<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]
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Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
Allergan, Inc.
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<PAGE> 2
[ALLERGAN LOGO]
2525 DUPONT DRIVE, IRVINE, CA 92612 (714) 752-4500
March 18, 1997
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 22, 1997 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.
/s/ WILLIAM C. SHEPHERD
William C. Shepherd
Chairman, President and
Chief Executive Officer
<PAGE> 3
[ALLERGAN LOGO]
2525 DUPONT DRIVE, IRVINE, CA 92612
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1997
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 22, 1997 at 10:00 A.M. for
the following purposes:
1. To elect five Class II directors to serve for three-year terms ending
in 2000 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 7, 1997 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
7, 1997 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
/s/ FRANCIS R. TUNNEY, JR.
Francis R. Tunney, Jr.
Secretary
March 18, 1997
<PAGE> 4
[ALLERGAN LOGO]
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS -- APRIL 22, 1997
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of Allergan,
Inc. ("Allergan" or the "Company"), 2525 Dupont Drive, Irvine, California 92612
for use at the Annual Meeting of the Company's stockholders to be held on April
22, 1997, 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 18, 1997.
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 7, 1997 are entitled to vote at the meeting. On that date Allergan had
65,549,936 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 securities of the Company by a person other than the
Company of which solicitation the Company has actual notice.
<PAGE> 5
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 12 directors
and currently three serve as Class I directors, five serve as Class II
directors, and four serve as Class III 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 FIVE NOMINEES NAMED BELOW, ALL OF WHOM ARE, AT
PRESENT, CLASS II 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 II -- TERM EXPIRES 2000:
HERBERT W. BOYER, PH.D., 60, is 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. 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 1994 and is a member of the Board's Audit Committee.
TAMARA J. ERICKSON, 42, joined PA Consulting Group, a management and
technology consulting company as Head of U.S. Consulting in May of 1996. From
August 1995 through May 1996, she was Senior Vice President of Arthur D. Little,
Inc., a management consulting company, and Chairman of its subsidiary,
Innovation Associates. Prior to that, Ms. Erickson held various positions at
Arthur D. Little, Inc., which she joined in 1978, including Managing Director,
North America Management Consulting from 1991 to 1995. 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
1991. She is a member of the Board of Directors of EG&G, Inc. and is a member of
the Board of Overseers of Boston Ballet. Ms. Erickson was elected to the Board
in 1992 and is Chairman of the Board's Corporate Governance Committee and a
member of the Organization and Compensation Committee.
WILLIAM R. GRANT, 72, 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. Mr. Grant is a director of Fluor
Corporation, Witco Corporation, New York Life Insurance Co., Inc., SmithKline
Beecham p.1.c., Seagull Energy Corporation, Datamedic Corp., MiniMed, Inc., 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
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Organization and Compensation Committee, and is a member of the Audit and
Corporate Governance Committees.
LOUIS T. ROSSO, 63, 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, Inc. and is a member of
the Board of Trustees of the St. Jude Heritage Foundation 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 Corporate Governance Committee.
WILLIAM C. SHEPHERD, 58, has been Chairman of the Board since January 1,
1996 and has been President and Chief Executive Officer of the Company since
1992. He was President and Chief Operating Officer from 1984 through 1991. Mr.
Shepherd first joined the Company in 1966. He is a director of Ligand
Pharmaceuticals Incorporated, Allergan Ligand Retinoid Therapeutics, Inc. and
Furon Company. Mr. Shepherd also serves on the Board of Directors of the Orange
County Performing Arts Center, and the National Children's Eye Care Foundation.
He is a member of the Governing Board of Pharmaceutical Partners for Better
Health Care. Mr. Shepherd has been a director of the Company since 1984.
DIRECTORS CONTINUING IN OFFICE
CLASS I -- TERM EXPIRES 1999:
HOWARD E. (TED) GREENE, JR., 54, has been Chairman of Amylin
Pharmaceuticals, Inc., a biotech company involved in research and development of
medicines for treating diabetes, since 1987 and was also Chief Executive Officer
from 1987 to July 1996. 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 subsequently became a division of Eli Lilly & 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 Biosite Diagnostics, Neurex Corporation, and the International
Biotechnology Trust. Mr. Greene was elected to the Board in 1990 and is a member
of the Finance Committee.
LESTER J. KAPLAN, PH.D., 46, has been Corporate Vice President, Science and
Technology since July of 1996 and had been Corporate Vice President, Research
and Development since 1992. He had been Senior Vice President, Pharmaceutical
Research and Development since 1991 and Senior Vice President, Research and
Development since 1989. Dr. Kaplan is an Advisory Board Member to the Pediatric
Cancer Research Foundation (PCRF) and Healthcare Ventures. He first joined the
Company in 1983 and was elected to the Board in 1994 and is a member of the
Finance Committee.
LEONARD D. SCHAEFFER, 51, 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. He is also a director of Metra Biosystems, Inc. Mr.
Schaeffer was the Administrator of the U.S. Health Care Financing Administration
(HCFA) from 1978 to 1980. He 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 Finance Committee.
CLASS III -- TERM EXPIRES 1998:
HANDEL E. EVANS, 62, is the Executive Chairman and Founder of Source
Informatics Inc., an international supplier of market information to the
pharmaceutical industry. Since 1991, Mr. Evans has also been the Chairman of the
Board and Founder of an affiliated company, Pharmaceutical Marketing Services,
Inc., which supplies specialized marketing products in the United States, Europe
and Japan. From 1988 to 1996, Mr. Evans was Chairman of Walsh International
Inc., the predecessor company of Source Informatics Inc. Prior to 1988, Mr.
Evans was a founder of and served in a variety of senior executive positions
with
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IMS International Inc., a pharmaceutical industry information supplier. 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, 64, is Chairman Emeritus of the Company as of January 1,
1996. He had been Chairman 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 President of SmithKline Beckman
Corporation's Eye and Skin Care Products Operations from 1981 to 1989. Mr.
Herbert is Chairman and Founder of Regenesis Bioremediation Products, formed in
1994, and is also a director of Beckman Instruments, Inc. Mr. Herbert is a
trustee of the University of Southern California and is a member of the Board of
Directors of Research to Prevent Blindness and of California Health Care
Institute. Mr. Herbert co-founded the Company in 1948 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.
LESLIE G. MCCRAW, 62, 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 of Fluor from 1988,
President and Chief Executive Officer of Fluor Daniel, Inc. from 1986, and
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 New York Life Insurance Company, Inc.
and serves on the Board of Directors for the National Committee on United
States-China Relations, the U.S.-China Business Council and the Business
Committee for the Arts and serves on the President's Export Council and the
International Advisory Board of the British-American Business Council. Mr.
McCraw is a member of the Board of Trustees of Clemson University. He 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, 63, is Chairman of Global Health Care Partners of DLJ Merchant
Banking Partners, previously doing business as the Finisterre Fund, a Donaldson,
Lufkin & Jenrette Company, specializing in private equity investment in health
care businesses world wide. He was Chairman of the Board of SmithKline Beecham
p.1.c., a pharmaceutical company, and its subsidiary, SmithKline Beecham
Corporation from 1989 until his retirement in 1994. Mr. Wendt is also a director
of Atlantic Richfield Co., Aviall, Inc. and The Egypt Investment Company as well
as Chairman of Steri-Oss Inc. He is a trustee of the American Enterprise
Institute, the Trilateral Commission and Trustee Emeritus of the American
Enterprise Institute. Mr. Wendt is the author of "Global Embrace," published in
1993. In 1994 he was awarded the Order of the Rising Sun Gold and Silver Star by
the Government of Japan, the highest honor given to a foreigner. In 1995 he was
named as Honorary Commander of the British Empire (CBE) by HRM Queen Elizabeth
II. 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 Corporate Governance
Committee.
INFORMATION REGARDING THE BOARD OF DIRECTORS
MEETINGS AND COMMITTEES
The Board of Directors held eight meetings during 1996 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 87% and all directors attended 75% or more of the
meetings of the Board and committees on which they served, except Mr. Evans, Mr.
Schaeffer and Mr. Wendt who attended 63%, 50% and 71% of such meetings,
respectively. It should be noted that Directors discharge their responsibilities
throughout the year not only at Board and committee meetings, but through
personal meetings and other communications, including considerable telephone
contact with the Chairman and others regarding matters of interest and concern
to the Company.
Audit Committee -- The Audit Committee, which had four meetings in 1996,
selects, subject to Board oversight, the Company's independent auditors for the
fiscal year 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;
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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
reviews, and investigates noncompliance matters. None of the members of the
Audit Committee are officers, employees or former employees of the Company or
any of its subsidiaries.
Finance Committee -- The Finance Committee, which had four meetings in
1996, reviews, approves or modifies management recommendations on corporate
financial strategy and policy and, where appropriate, makes recommendations to
the Board of Directors.
Corporate Governance Committee -- The Corporate Governance Committee held
two meetings in 1996. It 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; considers the
performance of incumbent directors; considers and makes recommendations to the
Board of Directors concerning the size and composition of the Board of
Directors; develops and recommends to the Board of Directors guidelines and
criteria to determine the qualifications of directors; considers and reports
annually to the Board of Directors concerning its assessment of the Board's
performance; considers, from time to time, the current Board committee structure
and membership; and recommends changes to the amount and type of compensation of
Board members as appropriate. None of the members of the Corporate Governance
Committee are officers, employees or former employees of the Company or any of
its subsidiaries.
Organization And Compensation Committee -- The Organization and
Compensation Committee, which had four meetings in 1996, 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 corporate officers, including salary and bonus awards,
and administers the 1989 Incentive Compensation Plan. No member of the
Organization and Compensation Committee is a current or former member of
management or eligible for compensation other than as a director. The report of
the Committee begins on page 18.
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 92612. 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
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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 12 members, two are officers of the Company who do
not receive additional compensation for Board or committee service. Directors
earned, during 1996, an annual $25,000 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.
Effective January 1, 1996, Mr. Herbert became Chairman Emeritus. He
provided ongoing advisory services to Allergan focusing on government affairs
and industrial relations. For those advisory services and his services as
Chairman Emeritus, he received an annual retainer of $50,000. He is also paid
retainer and attendance fees as described above, is eligible to participate in
the 1989 Nonemployee Director Stock Plan and 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,
McCraw, Rosso, Schaeffer and Wendt chose to defer all or a portion of their
retainers and meeting fees for the period January 1, 1996 through December 31,
1996.
In accordance with the Company's 1989 Nonemployee Director Stock Plan (the
"Director Plan"), as amended by the stockholders in April 1996, each director
who is not an employee of the Company receives grants of restricted stock upon
(a) initial election to the Board of 600 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 600 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.
STOCK OWNERSHIP GUIDELINES
At its meeting held in January 1996, the Board approved the stock ownership
guidelines for directors recommended by the Corporate Governance Committee. Each
nonemployee director is expected to own stock, including the economic equivalent
number of shares showing on the records of the Company under the Deferred
Directors Fee Program, equal in value to the number of years the director has
served on the Board since 1989 multiplied by the retainer fee for each year
served.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
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, 1996, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with, except that Henry Wendt, a director, filed all
reports since becoming a director in a timely manner, but inadvertently omitted
reporting 84 shares acquired under a dividend reinvestment plan in which he
began participating in December 1994. He subsequently corrected his prior
reports.
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CORPORATE GOVERNANCE
GUIDELINES ON SIGNIFICANT CORPORATE GOVERNANCE ISSUES
In 1995, the Board approved "Board Guidelines on Significant Corporate
Governance Issues." The Guidelines, as amended to date, are listed below.
Following adoption, the existing Nominating Committee assumed additional
responsibilities and was renamed the Corporate Governance Committee. These
guidelines are being published in this Proxy Statement to inform stockholders of
the Board's current thinking with respect to selected corporate governance
issues considered to be of significance to stockholders. The guidelines are only
guidelines, not rigid rules. Nor is it intended that publication of these
guidelines be interpreted as a representation that they will be followed in each
instance. The Board will continue to assess the appropriateness and efficacy of
the guidelines and it is likely that changes to the guidelines will be
considered from time to time.
1. SELECTION OF CHAIRMAN AND CEO
The Board should be free to make this choice any way that seems best for
the Company at a given point in time.
Therefore, the Board does not have a policy, one way or the other, on
whether or not the role of the Chief Executive Officer and Chairman should
be separate and, if it is to be separate, whether the Chairman should be
selected from the nonemployee directors or be an employee.
2. EXECUTIVE SESSIONS OF OUTSIDE DIRECTORS
The outside directors of the Board will meet in Executive Session at a
regularly scheduled meeting at least once each year. The format of these
meetings will include a discussion with the Chief Executive Officer on each
occasion. These meetings should be scheduled in conjunction with a regular
Board meeting.
It is the policy of the Board that a director be selected by the outside
directors to chair Executive Sessions or assume other responsibilities
which the outside directors as a whole might designate from time to time.
3. NUMBER OF COMMITTEES
The current committee structure of the Company seems appropriate. There
will, from time to time, be occasions in which the Board may want to form a
new committee or disband a current committee depending upon the
circumstances. The current four committees are Audit, Finance, Organization
& Compensation, and Corporate Governance. The Audit, Corporate Governance
and Organization & Compensation Committees will consist entirely of outside
directors.
4. ASSIGNMENT AND ROTATION OF COMMITTEE MEMBERS
The Corporate Governance Committee is responsible, after consultation with
the Chief Executive Officer and with consideration of the desires of
individual Board members, for the assignment of Board members to various
committees.
It is the sense of the Board that consideration should be given to rotating
committee members periodically at about a three- to four-year interval, but
the Board does not feel that such a rotation should be mandated as policy
since there may be reasons at a given point in time to maintain an
individual director's committee membership for a longer period.
5. FREQUENCY AND LENGTH OF COMMITTEE MEETINGS
The Committee chairman, in consultation with Committee members, will
determine the frequency and length of the meetings of the Committee.
Meetings will normally be held around Board meetings.
7
<PAGE> 11
6. COMMITTEE AGENDA
The chairman of the Committee, in consultation with the appropriate members
of management and staff, will develop the Committee's agenda.
Each Committee will issue a schedule of agenda subjects to be discussed for
the ensuing year at the beginning of each year (to the degree these can be
foreseen). This forward agenda will also be shared with the Board. Key
functional managers (i.e., CFO, CVP Human Resources) will have direct
contact with the appropriate Committee chairperson.
7. SELECTION OF AGENDA ITEMS FOR BOARD MEETINGS
The Chairman of the Board and the Chief Executive Officer (if the Chairman
is not the Chief Executive Officer) will establish the agenda for each
Board meeting.
At the beginning of the year the Chairman will establish a schedule of
agenda subjects to be discussed during the next three years.
Each Board member is free to suggest the inclusion of item(s) on the
agenda. The CEO will be proactive in encouraging Board members to submit
agenda items.
8. BOARD MATERIALS DISTRIBUTED IN ADVANCE
It is the sense of the Board that information and data that is important to
the Board's understanding of the business to be conducted at that meeting
be distributed in writing to the Board before the Board meets. Management
will make every attempt to see that this material is as brief as possible
while still providing the desired information.
9. PRESENTATIONS
As a general rule, presentations on specific subjects should be sent to the
Board members in advance so that Board meeting time may be conserved and
discussion time focused on questions that the Board has about the subject.
When there is no prior distribution of a presentation on a sensitive
subject, it is the sense of the Board that each member be advised by
telephone in advance of the meeting of the subject and the principal issues
the Board will need to consider.
10. REGULAR ATTENDANCE OF NON-DIRECTORS AT BOARD MEETINGS
The Board supports the regular attendance at each Board Meeting of
non-Board members who are members of senior management.
Should the Chief Executive Officer want to add additional people as
attendees on a regular basis, it is expected that this suggestion would be
made to the Board for its concurrence.
11. BOARD ACCESS TO SENIOR MANAGEMENT
Board members have complete access to Allergan's Management.
It is assumed that Board members will use judgment to be sure that this
contact is not distracting to the business operation of the Company and
that such contact, if in writing, be copied to the Chief Executive Officer
and/or the Chairman.
Furthermore, the Board encourages the senior management to, from time to
time, bring other managers into Board meetings who: (a) can provide
additional insight into the items being discussed because of personal
involvement in these areas, and/or (b) represent managers with future
potential that the senior management believes should be given exposure to
the Board.
12. BOARD COMPENSATION REVIEW
It is appropriate for the staff of the Company once every other year to
report to the Corporate Governance Committee the status of Allergan Board
compensation in relation to other U.S. companies.
8
<PAGE> 12
Changes in Board compensation, if any, should come at the suggestion of the
Corporate Governance Committee, but with full discussion and approval by
the Board. The Corporate Governance Committee will make Board compensation
change recommendations after it has reviewed the information it considers
appropriate from the Chief Executive Officer, the Human Resources
department and outside consultants.
13. SIZE OF THE BOARD
The Board presently has 12 members. It is the sense of the Board that a
size of 12 to 14 is about right. However, the Board would be willing to go
to a somewhat larger size in order to accommodate the availability of an
outstanding candidate(s).
14. MIX OF INSIDE AND OUTSIDE DIRECTORS
The Board believes that as a matter of policy there should be a majority of
Independent Directors on the Allergan Board. A maximum ratio should be 1/4
management directors to 3/4 Independent Directors.
But the Board believes that management should encourage senior managers to
understand that Board membership is not necessary or a prerequisite to any
higher management position in the Company. Managers other than the Chief
Executive Officer currently attend Board meetings on a regular basis even
though they are not members of the Board.
15. BOARD DEFINITION OF WHAT CONSTITUTES INDEPENDENCE FOR OUTSIDE DIRECTORS
Allergan's Bylaw defining independent directors was approved by the Board
in July 1995. The Board believes there is no current relationship between
any outside director and Allergan that would be construed in any way to
compromise any Board member being designated independent. Compliance with
the Bylaw is reviewed annually by the Corporate Governance Committee.
16. FORMER CHIEF EXECUTIVE OFFICER'S BOARD MEMBERSHIP
The Board believes this is a matter to be decided in each individual
instance. It is assumed that when the Chief Executive Officer resigns from
that position, he/she should offer his/her resignation from the Board at
the same time. Whether the individual continues to serve on the Board is a
matter for discussion at that time with the new Chief Executive Officer and
the Board.
A former Chief Executive Officer serving on the Board will be considered an
inside director for purposes of corporate governance.
17. BOARD MEMBERSHIP CRITERIA
The Corporate Governance Committee is responsible for reviewing with the
Board on an annual basis the appropriate skills and characteristics
required of Board members in the context of the current make-up of the
Board. This assessment should include issues of diversity, age, skills such
as understanding of manufacturing technologies, international background,
etc. -- all in the context of an assessment of the perceived needs of the
Board at that point in time.
18. SELECTION OF NEW DIRECTOR CANDIDATES
The Board itself should be responsible, in fact as well as procedure, for
selecting its own members. The Board delegates the screening process
involved to the Corporate Governance Committee with the direct input from
the Chairman of the Board as well as the Chief Executive Officer and the
other members of the Board. There should be a full discussion at a Board
meeting before the decision to invite someone to join the Board is made.
19. EXTENDING THE INVITATION TO A NEW POTENTIAL DIRECTOR TO JOIN THE BOARD
The invitation to join the Board should generally be extended by the
Chairman of the Corporate Governance Committee on behalf of the Board. The
new director will receive an orientation about the Company and its
Corporate Governance philosophy.
9
<PAGE> 13
20. ASSESSING THE BOARD'S PERFORMANCE
The Corporate Governance Committee is responsible to undertake an annual
assessment of the Board's performance. This will be discussed with the full
Board. This should be done following the end of each fiscal year and at the
same time as the report on Board membership criteria.
This assessment should be the Board's contribution as a whole and
specifically review areas in which the Board and/or the Management believes
a better contribution could be made. Its purpose is to increase the
effectiveness of the Board, not to target individual Board members.
21. DIRECTORS WHO CHANGE THEIR PRESENT JOB RESPONSIBILITY
It is the sense of the Board that individual directors who change the
responsibility they held when they were elected to the Board should
volunteer to resign from the Board.
It is not the sense of the Board that the directors who retire or change
from the position they held when they came on the Board should necessarily
leave the Board. There should, however, be an opportunity for the Board,
via the Corporate Governance Committee, to review the continued
appropriateness of Board membership under these circumstances.
22. TERM LIMITS
The Board does not believe it should establish term limits. While term
limits could help ensure that there are fresh ideas and viewpoints
available to the Board, they hold the disadvantage of losing the
contribution of directors who have been able to develop, over a period of
time, increasing insight into the Company and its operations and,
therefore, provide an increasing contribution to the Board as a whole.
As an alternative to term limits, the Corporate Governance Committee, in
consultation with the Chief Executive Officer and the Chairman of the
Board, will review each director's continuation on the Board every year.
This will also allow each director the opportunity to conveniently confirm
his/her desire to continue as a member of the Board.
23. RETIREMENT AGE
It is the sense of the Board that the current retirement age of 70 is
appropriate. In the unusual case when the mandated retirement age is not in
the best interest of the Company, the Board, acting through the Corporate
Governance Committee, should be guided by factors such as whether the
director has retired from other business pursuits, the past and anticipated
contributions to the Board as well as the factors typically considered for
ongoing service on the Board.
24. FORMAL EVALUATION OF THE CHIEF EXECUTIVE OFFICER
The Organization and Compensation Committee should make this evaluation
annually, and it should be communicated to the Chief Executive Officer by
the Chairman of the Organization and Compensation Committee.
The evaluation should be based on objective criteria including performance
of the business, accomplishment of long-term strategic objectives,
development of management, etc.
The evaluation will be used by the Organization and Compensation Committee
in the course of its deliberations when considering the compensation of the
Chief Executive Officer.
25. SUCCESSION PLANNING
There should be an annual report by the Chief Executive Officer to the
Board on succession planning.
There should also be available, on a continuing basis, the Chief Executive
Officer's recommendation as to a successor should he/she be unexpectedly
disabled.
10
<PAGE> 14
26. MANAGEMENT DEVELOPMENT
There will be an annual report to the Board by the Chief Executive Officer
on the Company's program for management development, described in detail.
This report should be given to the Board at the same time as the succession
planning report noted above.
27. BOARD INTERACTION WITH THE INVESTORS, THE MEDIA, CUSTOMERS, ETC.
The Board believes that only senior management speaks for Allergan.
Individual Board members may, with the knowledge of the management and, in
most instances, at the request of management, agree to receive input from
various constituencies that are involved with Allergan.
BOARD ASSESSMENT
The newly constituted Corporate Governance Committee conducted its first
assessment of Board performance in January 1996. All directors were asked to
complete a Board Evaluation and Feedback Form. On the Form, each director
entered a number grade from 1 to 5, and was encouraged to provide written
comments as to how well the Board performs against each of the following 18
standards:
1. The Board knows and understands the Company's vision, strategic plan
and operating plan.
2. The Board reflects its understanding of the Company's vision,
strategic plan and operating plan in the quality of its discussions
and actions on key issues throughout the year.
3. Board meetings are conducted in a manner which ensures open
communication, meaningful participation, and timely resolution of
issues.
4. The Board functions in a manner that enables each member to
participate fully in accordance with each member's particular
strengths. Board committees are staffed in ways that utilize each
member's strengths.
5. Advance Board materials contain the right information and are received
sufficiently in advance of meetings.
6. Board members are diligent in preparing for meetings.
7. The Board regularly monitors key performance measures throughout the
year. The Board regularly monitors the Company's income statement,
balance sheet and cash flow.
8. The Board places appropriate emphasis around the Company's long term
Research and Development commitments and regularly monitors
performance.
9. In tracking Company performance, the Board regularly considers the
performance of peer companies.
10. Board membership reflects the right mix of experience, skills,
perspectives and diversity.
11. The Board appropriately reviews the performance of the CEO.
12. The Organization and Compensation Committee (the "OCC") regularly
reviews the performance of the senior officers.
13. The Audit Committee regularly reviews the ethics of the conduct of the
senior officers.
14. The OCC monitors performance and assures that correlation between
executive pay and Company performance is regularly considered by the
Board and/or the OCC.
15. The OCC reviews succession plans for the CEO and senior management and
insures adequate channels of commitment through the executive session
of the Board.
16. The OCC is appropriately involved in senior management selection.
17. The trigger level for Board or committee involvement in major business
policies and decisions is meaningful and appropriate.
18. Taking everything into consideration involving the Board's
performance, the Board's performance is appropriate for the Company
considering its size and industry.
11
<PAGE> 15
The Corporate Governance Committee analyzed the numerical ratings, looking
at both average and median scores, as well as the specific and overall comments
provided, and then brought their findings to the meeting of outside directors
held in January 1996. At that meeting the outside directors discussed ways in
which Board performance could be improved in order to provide a greater benefit
to the Company and its stockholders. It is anticipated that specific plans will
be developed at future meetings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BY MANAGEMENT
The following table sets forth information as of January 31, 1997 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 footnote 5 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 II DIRECTORS NOMINEES:
Herbert W. Boyer, Ph.D. ................. 1,500 1,500
Tamara J. Erickson....................... 2,140 2,140
William R. Grant......................... 13,111 13,111
Louis T. Rosso........................... 46,323 46,323
William C. Shepherd...................... 98,086 293,132 391,218
CLASS III DIRECTORS:
Handel E. Evans.......................... 6,038 6,038
Gavin S. Herbert......................... 342,236(4) 272,600 614,836
Leslie G. McCraw......................... 4,036 4,036
Henry Wendt.............................. 39,165 39,165
CLASS I DIRECTOR:
Howard E. Greene, Jr. ................... 4,360 4,360
Lester J. Kaplan, Ph.D. ................. 13,800 84,982 98,782
Leonard D. Schaeffer..................... 3,300 3,300
OTHER NAMED EXECUTIVE OFFICERS
Albert J. Moyer.......................... 2,439 5,000 7,439
Francis R. Tunney, Jr. .................. 13,177 93,453 106,630
Michael J. Donohoe....................... 8,829 99,159 107,988
All current directors and executive
officers (22 persons, including those
named above).......................... 639,531 1,081,968 1,721,499(5)
</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, for employees,
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, 1996.
12
<PAGE> 16
(2) In addition to the beneficial ownership amounts described in the preceding
footnote, 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,
1997, such amounts constitute the economic equivalent of the following
numbers of shares of Common stock:
<TABLE>
<CAPTION>
ECONOMIC EQUIVALENT
NUMBER OF SHARES
-------------------
<S> <C>
Herbert W. Boyer................................... 245
Tamara J. Erickson................................. 4,346
Handel E. Evans.................................... 8,406
William R. Grant................................... 9,143
Howard E. Greene, Jr. ............................. 4,261
Leslie G. McCraw................................... 7,716
Louis T. Rosso..................................... 6,012
Leonard D. Schaeffer............................... 3,473
Henry Wendt........................................ 8,181
</TABLE>
(3) Shares which the party or group has the right to acquire within 60 days
after January 31, 1997 upon the exercise of stock options.
(4) Includes 85,440 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 2.6% of the shares outstanding as of January 31, 1997.
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>
NAME AND ADDRESS OF SHARES PERCENT
BENEFICIAL OWNERS BENEFICIALLY OWNED OF CLASS
--------------------------------------------------- ------------------ --------
<S> <C> <C>
Swiss Bank Corporation and Brinson Partners, 5,747,648(1) 8.8%
Inc. ............................................
209 South LaSalle Street
Chicago, Illinois 60604-1295
State Farm Mutual Automobile Insurance Company..... 4,282,900(2) 6.5%
One State Farm Plaza
Bloomington, Illinois 61710
Mellon Bank Corporation............................ 3,993,294(3) 6.1%
One Mellon Bank Center
Pittsburgh, PA 15258-0001
Certain Fidelity funds............................. 3,975,890(4) 6.1%
82 Devonshire Street
Boston, MA 02109-3614
</TABLE>
- - ---------------
(1) Based on a Schedule 13G, dated February 12, 1997, filed with the Securities
and Exchange Commission by the named beneficial owner on behalf of itself
and related entities.
(2) Based on a Schedule 13G, dated January 17, 1997, 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 February 1, 1997, 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.
(4) Based on a Schedule 13G, dated February 14, 1997, filed with the Securities
and Exchange Commission by FMR Corp. on behalf of itself and related
entities.
13
<PAGE> 17
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, 1994, 1995 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
--------------------------- STOCK UNDERLYING ALL OTHER
SALARY BONUS OTHER AWARD(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($) ($)(3) (#) ($)(4)
- - --------------------------------- ---- ------- ------- ----- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William C. Shepherd,............. 1996 646,667 170,000 80,000 16,389
Chairman of the Board, 1995 605,000 160,000 65,000 18,798
President & CEO 1994 546,010 420,000 61,000 23,609
Lester J. Kaplan, Ph.D.,......... 1996 264,943 100,000 31,200 13,224
Corporate Vice President, 1995 249,916 80,000 24,000 13,991
Science & Technology 1994 235,608 136,000 16,000 13,236
Albert J. Moyer,................. 1996 263,751 85,000 20,000 6,773
Corporate Vice President & CFO 1995 105,132 30,000 59,500 20,000 5,903
Francis R. Tunney, Jr............ 1996 258,576 85,000 20,000 8,227
Corporate Vice President, 1995 243,582 80,000 16,000 7,844
General Counsel and Secretary 1994 225,660 137,000 16,000 9,300
Michael J. Donohoe,.............. 1996 264,950 36,000 (5) 26,400 12,348
Corporate Vice President & 1995 254,025 50,000 (5) 24,000 14,078
President, Europe/Middle 1994 235,407 136,000 (5) 24,000 8,644
East/Africa Region
</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 indicated.
(3) All shares of restricted stock vest, in whole, in four years 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, 1996) were held by each of the named executives as of
December 31, 1996: Mr. Moyer, 2,000 ($71,250).
(4) The total amounts shown in this column for the 1996 fiscal year consist of
Company contributions to the Allergan, Inc. Savings and Investment Plan
("SIP") and the Allergan, Inc. Employee Stock Ownership Plan ("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......................... $ 2,375 $ 2,843 $ 11,171 $ --
Dr. Kaplan........................... 3,750 2,843 1,512 5,119
Mr. Moyer............................ 3,750 2,843 180 --
Mr. Tunney........................... 3,750 2,843 1,634 --
Mr. Donohoe.......................... 2,479 2,843 1,915 5,111
</TABLE>
(5) Mr. Donohoe temporarily relocated to the United Kingdom in 1992 in
connection with his election as President, Europe/Middle East/Africa Region
(then the 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.
14
<PAGE> 18
STOCK OPTIONS
The following table shows information regarding stock options granted to
the named executive officers during 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL 1996 PER SHARE DATE VALUE($)(2)
- - ------------------------------ ------------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
William C. Shepherd........... 80,000 9.2% $35.125 4/22/06 $ 1,093,600
Lester J. Kaplan, Ph.D........ 31,200 3.6% $35.125 4/22/06 $ 426,504
Albert J. Moyer............... 20,000 2.3% $35.125 4/22/06 $ 273,400
Francis R. Tunney, Jr......... 20,000 2.3% $35.125 4/22/06 $ 273,400
Michael J. Donohoe............ 26,400 3.0% $35.125 4/22/03 $ 303,864
</TABLE>
- - ---------------
(1) All options disclosed above were granted pursuant to the 1989 Incentive
Compensation Plan (the "Incentive Plan") on April 22, 1996 and become
exercisable 25% per year beginning April 22, 1997. 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 and Severance Arrangements" on page 17.
(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 1996 option grants, the following assumptions
were used in the Black-Scholes model: market price of stock, $35.125;
exercise price of option, $35.125; stock volatility, 0.259 (based on
three-year volatility and dividend yield); annualized risk-free interest
rate, 6.90% (based on the 10-year zero coupon rate, except for Mr. Donohoe,
for which a 6.60% interest rate was used based on the 7-year zero coupon
rate); option term, ten years (except for Mr. Donohoe, for whom a seven-year
term was assumed); dividend yield, 1.68%.
15
<PAGE> 19
OPTION EXERCISES AND HOLDINGS
The following table shows stock option exercises by the named executive
officers during 1996, including the aggregate value of gains on the date of
exercise. In addition, this table includes the number of shares covered by both
exercisable and non-exercisable stock options as of December 31, 1996. Also
reported are the values for "in-the-money" options which represent the positive
spread between the exercise price of any such existing stock options and the
year-end price of Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON AT DECEMBER 31, 1996(#)(1) AT DECEMBER 31, 1996($)(2)
EXERCISE VALUE ------------------------------ ------------------------------
NAME (#) REALIZED ($) EXERCISABLE UN-EXERCISABLE EXERCISABLE UN-EXERCISABLE
- - -------------------------- ----------- ------------ ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
William C. Shepherd....... 19,614 $384,925 293,132 174,500 $ 4,109,340 $1,061,579
Lester J. Kaplan, Ph.D.... -- -- 84,982 61,200 1,196,262 325,260
Albert J. Moyer........... -- -- 5,000 35,000 29,375 98,125
Francis R. Tunney, Jr..... 3,433 68,406 93,453 44,000 1,321,595 271,660
Michael J. Donohoe........ -- -- 99,159 62,400 1,333,699 405,690
</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 $35.625 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.
16
<PAGE> 20
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 49,300 65,800 82,200 98,600 115,100 120,100 125,100
$ 250,000 62,300 83,100 103,800 124,600 145,300 151,600 157,800
$ 300,000 75,300 100,400 125,400 150,500 175,600 183,100 190,600
$ 350,000 88,200 117,700 147,100 176,500 205,900 214,600 223,400
$ 400,000 101,200 135,000 168,700 202,400 236,200 246,200 256,200
$ 500,000 127,200 169,600 211,900 254,300 296,700 309,200 321,700
$ 600,000 153,100 204,200 255,200 306,200 357,300 372,300 387,300
$ 700,000 179,100 238,800 298,400 358,100 417,800 435,300 452,800
$ 800,000 205,000 273,400 341,700 410,000 478,400 498,400 518,400
$ 900,000 231,000 308,000 384,900 461,900 538,900 561,400 583,900
</TABLE>
The benefits shown are computed as a single life annuity beginning at age
62 with no deduction for Social Security or other offset amounts. 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; Dr. Kaplan, 29 years; Mr. Moyer, 10 years;
Mr. Tunney, 30 years; and Mr. Donohoe, 18 years.
CHANGE IN CONTROL AND SEVERANCE ARRANGEMENTS
The Company has entered into agreements with each of its executive officers
and certain other executives 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 rate 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: Mr. Shepherd -- three years; Messrs. Kaplan, Tunney,
Moyer and Donohoe, and six other corporate vice presidents -- two years; other
covered executives (23 persons) -- one year.
In addition, the Company's SRP, Incentive Plan, Savings and Investment
Plan, Employee Stock Ownership Plan, Management Bonus 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.
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<PAGE> 21
The Organization and Compensation Committee has approved a severance pay
policy for Corporate Vice Presidents whose employment is terminated as a result
of a reduction in force, unacceptable performance or sale of a business unit
where the Corporate Vice President is not offered similar employment with the
acquiring company. The amount of severance pay depends upon the Corporate Vice
President's years of service with the Company. For Corporate Vice Presidents
having 15 or more years of service, the payment and benefits are consistent with
those provided pursuant to their Change in Control Agreements described above.
For Corporate Vice Presidents having between eight and 14 years of service, the
severance pay is between 22 and 26 months of base salary, depending upon the
actual full years of service, with no additional benefits other than health care
coverage during the severance pay period. For Corporate Vice Presidents having
between zero and seven years of service, the severance pay is between 14 and
15 1/2 months of base salary, depending upon the actual full years of service,
with no additional benefits other than health care coverage during the severance
pay period.
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 1996, 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 participant's year end 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
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<PAGE> 22
should be "at risk" for those employees with greater influence on corporate
results. 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
(subject to his or her supervisor's review and approval or modification) a
number of objectives for the coming year and then receives an evaluation 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 1996
included identifying and pursuing new business opportunities, obtaining
regulatory approvals for new products, introducing new products into designated
markets, integration of business acquisitions and increasing the Company's
presence in a number of geographic areas, particularly emerging markets in Asia.
This information (or summaries thereof) is generally considered by the Committee
in an evaluation of overall performance of the executive officers for purposes
of determining the actual bonus.
Corporate objectives are established for: cash flow return on investment
(CFROI), sales growth over the prior year, and earnings per share (EPS)
objectives. The Committee believes that these measures have the highest
historical correlation with long term increases in shareholder value. Targets
based on corporate 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 EPS are achieved. The bonus award guideline is
leveraged with the possible percentage ranging from 0% to 135%, and is linked to
company performance against the three measures.
For 1996, results in EPS and sales growth were below planned levels,
yielding no regular bonus. The Committee, however, was of the view that the
performance of the Company was excellent in several areas, primarily in the
introduction of new products, the establishment of several key collaborations
and the restructuring of the Company, thus providing shareholders with the
groundwork for future growth. Therefore, the Committee utilized the
discretionary bonus pool feature of the plan and approved the payment of a bonus
at 39% of normal target levels.
The following illustrates the bonus determination process used for 1996:
<TABLE>
<CAPTION>
EMPLOYEE'S CORPORATE INDIVIDUAL INDIVIDUAL
BONUS OBJECTIVE PERFORMANCE BONUS
TARGET ACHIEVEMENT ACHIEVEMENT PERCENTAGE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
X X =
e.g. 35% 39% 100% 13.7%
</TABLE>
For bonus year 1996, the Committee approved a total bonus fund of
approximately $3.8 million for approximately 500 participating employees.
For bonus year 1997, the Management Bonus Plan has been redesigned to tie
it more closely to individual employee performance as reflected in each
employee's pre-established individual objectives. The corporate objective, which
accounts for 50% of the bonus target for executive officers, is based upon EPS
only.
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:
- focus attention on building shareholder value through meeting longer-term
financial and strategic goals;
19
<PAGE> 23
- link management's financial success to that of the shareholders via
broad-based participation of Allergan management employees (approximately
365 managers received grants in 1996);
- balance long-term with short-term decision making; and
- encourage and create ownership and retention of the Company's stock.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
tax deductibility by a company of annual compensation in excess of $1,000,000
paid to any of its five most highly compensated executive officers. However,
performance-based compensation that has been approved by stockholders is
excluded from the $1,000,000 limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals and the board committee that establishes such goals consists
only of "outside directors." Additionally, stock options will qualify for the
performance-based exception where, among other requirements, the exercise price
of the option is not less than the fair market value of the stock on the date of
grant, and the plan includes a per-executive limitation on the number of shares
for which options may be granted during a specified period.
All members of the Committee qualify as outside directors. While the tax
impact of any compensation arrangement is one factor to be considered, such
impact is evaluated in light of the Committee's overall compensation philosophy.
The Committee will consider ways to maximize the deductibility of executive
compensation, while retaining the discretion the Committee deems necessary to
compensate officers in a manner commensurate with performance and the
competitive environment for executive talent. However, from time to time the
Committee may award compensation which is not fully deductible if the Committee
determines that such award is consistent with its philosophy and is in the best
interests of Allergan and its stockholders.
The 1989 Incentive Compensation Plan, as amended, approved by the
stockholders in April 1996, was designed to meet the performance-based criteria
of Section 162(m) of the Internal Revenue Code of 1986, as amended.
COMMITTEE ACTIVITIES
In 1996, the Committee had four formal meetings as well as many interim
discussions. The following summarizes the Committee's major activities:
- Reviewed and determined 1996 salary increases for each corporate officer
based on their performance.
- Approved the 1997 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.
- Determined 1995 management bonus awards for corporate officers based on
assessment of their performance against objectives. Approved the 1996
Management Bonus Plan's corporate financial objectives.
- Reviewed and recommended 1996 stock awards for executive officers as well
as for other participants, totalling approximately 365.
- Recommended the election of 1996 corporate officers and the designation
of executive officers covered under Section 16 of the Securities Exchange
Act of 1934.
- Reviewed executive stock ownership compared to the executive stock
ownership requirements established by the Committee. The Chairman,
President and Chief Executive Officer is expected to hold five times his
salary in Company stock; and the guideline for corporate vice presidents
is two times salary.
- Reviewed Pension Plan, Employee Stock Ownership Plan and Savings and
Investment Plan funding levels.
- Reviewed management development and succession plans.
20
<PAGE> 24
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 1997 Executive Salary
Plans and Stock Award Guidelines.
SALARY INCREASES
The CEO received an increase of 6.2% effective February 1, 1997, reflecting
the Committee's assessment of Mr. Shepherd's 1996 performance. As to specifics,
the Committee noted the large number of regulatory approvals for both new
products and additional indications for existing products, both in the U.S. and
elsewhere, an improving long term product pipeline, identification of technical
collaboration partners and integration of previously acquired businesses.
The other named executive officers received an average increase of 6.1%
effective February 1, 1997 to reflect performance and key contributions.
MANAGEMENT BONUS PLAN AWARDS
At the January 1997 meeting, the Committee approved bonus awards for
executive officers, as described above.
The CEO received a Management Bonus Plan award of $170,000, based on the
Committee's assessment of Allergan's 1996 corporate results in relation to Mr.
Shepherd's objectives for the year. For purposes of compensation decisions, the
Company's performance is generally measured under Management Bonus Plan targets
established prior to the start of the fiscal year.
In the case of Mr. Shepherd and each of the other named executives, the
Committee was influenced by the overall performance of the Company relative to
goals established for the year.
LONG-TERM INCENTIVE GRANTS
At the April 1996 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 1996 to executive officers were not affected in any significant
way by awards made in previous years.
The CEO received 80,000 non-qualified stock options, which was above the
guideline amount for the position. The Committee was influenced by, among other
things, Mr. Shepherd's leadership and the Company's success in introducing new
products.
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 (for actions
of the Committee from January 1996
until September 1996)
21
<PAGE> 25
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, 1991 and ending
December 31, 1996. The graph assumes that all dividends have been reinvested.
<TABLE>
<CAPTION>
Measurement Period S&P Health Care
(Fiscal Year Covered) AGN S&P 500 Diversified
<S> <C> <C> <C>
12/91 100 100 100
12/92 108 108 85
12/93 96 118 81
12/94 121 120 95
12/95 142 165 140
12/96 158 203 177
</TABLE>
CERTAIN TRANSACTIONS
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. ("Allergan Ireland") also
purchased, in conjunction with the formation of the joint venture and through
1994, equity interests in Ligand for approximately $24 million, including the
exercise of warrants in 1993. William C. Shepherd, Chairman, President and Chief
Executive Officer of the Company, became a director of Ligand shortly after the
formation of the joint venture.
In June 1995, Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT")
succeeded to the operations of the joint venture. Mr. Shepherd is a director of
ALRT and Dwight J. Yoder, Controller and Principal Accounting Officer of the
Company, is the Chief Financial Officer of ALRT. ALRT was funded by capital
contributions of $50 million from the Company, $17.5 million from Ligand, and
$32.5 million gross proceeds from a subscription offering to the stockholders of
the Company and Ligand (the "Subscription Offering"). The Company and Ligand
have various options to purchase stock or assets of ALRT. In connection with the
completion of the Subscription Offering and the funding of ALRT, Allergan
Ireland purchased $6 million of the common stock of Ligand. As of December 31,
1996, Allergan Ireland owned, approximately, an 11% equity interest in Ligand.
In addition, the Company, Ligand and ALRT have entered into several agreements
pursuant to which the Company has licensed technology, performs R&D and
administrative activities and has certain commercialization rights relating to
ALRT projects. In 1996, ALRT paid the Company approximately $9.1 million for R&D
and other administrative activities.
22
<PAGE> 26
Pharmaceutical Marketing Services Inc. and Source Informatics, Inc., of
which Handel E. Evans, a director of the Company and a member of the
Organization and Compensation Committee, is the Chairman and Executive Chairman,
respectively, provided pharmaceutical marketing research data during 1996 for
which the Company paid approximately $350,000 in the aggregate.
Effective as of October 31, 1992, the Company sold its contact 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 Partners International,
L.P. (collectively, the "Galen Funds"). The Galen Funds hold approximately 19.6%
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 Board's 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 1996,
the Company received from OSI approximately $2,009,000 in interest payments with
respect to the transaction debt and $13,800,000 as payment in full on a
Subordinated Promissory Note, approximately $10,000 for miscellaneous equipment
and approximately $84,000 in dividend payments on cumulative preferred stock.
Also in 1996, Francis R. Tunney, Jr., Corporate Vice President, General Counsel
and Secretary of the Company, became a director of OSI.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, independent auditors, audited the consolidated
financial statements of the Company for the fiscal year ended December 31, 1996.
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. The
Audit Committee of the Board of Directors selects the independent public
accountants, typically during the third or fourth quarter of the fiscal year.
ANNUAL REPORT
The Annual Report to Shareholders, including consolidated financial
statements for the year ended December 31, 1996, accompanies the proxy material
being mailed to all stockholders. The Annual Report is not a part of the proxy
solicitation material.
DEADLINE FOR STOCKHOLDER PROPOSALS
Any stockholder of the Company wishing to have a proposal considered for
inclusion in the Company's 1998 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 14, 1997.
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.
23
<PAGE> 27
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
[SIG]
Francis R. Tunney, Jr.
Secretary
March 18, 1997
Irvine, California
24
<PAGE> 28
[LOGO] ALLERGAN
CONFIDENTIAL PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING APRIL 22, 1997
The undersigned hereby constitutes and appoints Francis R. Tunney, Jr. and Susan
J. Glass, and each of them, his or her 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 22, 1997, and at
any adjournments thereof, on all matters coming before the meeting.
Election of Directors, Nominees:
Herbert W. Boyer, Ph.D., Tamara J. Erickson, William R. Grant,
Louis T. Rosso, William C. Shepherd
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> 29
Please mark your --------
[X] votes as in this 5893
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.
------------------------------------------------
------------------------------------------------
SIGNATURE(S) DATE
