of the University of Southern California and is also a
member of the Board of Directors of Research to Prevent Blindness and of the
California Health Care Institute. Mr. Herbert co-founded the Company in 1950 and
retired as an employee in 1994. He has been a director of the Company since 1950
and is a member of the Board's Finance Committee.
2
<PAGE> 6
LESLIE G. MCCRAW, 60, is Chairman of the Board and Chief Executive Officer
of Fluor Corporation, an international engineering, construction and diversified
services company. Mr. McCraw was Vice Chairman of the Board and Chief Executive
Officer of Fluor from 1990 to 1991. He was President and Chief Executive Officer
of Fluor Daniel, Inc. from 1988 and was President and Chief Executive Officer of
Daniel International Corporation from 1984. In 1975, Mr. McCraw joined Daniel,
which became a wholly-owned subsidiary of Fluor in 1977. He is also a director
of Multimedia, Inc. and serves on the Boards of Directors of the Orange County
Performing Arts Center, Junior Achievement and the President's Export Council.
Mr. McCraw has been a director of the Company since 1990 and is a member of the
Board's Audit, and Organization and Compensation Committees.
HENRY WENDT, 61, has been Executive Chairman of Finisterre Fund, a private
equity fund working exclusively in the health care products industry since
September 1994 and is the owner and President of Quivira Winery. He was Chairman
of the Board of SmithKline Beecham p.l.c., a pharmaceutical company, and its
subsidiary, SmithKline Beecham Corporation from 1989 until his retirement in
1994. He was Chief Executive Officer of SmithKline Beckman Corporation from 1987
to 1989 and was President and Chief Executive Officer from 1982 to 1987. Mr.
Wendt is also a director of Beckman Instruments, Inc., Atlantic Richfield Co.
and Aviall, Inc. He is the author of "Global Embrace," published in 1993. Mr.
Wendt has been a director of the Company since 1989 and is Chairman of the
Board's Finance Committee and a member of the Nominating Committee.
DIRECTORS CONTINUING IN OFFICE
CLASS I -- TERM EXPIRES 1996:
HOWARD E. (TED) GREENE, JR., 52, has been Chairman and Chief Executive
Officer of Amylin Pharmaceuticals, Inc., a biotech company involved in research
and development of medicines for treating diabetes, since 1987. He was a General
Partner of Biovest Partners, a seed venture capital firm specializing in medical
technology companies, from 1986 until 1993, and was Chief Executive Officer of
Hybritech Incorporated, a biotech company that is now a division of Eli Lily &
Company, from 1979 until 1986. From 1974 until 1979, Mr. Greene was an executive
with Baxter Healthcare, and from 1967 until 1974 he was a consultant with
McKinsey & Company. Mr. Greene is Chairman of the Board of Cytel Corporation and
is also a director of Pyxis Corporation, Neurex Corporation and the
International Biotechnology Trust. Mr. Greene was elected to the Board in 1990
and is a member of the Board's Finance Committee.
RICHARD M. HAUGEN, 42, has been Executive Vice President and Chief
Operating Officer of the Company since April 1992 and had been Corporate Vice
President of the Company and President, Worldwide Eye Marketing and Sales &
Operations since January 1992. Prior thereto, Mr. Haugen was Corporate Vice
President and President, Americas Region in 1991 and had been President of
Allergan Optical and Senior Vice President of the Company from 1989 to 1991.
Prior thereto he was Senior Vice President and President of Allergan
Pharmaceuticals from 1988 to 1989 and was Senior Vice President, Planning and
Business Development since 1987. Mr. Haugen first joined the Company in 1976.
Mr. Haugen was elected to the Board in 1992 and is a member of the Board's
Finance Committee.
LESTER J. KAPLAN, PH.D., 44, has been Corporate Vice President, Research
and Development of the Company since 1992. He had been Senior Vice President,
Pharmaceutical Research and Development since 1991, Senior Vice President,
Research and Development since 1989 and Vice President since 1988. Dr. Kaplan
had served as Senior Director in Group Research and Development from 1986 to
1988 and as
3
<PAGE> 7
Associate Director, Discovery Research from 1984 to 1986. Dr. Kaplan first
joined the Company in 1983 and was elected to the Board in November 1994.
LEONARD D. SCHAEFFER, 49, has been Chairman of the Board of Blue Cross of
California, a health insurance organization, since 1989 and Chief Executive
Officer since 1986. He has also been Chairman of the Board and Chief Executive
Officer of WellPoint Health Networks, Inc., a for-profit managed health care
company, since 1992. Mr. Schaeffer was the Administrator of the U.S. Health Care
Financing Administration (HCFA) from 1978 to 1980. Mr. Schaeffer is Chairman of
the Board of the National Health Foundation and the National Institute for
Health Care Management. Mr. Schaeffer was elected to the Board in 1993 and is a
member of the Board's Organization and Compensation Committee.
CLASS II -- TERM EXPIRES 1997:
HERBERT W. BOYER, PH.D., 58, a founder of Genentech, Inc., a biotechnology
company, has been a director of Genentech since 1976 and is a consultant to
Genentech. He served as Vice President of Genentech from 1976 to 1991. Dr.
Boyer, a Professor of Biochemistry at the University of California at San
Francisco from 1976 to 1991, demonstrated the usefulness of recombinant DNA
technology to produce medicines economically, which laid the groundwork for
Genentech's development. In 1993, Dr. Boyer received the 1993 Helmut Horten
Research Award. He also received the National Medal of Science from President
Bush in 1990, the National Medal of Technology in 1989 and the Albert Lasker
Basic Medical Research Award in 1980. He is an elected member of the National
Academy of Sciences and a Fellow in the American Academy of Arts and Sciences.
Dr. Boyer was elected to the Board in July 1994 and is a member of the Board's
Audit Committee.
TAMARA J. ERICKSON, 40, is a Senior Vice President and a Managing Director
of Arthur D. Little, Inc., a management consulting company. From 1978 to 1991,
Ms. Erickson held various positions at Arthur D. Little, Inc. including Vice
President and Managing Director, Health Industries from 1985 to 1989, Vice
President and Managing Director, Industry Management Section from 1989 to 1991,
and Vice President and Managing Director, North America Management Consulting
from 1991 to 1993. She directed the firm's global health care practice from 1983
to 1991. Ms. Erickson is co-author of "Third Generation R&D -- Managing the Link
to Corporate Strategy," published in April 1991. She is a member of the Board of
Trustees of Boston Ballet. Ms. Erickson was elected to the Board in 1992 and is
a member of the Board's Nominating, and Organization and Compensation
Committees.
WILLIAM R. GRANT, 70, is Chairman of Galen Associates, Inc., a venture
capital firm in the health care industry. From 1987 to 1989 he was Chairman of
New York Life International Investment, Inc. From 1979 to 1987 he was Chairman
of MacKay-Shields Financial Corporation, investment counselors. Mr. Grant is a
director of Fluor Corporation, Witco Corporation, New York Life Insurance Co.,
Inc., SmithKline Beecham p.l.c., Seagull Energy Corporation, Datamedic Corp. and
O.S.I. Corporation. He is a trustee of the Mary Cary Flagler Trust. Mr. Grant
was elected to the Board in 1989 and is Chairman of the Board's Organization and
Compensation, and Nominating Committees, and a member of the Audit Committee.
LOUIS T. ROSSO, 61, has been Chief Executive Officer of Beckman
Instruments, Inc., a manufacturer of laboratory instruments, since 1988 and
Chairman of the Board since 1989. He also served as President from 1982 until
1993 and as Vice President of SmithKline Beckman Corporation from 1982 until
1989. He is a director of American Health Properties and of Harvey Mudd College.
Mr. Rosso was elected to the Board in 1989 and is Chairman of the Board's Audit
Committee and a member of the Nominating Committee.
4
<PAGE> 8
WILLIAM C. SHEPHERD, 56, has been President and Chief Executive Officer of
the Company since 1992 and had been President and Chief Operating Officer from
1984 to 1991. Prior thereto, he was President of Allergan U.S., Senior Vice
President, U.S. Operations and Vice President, Operations. Mr. Shepherd first
joined the Company in 1966. He is a director of Ligand Pharmaceuticals
Incorporated and serves on the Board of Directors of the Orange County
Performing Arts Center. Mr. Shepherd has been a director of the Company since
1984 and is a member of the Board's Finance Committee.
INFORMATION REGARDING THE BOARD OF DIRECTORS
MEETINGS AND COMMITTEES
The Board of Directors held seven meetings during 1994 and its standing
committees also met from time to time to address issues within their respective
jurisdictions. Average attendance by directors at regular and special Board and
committee meetings was 85% and all directors attended 75% or more of the
meetings of the Board and committees on which they served, except Dr. Boyer and
Mr. Wendt who attended 40% and 73% of such meetings, respectively.
Audit Committee -- The Audit Committee, which had four meetings in 1994,
nominates the firm of independent auditors for appointment by the Board and
meets with the independent auditors to discuss the scope and results of their
audit examination and the fees related to such work. It also meets with the
Company's internal auditors and financial management to review the internal
audit department's activities; to discuss the Company's accounting practices and
procedures; to review the adequacy of the Company's accounting and control
systems; and to report to the Board any considerations or recommendations the
Audit Committee may have with respect to such matters. The Committee also
reviews the audit schedule and considers any issues raised by its members, the
independent public accountants retained to audit the books and records of the
Company, the internal audit staff, the legal staff or management. In addition,
the Committee monitors the Business Ethics Policy for the Company's employees,
coordinates compliance and reviews and investigates noncompliance matters. None
of the members of the Audit Committee are officers or employees of the Company
or any of its subsidiaries.
Finance Committee -- The Finance Committee, which had five meetings in
1994, reviews, approves or modifies management recommendations on corporate
financial strategy and policy and, where appropriate, makes recommendations to
the Board of Directors.
Nominating Committee -- The Nominating Committee, which held three meetings
in 1994, recommends qualified candidates for election as directors of the
Company, including the slate of directors which the Board proposes for election
by stockholders at the Annual Meeting.
Organization And Compensation Committee -- The Organization and
Compensation Committee, which had four meetings in 1994, reviews and approves
corporate organizational structure; reviews performance of corporate officers;
establishes overall employee compensation policies; and recommends to the Board
of Directors major compensation programs. The Committee also reviews and
approves compensation of directors and corporate officers, including salary and
bonus awards, and administers the 1989 Incentive Compensation Plan. No member of
the Organization and Compensation Committee is a member of management or
eligible for compensation other than as a director. The report of the Committee
begins on page 15.
5
<PAGE> 9
STOCKHOLDER NOMINATIONS
The Restated Certificate of Incorporation of the Company provides that any
stockholder entitled to vote for the election of directors at a meeting may
nominate persons for election as directors only if timely written notice of such
stockholder's intent to make such nomination is given, either by personal
delivery or United States mail, postage prepaid, to the Secretary, Allergan,
Inc., 2525 Dupont Drive, Irvine, CA 92715. To be timely, a stockholder's notice
must be delivered to, or mailed and received at, the address provided not less
than 30 days nor more than 60 days prior to the scheduled annual meeting,
regardless of any postponements, deferrals or adjournments of that meeting to a
later date; provided, however, that if less than 40 days' notice or prior public
disclosure of the date of the scheduled annual meeting is given or made, notice
by the stockholder, to be timely, must be so delivered or received not later
than the close of business on the tenth day following the earlier of the day on
which such notice of the date of the scheduled annual meeting was mailed or the
day on which such public disclosure was made. A stockholder's notice to the
Secretary must set forth: (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, (i) the name, age, business
address and residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class and number of shares of capital stock
of the Company beneficially owned by the person, (iv) any other information
relating to the person that is required to be disclosed in solicitations for
proxies for election of directors pursuant to Rule 14a under the Securities
Exchange Act of 1934, as amended; and (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the Company's books, of the
stockholder and (ii) the class and number of shares of the Company's stock which
are beneficially owned by the stockholder on the date of such stockholder
notice. The Company may require any proposed nominee to furnish such other
information as may be reasonably required by the Company to determine the
eligibility of such proposed nominee to serve as director of the Company.
DIRECTOR COMPENSATION
Of the Board's current 13 members, three are officers of the Company who do
not receive additional compensation for Board or committee service. Except for
the Chairman, the remaining directors receive an annual $20,000 retainer plus
$1,300 for each Board meeting and $1,000 for each committee meeting attended by
committee members and $1,500 for each committee meeting attended by the
committee chair.
Mr. Herbert, Chairman of the Board of the Company, retired effective March
31, 1994 as an executive officer and employee of the Company. Mr. Herbert
continues to serve in the capacity of Chairman of the Board and provides ongoing
advisory services to Allergan focusing on government affairs and industrial
relations. For those advisory services and his services as Chairman, he receives
an annual retainer of $150,000. He is also paid attendance fees as described
above, will receive grants of restricted stock under the 1989 Nonemployee
Director Stock Plan and is eligible to participate in the Deferred Directors Fee
Program, both as described below.
In 1991, the Company adopted a Deferred Directors Fee Program that permits
directors to defer all or a portion of their retainers and meeting fees until
termination of their status as a director. Deferred amounts are treated as
having been invested in Common Stock of the Company and thus are valued
according to fluctuations in the market price of the Common Stock. Distributions
will be made in cash only. Ms. Erickson and Messrs. Evans, Grant, Greene,
Kermes, McCraw, Rosso, Schaeffer and Wendt chose to defer all or a portion of
their retainers and meeting fees for the period January 1, 1994 through December
31, 1994.
In accordance with the Company's 1989 Nonemployee Director Stock Plan (the
"Director Plan"), as amended by the stockholders in April 1994, each director
who is not an employee of the Company receives
6
<PAGE> 10
grants of restricted stock upon (a) initial election to the Board of 500 shares
per year for each year, including a partial year of the term to be served, to a
maximum of three years and (b) reelection to the Board of 500 shares per year
for each of the three years of the new term. If an individual ceases to serve as
a director prior to full vesting of a restricted stock grant for reasons other
than death or total disability those shares not then vested will be returned to
the Company without payment of any consideration to the director. The Director
Plan provides that the number of shares available for issuance under the
Director Plan shall be adjusted in the event of certain changes in
capitalization, such as stock splits and stock dividends.
OTHER MATTERS
In June 1992, the Company entered into a joint venture with Ligand
Pharmaceuticals Incorporated ("Ligand") for the research and development and
commercial exploitation of pharmaceutical products based on retinoid technology.
Each company agreed to contribute $15 million to the venture over three years.
Allergan Pharmaceuticals (Ireland) Ltd., Inc. ("Alergan Ireland") also
purchased, in conjunction with the formation of the joint venture and
thereafter, an approximately 14.7% equity interest in Ligand for approximately
$24 million, including the exercise of warrants in 1993. William C. Shepherd,
President and CEO of the Company, became a director of Ligand shortly after the
formation of the joint venture.
Ligand and Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT"), a recently
formed corporation which is intended to succeed to the operations of the joint
venture, have filed a registration statement with the Securities and Exchange
Commission ("SEC") relating to the funding of ALRT through a subscription
offering to the stockholders of the Company and of Ligand (the "Subscription
Offering"). ALRT will commence operations upon the completion of the
Subscription Offering. Allergan Ireland has agreed to purchase $6 million of
Ligand Common Stock upon the completion of the Subscription Offering at a price
equal to the average closing price of Ligand Common Stock for the 20 trading
days ending the trading day immediately preceding such completion. Mr. Shepherd
is a director of ALRT. A registration statement relating to the Subscription
Offering has been filed with the SEC but has not yet become effective. The
securities to be offered in the Subscription Offering may not be sold nor may
offers related to them be accepted prior to the time such registration statement
becomes effective. This disclosure shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of such securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
COMPLIANCE WITH SEC REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the SEC and the New York Stock Exchange. Executive
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.
Based solely on its review of the copies of such forms furnished to the
Company and written representations that no other reports were required during
the fiscal year ended December 31, 1994, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with except that Jacqueline J. Schiavo, an executive
officer, filed her Form 3 upon becoming an executive officer in a timely manner
but inadvertently omitted to report options to purchase 1,544 shares and
Diethart Reichardt, an executive officer, filed his Form 3 upon becoming an
executive officer in a timely manner but inadvertently reported ownership of
certain shares twice. They subsequently corrected their prior reports.
7
<PAGE> 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BY MANAGEMENT
The following table sets forth information as of January 31, 1995 regarding
the beneficial ownership of the Common Stock of the Company by each nominee,
present directors of the Company, each of the executive officers named in the
Summary Compensation Table and all of the directors and executive officers of
the Company as a group. Except as described in footnotes 5 and 6 below, no
officer or director of the Company owns beneficially 1% or more of the common
stock outstanding.
<TABLE>
<CAPTION>
SHARES OF RIGHTS TO
COMMON STOCK ACQUIRE
BENEFICIALLY BENEFICIAL
BENEFICIAL OWNER OWNED(1)(2) OWNERSHIP(3) TOTAL
---------------- ------------ ------------ ---------
<S> <C> <C> <C>
CLASS III DIRECTOR NOMINEES:
Handel E. Evans.............................. 4,409 -- 4,409
Gavin S. Herbert............................. 429,125(4) 314,892 744,017(5)
Leslie G. McCraw............................. 2,456 -- 2,456
Henry Wendt.................................. 51,603 -- 51,603
CLASS I DIRECTORS:
Howard E. Greene, Jr......................... 2,560 -- 2,560
Richard M. Haugen............................ 41,086 98,273 139,359
Lester J. Kaplan, Ph.D....................... 14,709 52,832 67,541
Leonard D. Schaeffer......................... 1,000 -- 1,000
CLASS II DIRECTORS:
Herbert W. Boyer, Ph.D....................... 1,500 -- 1,500
Tamara J. Erickson........................... 2,140 -- 2,140
William R. Grant............................. 15,811 -- 15,811
Louis T. Rosso............................... 46,258 -- 46,258
William C. Shepherd.......................... 92,784 194,496 287,280
OTHER NAMED EXECUTIVE OFFICERS
Vicente Anido, Jr., Ph.D..................... 2,482 6,000 8,482
Michael J. Donohoe........................... 8,155 51,509 59,664
All current directors and executive officers
(21 persons, including those named
above).................................. 777,764 922,124 1,699,888(6)
</TABLE>
- ---------------
(1) In addition to shares held in the individual's sole name, this column
includes shares held by the spouse and other members of the named person's
immediate household who share that household with the named person, and
shares held in family trusts. This column also includes shares held in trust
for the benefit of the named party or group in the Company's Savings and
Investment Plan and the Employee Stock Ownership Plan as of December 31,
1994.
8
<PAGE> 12
(2) In addition to the foregoing beneficial ownership amounts, the Directors
listed below elected to defer all or a portion of their annual retainer and
meeting fees, with such deferred amounts treated as having been invested in
Common Stock of the Company. As of January 31, 1995, such amounts constitute
the economic equivalent of the following numbers of shares of Common stock:
<TABLE>
<CAPTION>
ECONOMIC EQUIVALENT
NUMBER OF SHARES
-------------------
<S> <C>
Tamara J. Erickson................................... 1,939
Handel E. Evans...................................... 6,093
William R. Grant..................................... 6,366
Howard E. Greene, Jr................................. 3,090
Leslie G. McCraw..................................... 5,159
Louis T. Rosso....................................... 3,387
Leonard D. Schaeffer................................. 1,753
Henry Wendt.......................................... 5,779
</TABLE>
(3) Shares which the party or group has the right to acquire within 60 days
after January 31, 1995 upon the exercise of stock options.
(4) Includes 122,140 shares held in two trusts for which Mr. Herbert serves as
co-trustee and in which he or his sister has a beneficial interest.
(5) Represents 1.2% of the shares outstanding as of January 31, 1995.
(6) Represents 2.7% of the shares outstanding as of January 31, 1995.
9
<PAGE> 13
BY OTHERS
Management of the Company knows of no person, except as set forth below,
who is the beneficial owner of more than 5% of the Company's issued and
outstanding Common Stock.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENT
BENEFICIAL OWNERS OWNED OF CLASS
------------------- ----------- --------
<S> <C> <C>
Certain Fidelity funds............................... 8,602,077(1) 13.5%
82 Devonshire Street
Boston, MA 02109-3614
INVESCO plc and
INVESCO Capital Management, Inc.................... 4,611,200(2) 7.2%
11 Devonshire Square
London EC2M 47R
England
State Farm Mutual.................................... 4,543,900(3) 7.1%
Automobile Insurance Company
One State Farm Plaza
Bloomington, Illinois 61710
Brinson Partners, Inc................................ 4,035,245(4) 6.3%
209 South LaSalle Street
Chicago, Illinois 60604
Mellon Bank Corporation.............................. 3,607,445(5) 5.7%
One Mellon Bank Center
Pittsburgh, PA 15258-0001
</TABLE>
- ---------------
(1) Based on a Schedule 13G, dated February 13, 1995, filed with the Securities
and Exchange Commission by FMR Corp. on behalf of itself and related
entities.
(2) Based on a Schedule 13G, dated February 10, 1995, filed with the Securities
and Exchange Commission by the named beneficial owner on behalf of itself
and related entities.
(3) Based on a Schedule 13G, dated January 28, 1995, filed with the Securities
and Exchange Commission by the named beneficial owner on behalf of itself
and related entities.
(4) Based on a Schedule 13G, dated February 13, 1995, filed with the Securities
and Exchange Commission by the named beneficial owner on behalf of itself
and related entities.
(5) Based on a Schedule 13G, dated January 19, 1995, filed with the Securities
and Exchange Commission by the named beneficial owner on behalf of itself
and related entities. Includes shares held as trustee for certain of the
Company's employee benefit plans.
10
<PAGE> 14
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows the compensation for the Company's Chief
Executive Officer and the four most highly paid executive officers other than
the CEO for services rendered in all capacities to the Company and its
subsidiaries for the years ended December 31, 1992, 1993 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
--------------------
ANNUAL COMPENSATION RESTRICTED
NAME AND -------------------------- STOCK ALL OTHER
PRINCIPAL SALARY BONUS OTHER AWARD(S) COMPENSATION
POSITION YEAR ($)(1) ($)(2) ($) ($)(3) OPTIONS(#) ($)(4)
--------- ---- -------- -------- ------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William C. Shepherd, 1994 546,010 420,000 61,000 23,609
President and CEO 1993 494,348 320,000 61,000 23,235
1992 416,004 340,000 245,000 61,000 25,182
Richard M. Haugen, 1994 389,930 274,000 34,300 20,496
Executive Vice 1993 351,796 200,000 34,300 15,905
President and COO 1992 289,680 224,000 36,500 21,166
Vicente Anido, Jr., Ph.D., 1994 233,000 148,000 24,000 11,573
Corporate Vice President 1993 116,767 47,500 24,000 3,920
and President, Americas Region
Lester J. Kaplan, Ph.D., 1994 235,608 136,000 16,000 13,236
Corporate Vice 1993 219,625 106,900 16,000 17,576
President, R&D 1992 203,300 115,000 108,750 13,300 12,892
Michael J. Donohoe, 1994 235,407 136,000 (5) 24,000 8,644
Corporate Vice President and 1993 218,938 106,800 (5) 24,000 13,463
President, Europe Region 1992 202,750 126,880 (5) 24,800 16,239
</TABLE>
- ---------------
(1) The amounts shown include cash compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers.
(2) The amounts shown represent bonus performance awards which were paid in
February of the following year under the Company's Management Bonus Plan for
services rendered during the fiscal year covered.
(3) All shares of restricted stock vest, in whole, in three years or more and
receive non-preferential dividends. The amounts shown in the table represent
the value of the restricted stock awards on the date of grant. The following
number of restricted shares (and the value based on the closing price of the
stock on December 31, 1994) were held by each of the named executives as of
December 31, 1994: Mr. Shepherd, 10,000 ($282,500); Mr. Anido, 2,000
($56,500); and Dr. Kaplan, 5,000 ($141,250). Restrictions on Mr. Shepherd's
shares lapsed in January 1995.
(4) The total amounts shown in this column for the 1994 fiscal year consist of
contributions to the Allergan, Inc. Savings and Investment Plan ("SIP"), the
Allergan, Inc. Employee Stock Ownership Plan
11
<PAGE> 15
("ESOP"), the cost of term life insurance and term executive post-retirement
life insurance premiums ("Ins") and payment in lieu of vacation ("Vac"), as
follows:
<TABLE>
<CAPTION>
SIP ESOP INS VAC
------ ------ ------ ------
<S> <C> <C> <C> <C>
Mr. Shepherd............................ $4,832 $3,334 $15,443 $ --
Mr. Haugen.............................. 6,756 3,334 2,850 7,556
Dr. Anido............................... 1,957 3,334 1,780 4,502
Dr. Kaplan.............................. 3,750 3,334 1,596 4,556
Mr. Donohoe............................. 3,760 3,334 1,550 --
</TABLE>
In addition, Dr. Anido received $92,594 and $37,511 in 1993 and 1994,
respectively, in connection with his relocation to California to join
the Company.
(5) Mr. Donohoe temporarily relocated to the United Kingdom in February 1992 in
connection with his election as President, Europe Region. As a U.S.-based
employee assigned abroad, Mr. Donohoe is entitled to certain payments that
are made available generally to employees as part of the assignment. These
amounts, which typically are associated with the expenses of maintaining two
households, home visits, tax equalization and additional education costs for
such employees' children, have not been included in this table.
STOCK OPTIONS
The following table shows information regarding stock options granted to
the named executive officers during 1994.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE OR GRANT DATE
GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT
NAME (#)(1) 1994 PER SHARE DATE VALUE ($)(2)
---- ---------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C>
William C. Shepherd............... 61,000 7.8% $ 21.06 4/19/04 $484,340
Richard M. Haugen................. 34,300 4.4% $ 21.06 4/19/04 272,342
Vicente Anido, Jr., Ph.D.......... 24,000 3.1% $ 21.06 4/19/04 190,560
Lester J. Kaplan, Ph.D............ 16,000 2.1% $ 21.06 4/19/04 127,040
Michael J. Donohoe................ 24,000 3.1% $ 21.06 4/19/04 190,560
</TABLE>
- ---------------
(1) All options disclosed above were granted pursuant to the 1989 Incentive
Compensation Plan (the "Incentive Plan") on April 19, 1994 and become
exercisable 25% per year beginning April 19, 1995 The exercise price and the
tax withholding obligations related to exercise may be paid by delivery of
already-owned shares. The Incentive Plan grants broad discretion to change
material terms, including the acceleration of vesting upon a "Change in
Control." See "Change in Control Arrangements" on page 14.
(2) Based on the Black-Scholes model of option valuation to determine grant date
present value. The actual value, if any, an executive may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised, so that there is no assurance the value realized by
an executive will be at or near the value estimated by the Black-Scholes
model. With respect to the 1994 option grants, the following assumptions
were used in the Black-Scholes model: market price of stock, $21.06;
exercise price of option, $21.06; stock volatility, .222 (based on two-year
volatility and dividend yield); annualized risk-free interest rate, 7.30%;
option term, 10 years; dividend yield, 1.69; risk of termination per year of
vesting, 3%.
12
<PAGE> 16
OPTION EXERCISES AND HOLDINGS
The following table shows stock option exercises by the named executive
officers during 1994, including the aggregate value of gains on the date of
exercise. In addition, this table includes the number of shares covered by both
exercisable and non-exercisable stock options as of December 31, 1994. Also
reported are the values for "in-the-money" options which represent the positive
spread between the exercise price of any such existing stock options and the
year-end price of Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE AT 12/31/94(#)(1) AT 12/31/94 ($)(2)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME # ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William C. Shepherd......... 23,536 $250,658 194,496 147,750 $1,466,226 $927,098
Richard M. Haugen........... 1,471 14,931 98,273 85,525 743,775 536,864
Vicente Anido, Jr., Ph.D.... -- -- 6,000 42,000 25,680 249,600
Lester J. Kaplan, Ph.D...... -- -- 52,832 38,150 403,870 239,060
Michael J. Donohoe.......... -- -- 51,509 59,650 340,039 374,353
</TABLE>
- ---------------
(1) In accordance with the agreement entered into between the Company and SKB
governing the Spinoff Distribution, each employee or former employee of the
Company who as of the date of the Spinoff Distribution held an SKB stock
option was granted a nonqualified stock option under the Incentive Plan in
substitution of the SKB option. The exercise prices of the Company options
were set by the Company's Incentive Compensation Plan Committee, then in
existence, in a manner designed to preserve the gain in the SKB option at
the time of substitution. The numbers shown include the value of options
accumulated, and not yet exercised, over a ten-year period, including the
period when the Company was a subsidiary of SKB.
(2) Based on the closing price of $28.25 on the New York Stock Exchange of the
Company's Common Stock.
DEFINED BENEFIT PENSION PLANS
The Company has established a defined benefit retirement plan as a
successor to the pension benefit obligations of the retirement plan of its
former parent company, SmithKline Beckman Corporation ("SKB") with respect to
Allergan employees. Allergan became an independent, publicly-held company as a
result of a spinoff distribution by SKB in 1989 (the "Spinoff Distribution").
The Allergan plan, into which certain assets of the SKB plan were transferred in
conjunction with the Spinoff Distribution, provides pension benefits to
employees, including officers, based upon the average of the highest 60
consecutive months of eligible earnings ("Final Average Pay") and years of
service integrated with covered compensation as defined by the Social Security
Administration.
Allergan has also established two supplemental retirement plans ("SRP") for
employees, including officers. These plans pay benefits directly to a
participant to the extent benefits under the Pension Plan are limited by certain
Internal Revenue Code provisions.
13
<PAGE> 17
The following table illustrates the annual combined retirement benefits
payable under the retirement plans based on an age 62 retirement. If an employee
elects a benefit for his or her surviving spouse, the retirement benefit for the
employee is reduced to reflect this additional coverage.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------
FINAL AVERAGE PAY 15 20 25 30 35 40 45
- ----------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$200,000........................ 49,600 66,100 82,700 99,200 115,700 120,700 125,700
$250,000........................ 62,600 83,400 104,300 125,100 146,000 152,200 158,500
$300,000........................ 75,500 100,700 125,900 151,100 176,300 183,800 191,300
$350,000........................ 88,500 118,000 147,500 177,000 206,500 215,300 224,000
$400,000........................ 101,500 135,300 169,200 203,000 236,800 246,800 256,800
$500,000........................ 127,400 169,900 212,400 254,900 297,400 309,900 322,400
$600,000........................ 153,400 204,500 255,700 306,800 357,900 372,900 387,900
$700,000........................ 179,300 239,100 298,900 358,700 418,500 436,000 453,500
$800,000........................ 205,300 273,700 342,200 410,600 479,000 499,000 519,000
$900,000........................ 231,200 308,300 385,400 462,500 539,600 562,100 584,600
</TABLE>
Eligible earnings include basic salary and bonuses earned during the year.
Unreduced benefits are payable at age 62, but employees may continue employment
beyond then and earn additional retirement benefits. Credited years of service
at normal retirement for the individuals named in the compensation table would
be as follows: Mr. Shepherd, 34 years; Mr. Haugen, 35 years; Dr. Anido, 21
years; Dr. Kaplan, 29 years; and Mr. Donohoe, 18 years.
CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into agreements with each of its executive officers
and certain other officers which provide certain benefits in the event of a
change in control of the Company. A "change in control" of the Company is
defined as, in general, the acquisition by any person of beneficial ownership of
20% or more of the voting stock of the Company, certain business combinations
involving the Company or a change in a majority of the incumbent members of the
Board of Directors, except for changes in the majority of such members approved
by such members. If, within two years after a change in control, the Company or,
in certain circumstances, the executive, terminates his or her employment, the
executive is entitled to a severance payment equal to one, two or three
(depending on the executive in question) times (i) such executive's highest
annual salary within the five-year period preceding termination plus (ii) a
bonus increment equal to the average of the two highest of the last five bonuses
paid to such executive under the Company's Management Bonus Plan. In addition,
the executive is entitled to the continuation of all employment benefits for a
one-, two- or three-year period (depending on the executive in question), the
vesting of all stock options and certain other benefits, including payment of an
amount sufficient to offset any "excess parachute payment" excise tax payable by
the executive pursuant to the provisions of the Internal Revenue Code or any
comparable provision of state law. The multiple of salary and bonus (as
calculated above) and the number of years of continued coverage of other
benefits are as follows: Messrs. Shepherd and Haugen -- three years; Messrs.
Anido, Kaplan and Donohoe, and the other six executive officers -- two years;
other covered officers (21 persons) -- one year.
14
<PAGE> 18
In addition, the Company's SRP, Incentive Plan, Savings and Investment
Plan, Employee Stock Ownership Plan and Nonemployee Director Stock Plan each
contain provisions for the accelerated vesting of benefits under such plans upon
a change in control of the Company. For such purposes a change in control is
deemed to occur upon the acquisition by any person of 50% or more of the
combined voting power of the Company's then outstanding voting securities, a
change in composition of a majority of the Board of Directors unless approved by
incumbent directors, and certain other acquisition related events.
REPORT OF THE ORGANIZATION AND COMPENSATION COMMITTEE
As members of the Organization and Compensation Committee, it is our duty,
pursuant to our charter to: administer the Company's Management Bonus Plan and
the 1989 Incentive Compensation Plan, review and adjust base compensation
levels, evaluate performance, and consider and approve management succession for
corporate officers.
Allergan's executive compensation programs are designed to attract,
motivate, and retain the executive talent needed to optimize shareholder value
in a competitive environment. The programs support the goal of increasing
shareholder value of the Company by achieving specific financial and strategic
objectives.
Allergan's executive compensation programs are designed to provide:
- levels of base compensation that are competitive with comparable
pharmaceutical and diversified health care companies;
- annual incentive compensation that varies in a consistent and predictable
manner with achievement of the financial performance objectives of the
Company; and
- long-term incentive compensation that focuses executive efforts on
building shareholder value through meeting longer-term financial and
strategic goals.
In designing and administering its executive compensation program, the
Company attempts to strike an appropriate balance among these various elements,
each of which is discussed in greater detail below.
BASE SALARY
Base salary, as well as bonus, is targeted at the 50th percentile level,
consistent with comparable pharmaceutical and diversified health care companies.
The Company's Compensation Department, in an effort to obtain a broad base of
data, participates in a number of salary surveys and obtains commercially
available surveys. In conducting its analysis, the Company attempts, when data
is available, to include data from companies included in the S&P Health Care
(Diversified) Index and other S&P Health Care indices, as well as from companies
subjectively considered comparable based on such factors as size, product lines,
employment levels and market capitalization. For 1994, the executive salary
structure adjustment and merit increase guidelines were based on commercially
available surveys from the pharmaceutical and health care industries. Allergan's
salary increase program is designed to reward individual performance consistent
with the Company's overall financial performance in the context of competitive
practice. Annual performance reviews and formal merit increase guidelines
determine individual salary increases.
THE MANAGEMENT BONUS PLAN
The Management Bonus Plan is designed to reward management-level employees
for their contributions to corporate and individual objectives. Each eligible
employee's award is expressed as a percentage of the
15
<PAGE> 19
participant's December 31, 1994 base salary. Bonus targets begin at 10% for
managers and range from 30% to 60% for executive officers, it being the
Committee's compensation philosophy that increasing portions of compensation
should be "at risk" for those employees with greater influence on shareholder
value. Individual performance is measured against objectives that reflect what
executives must do in order for Allergan to meet its short- and long-term
business goals. A participant's individual bonus target award may be modified
from 0% to 150%. In general, each eligible employee sets for himself or herself
a number of objectives for the coming year and then submits a self-assessment of
performance against these objectives as a part of the year-end compensation
review process. The individual objectives vary considerably in detail and
subject matter. Examples of objectives identified by executive officers for 1994
include identifying and pursuing new business opportunities, making important
progress toward obtaining "ISO 9000" certification (a quality assurance
program), introduction of new products into designated markets, and filling key
vacancies in management. This information (or summaries thereof) is generally
considered by the Committee in a subjective evaluation of overall performance of
the executive officers for purposes of determining the actual bonus.
Organizational objectives are measured in terms related to Allergan's
increase in shareholder value: cash flow return on investment (CFROI), sales
growth over the prior year, and operating margin objectives. The Committee
believes that these measures are primary determinants with the highest
historical correlation with share price. Targets based on organizational
objectives are established as part of the annual operating plan process which
includes a review of peer group company performance.
The bonus target is set at 100% when 100% of operating plan objectives for
CFROI, sales growth, and operating margin are achieved. The bonus award
guideline is highly leveraged with the possible percentage ranging from 0% to
200%, and is linked to company performance against the three measures. For 1994,
the Company's bonus award guideline percentage was 115%, with results in CFROI
and sales growth exceeding planned levels and operating margin below the planned
level.
The following illustrates the bonus determination process:
<TABLE>
<CAPTION>
Employee's Organizational Individual Individual
Bonus Objective Performance Bonus
Target Achievement Achievement Percentage
<S> <C> <C> <C> <C>
X X =
e.g. 25% 115% 110% 31.6%
</TABLE>
For bonus year 1994, the Committee approved a total bonus fund of
approximately $10 million for approximately 450 participating employees.
TOTAL ANNUAL CASH COMPENSATION (BASE SALARY PLUS BONUS)
Total cash compensation is set competitively at the 50th percentile, as
described in the section titled Base Salary above, when annual operating plans
and targets are achieved. Top-quartile cash compensation can be attained only if
business results significantly exceed the operating plan.
INCENTIVE COMPENSATION PLAN
The 1989 Incentive Compensation Plan (the "Incentive Plan") authorizes the
granting of various stock-based incentive awards to officers and key employees
of the Company and its subsidiaries. The plan has been designed to:
- link management's financial success to that of the shareholders via
broad-based participation of Allergan management employees (approximately
400 managers received grants in 1994);
16
<PAGE> 20
- focus attention on building shareholder value through meeting longer-term
financial and strategic goals;
- balance long-term with short-term decision making; and
- encourage and create ownership and retention of the Company's stock.
COMMITTEE ACTIVITIES
In 1994, the Committee had four formal meetings as well as many interim
discussions. The following summarizes the Committee's major activities:
- Approved the 1994 Executive Salary Plans. These plans set the salary
grades, ranges, and target bonus percentages based on competitive
information from comparable pharmaceutical and diversified health care
companies.
- Reviewed and determined 1994 salary increases for each corporate officer
based on their performance.
- Determined 1993 management bonus awards for corporate officers based on
assessment of their performance against objectives. Approved the 1994
Management Bonus Plan's corporate financial objectives.
- Reviewed and recommended 1994 stock awards for executive officers as well
as for approximately 400 other participants.
- Recommended the election of 1994 corporate officers and the designation
of executive officers covered under section 16 of the Securities Exchange
Act of 1934.
- Reviewed executive stock ownership guidelines. The President and CEO is
expected to hold three times his salary in Company stock; the guideline
for the Executive Vice President and COO is two times his salary; and the
guideline for corporate vice presidents is one time salary.
- Approved an Executive Deferred Compensation Plan.
- Reviewed Pension Plan, Employee Stock Ownership Plan and Savings and
Investment Plan funding levels.
- Reviewed management development and succession planning efforts.
The Company, with the approval of the Committee, has retained the services
of Towers Perrin, a Human Resources consulting firm, since 1989 to provide
advice and review the reasonableness of compensation paid to executive officers
of the Company. As part of its services, Towers Perrin reviewed and, as
appropriate, provided recommendations with respect to the 1994 Executive Salary
Plan and Stock Award Guidelines.
SALARY INCREASES
The CEO received an increase of 10.9% effective February 1, 1995,
reflecting the Committee's assessment of Mr. Shepherd's 1994 performance when
evaluated against the objectives established for the year. Of particular
noteworthiness were his outstanding accomplishments including the completion of
three acquisitions, development of a strategic plan identifying ten critical
success factors, financial results, "ISO 9000" certification (a quality
assurance program) in most sites and movement of the Company to increasingly
competitive levels in a number of areas. The Committee, in setting Mr.
Shepherd's increase, also took into consideration the fact that Mr. Shepherd's
salary is below the midpoint for his salary grade, owing in large
17
<PAGE> 21
measure to the relatively short time he has served as CEO. During 1994, Mr.
Shepherd's base salary was 91% of the targeted level for his salary grade.
The other named executive officers received an average increase of 8.5%
effective February 1, 1995 to reflect performance that was generally above
average, thus enabling the Company to achieve excellent results considering
market conditions. During 1994, salaries for the other named executive officers
averaged 85% of the targeted levels for their salary grades.
MANAGEMENT BONUS PLAN AWARDS
At the January 1995 meeting, the Committee approved bonus awards for
executive officers. All of these awards were within the terms of the Management
Bonus Plan.
The CEO received a Management Bonus Plan award of $420,000, based on the
Committee's assessment of Mr. Shepherd's performance and Allergan's 1994
corporate financial results. For purposes of compensation decisions, the
Company's performance is measured under the Management Bonus Plan against goals
established prior to the start of the fiscal year.
In the case of Mr. Shepherd, the Committee was influenced by the same
business factors discussed in connection with his salary increase. In the case
of each of the other named executives, the Committee was influenced by the
achievements that enabled their respective business units to reach their
financial and strategic goals.
LONG-TERM INCENTIVE GRANTS
At the April 1994 meeting, the Committee considered long-term incentive
grants for each of the executive officers of the Company. The guidelines for
each grade level are set periodically based upon a comparison of Allergan to
survey data for over 200 companies prepared and analyzed by Towers Perrin in
order to approximate the 75th percentile level compensation if the Company is
successful and that success results in increased stock prices. Although
information with respect to previous grants is considered by the Committee,
awards made in 1994 to executive officers were not affected in any significant
way by awards made in previous years.
The CEO received 61,000 non-qualified stock options, which was equal to the
guideline amount previously set for the position. The Committee was influenced
by, among other things, the Company's performance and Mr. Shepherd's leadership.
In the case of each of the other named executives, the stock award was
within the Company's guideline and reflects the assessment of individual
performance as well as the performance of the Company as discussed in the
previous paragraph. In determining the specific award to the CEO and each of the
other named executives, the Committee considers a mix of individual and
corporate performance achievements, without attributing relative weights to the
various factors considered.
Organization and Compensation
Committee,
Mr. William R. Grant, Chairman
Ms. Tamara J. Erickson
Mr. Handel E. Evans
Mr. Leslie G. McCraw
Mr. Leonard D. Schaeffer
18
<PAGE> 22
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Company's Organization and Compensation Committee is a
current or former officer or employee of the Company or any of its subsidiaries.
There are no compensation committee interlocks between the Company and other
entities involving Allergan executive officers and Allergan Board members who
serve as executive officers of such other entities.
Walsh International Inc. and Pharmaceutical Marketing Services Inc., of
which Handel E. Evans, a director of the Company and a member of the
Organization and Compensation Committee, is the Chairman, provided
pharmaceutical marketing research data during 1994 for which the Company paid
approximately $271,000.
Blue Cross of California, of which Leonard D. Schaeffer, a director of the
Company and a member of the Organization and Compensation Committee, is the
Executive Chairman, provided administrative services for certain of the
Company's health plans during 1994 for which the Company paid approximately
$320,000.
Effective as of October 31, 1992, the Company sold its contract lens
business in North and South America to a privately-held company, O.S.I.
Corporation ("OSI"), in a transaction in which the Company received a
combination of secured and subordinated debt of OSI, a minority equity position
in OSI and cash. In addition, OSI and the Company entered into certain licensing
and product manufacturing arrangements pursuant to which OSI pays the Company
certain royalties and product manufacturing fees. The terms of the sale and
licensing and manufacturing arrangements were determined by arms' length
negotiations between the Company and the controlling shareholder of OSI. OSI
received a portion of its funding in connection with the transaction from two
venture capital funds, Galen Partners, L.P. and Galen International Partners,
L.P. (collectively, the "Galen Funds"). The Galen Funds hold approximately 21%
of the outstanding capital stock of OSI (assuming full exercise and conversion
of all options, warrants and convertible securities). William R. Grant, a
director of the Company and chairman of the Organization and Compensation
Committee, is a general partner of the firm which manages the Galen Funds. Mr.
Grant did not participate in the deliberations of the Company's Board of
Directors concerning the OSI transaction and abstained from voting on the matter
when it was approved by the Company's Board of Directors. During 1994, the
Company received from OSI approximately $1,932,000 in interest payments with
respect to the transaction debt, approximately $275,000 in product manufacturing
fees, and approximately $1,000,000 in royalty fees. In addition, at the request
of OSI, during 1994 the Company exercised warrants to acquire 318,432 shares of
common stock of OSI, which warrants were acquired in connection with the OSI
transaction, for an aggregate exercise price of $3,184.
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<PAGE> 23
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock with the
cumulative total return of the S&P 500 Stock Index and the S&P Health Care
(Diversified) Index for the period beginning December 31, 1989 and ending
December 31, 1994. The graph assumes that all dividends have been reinvested.
[GRAPH]
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, independent auditors, audited the consolidated
financial statements of the Company for the fiscal year ended December 31, 1994.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
stockholders' meeting, will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
Independent public accountants for the fiscal year ending December 31, 1995 will
be selected by the Board of Directors after a review and recommendation to the
Board by the Audit Committee.
ANNUAL REPORT
The Annual Report to Shareholders, including consolidated financial
statements for the year ended December 31, 1994, accompanies the proxy material
being mailed to all stockholders. The Annual Report is not a part of the proxy
solicitation material.
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<PAGE> 24
DEADLINE FOR STOCKHOLDER PROPOSALS
Any stockholder of the Company wishing to have a proposal considered for
inclusion in the Company's 1996 proxy solicitation materials must, in addition
to other applicable requirements, set forth such proposal in writing and send
the proposal to the Secretary of the Company so that it is received on or before
November 16, 1995.
OTHER BUSINESS
PRESENTED BY MANAGEMENT
As of the date of this Proxy Statement, management knows of no other
matters to be brought before the stockholders at the Annual Meeting. Should any
other matters properly come before the meeting, action may be taken thereon
pursuant to the proxies in the form enclosed, which confer discretionary
authority on the persons named therein or their substitutes with respect to such
matters.
PRESENTED BY STOCKHOLDERS
Pursuant to the Company's Restated Certificate of Incorporation only such
business shall be conducted at an annual meeting of stockholders as is properly
brought before the meeting. For business to be properly brought before an annual
meeting by a stockholder, in addition to any other applicable requirements,
timely notice of the matter must be first given to the Secretary of the Company.
To be timely, written notice must be received by the Secretary no less than 30
days nor more than 60 days prior to the meeting. If less than 40 days' notice or
prior public disclosure of the meeting has been given to stockholders, then
notice of the proposed business matter must be received by the Secretary not
later than ten days after the mailing of notice of the meeting or such public
disclosure. Any notice to the Secretary must include as to each matter the
stockholder proposes to bring before the meeting: (a) a brief description of the
proposal desired to be brought before the meeting and the reason for conducting
such business at the annual meeting, (b) the name and record address of the
stockholder proposing such business and any other stockholders known by such
stockholder to be supporting such proposal, (c) the class and number of shares
of the Company which are beneficially owned by the stockholder on the date of
such stockholder notice and by other stockholders known by such stockholder to
be supporting such proposal on the date of such stockholder notice, and (d) any
material interest of the stockholder in such business.
By Order of the Board of Directors
/s/ FRANCIS R. TUNNEY, JR.
-------------------------------------
Francis R. Tunney, Jr.
Secretary
March 23, 1995
Irvine, California
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<PAGE> 25
PROXY
[ALLERGAN LOGO]
CONFIDENTIAL PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING APRIL 25, 1995
The undersigned hereby constitutes and appoints Gavin S. Herbert, Francis R.
Tunney, Jr. and Richard M. Haugen, and each of them, his true and lawful agents
and proxies with full power of substitution in each to represent the
undersigned at the Annual Meeting of Stockholders of ALLERGAN, INC. to be held
at its corporate headquarters, 2525 Dupont Drive, Irvine, CA on Tuesday, April
25, 1995, and at any adjournments thereof, on all matters coming before the
meeting.
Election of Directors, Nominees:
Handel E. Evans, Gavin S. Herbert, Leslie G. McCraw, Henry Wendt
If this Proxy relates to shares held for the undersigned in the Allergan, Inc.
Employee Stock Ownership Plan, the Allergan, Inc. Savings and Investment Plan
and the Allergan, Inc. Puerto Rico Savings and Investment Plan, then, when
properly executed, it shall constitute instructions to the plan trustees to
vote in the manner directed herein.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
SIDE
<PAGE> 26
[X] Please mark your votes
as in this example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR election of
Directors.
The Board of Directors recommends a vote FOR election of Directors.
1. Election of FOR WITHHELD
Directors. [ ] [ ]
(see reverse)
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
Please check the box if you plan to [ ]
attend the Annual Meeting.
Please check the box if you wish [ ]
to have your vote disclosed to the
Company. The Company's Confidential
Voting Policy is described in the
Proxy Statement accompanying this
Proxy.
NOTE: Please sign as name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such.
---------------------------------------------
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SIGNATURE(S) DATE
