<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
Allergan, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE> 2
ALLERGAN LOGO
2525 DUPONT DRIVE, IRVINE, CA 92612 (714) 246-4500
March 17, 1998
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 21, 1998 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.
<TABLE>
<S> <C>
Herbert W. Boyer David E.I. Pyott
[SIG] [SIG]
Chairman of the Board President and
Chief Executive Officer
</TABLE>
<PAGE> 3
ALLERGAN LOGO
2525 Dupont Drive, Irvine, CA 92612
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 21, 1998
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 21, 1998 at 10:00 A.M. for
the following purposes:
1. To elect three Class III directors to serve for three-year terms ending
in 2001 and until their successors are elected and qualified.
2. To approve the Allergan, Inc. Stock Price Incentive Plan.
3. To approve an amendment to the Company's 1989 Nonemployee Director Stock
Plan.
4. To consider and take action upon a stockholder proposal concerning
cumulative voting.
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed February 27, 1998 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
February 27, 1998 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 17, 1998
<PAGE> 4
ALLERGAN, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS -- APRIL 21, 1998
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
21, 1998, 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 17, 1998.
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 has retained D.F.
King & Co., a professional soliciting organization, to aid in the solicitation
of proxies to be voted at the annual meeting at an estimated cost of $10,500
plus out-of-pocket expenses. 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, FOR the proposal to approve the Allergan, Inc. Stock
Price Incentive Plan, FOR the proposal to approve an amendment to the Company's
1989 Nonemployee Director Stock Plan and AGAINST the stockholder proposal,
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
February 27, 1998 are entitled to vote at the meeting. On that date Allergan had
65,479,220 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 four each serve as Class I, Class II and Class III directors.
Effective with the retirement of Leslie G. McCraw as a director at the annual
meeting in April 1998, the size of the Board of Directors will be decreased to
11 and there will be three directors in Class III.
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 THREE NOMINEES NAMED BELOW, ALL OF WHOM ARE, AT
PRESENT, CLASS III DIRECTORS OF THE COMPANY.
Directors are to be elected by a plurality of the votes cast at the meeting
in person or by proxy by the holders of shares entitled to vote in the election.
The Board of Directors is informed that all the nominees are willing to serve as
directors, but if any of them should decline or be unable to act as a director,
the persons named in the proxy will vote for such substitute nominee or nominees
as may be designated by the Board of Directors unless the Board reduces the
number of directors accordingly.
NOMINEES FOR DIRECTORS
CLASS III -- TERM EXPIRES 2001:
HANDEL E. EVANS, 63, is the Chairman and Founder of Pharmaceutical
Marketing Services Inc., a supplier of market information and specialized
marketing products to the pharmaceutical industry in the United States, Europe
and Japan. Until December 1997, Mr. Evans also served as a director and Chairman
of the Board of Source Informatics, Inc., a database and information services
company that was spun off by Walsh International Inc. in April 1996. From 1988
to 1996, Mr. Evans was also Chairman of Walsh International Inc., a specialized
software house providing services to the pharmaceutical industry. Prior to 1988,
Mr. Evans was a founder of and served in a variety of senior executive positions
with 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, 65, is Chairman Emeritus of the Company as of January 1,
1996. He had been Chairman from 1977 to 1995 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. 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 is a
co-founder of the Company 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 and
Science and Technology Committees.
HENRY WENDT, 64, is Chairman of Global Health Care Partners unit of DLJ
Merchant Banking, a Donaldson, Lufkin & Jenrette Company, specializing in
private equity investment in health care businesses worldwide. 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 a director of Atlantic Richfield Co., The Egypt Investment
Company, and West Marine Products. He is a trustee of the Trilateral Commission
and Trustee Emeritus of the American Enterprise Institute. Mr. Wendt is the
author of
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<PAGE> 6
"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.
DIRECTORS CONTINUING IN OFFICE
CLASS I -- TERM EXPIRES 1999:
HOWARD E. (TED) GREENE, JR., 55, 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 and Science and Technology Committees.
LESTER J. KAPLAN, PH.D., 47, 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 a member of the Board of Directors of
ACADIA Pharmaceuticals Inc. and Allergan Specialty Therapeutics, Inc., and 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 and Science and Technology
Committees.
LOUIS T. ROSSO, 64, 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 Health Foundation, Harvey Mudd
College, and the Keck Graduate Institute of Applied Life Sciences. 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.
LEONARD D. SCHAEFFER, 52, has been Chairman of the Board of Blue Cross of
California, a health insurance organization, since 1989 and Chief Executive
Officer since 1986. He has also been Chairman of the Board and Chief Executive
Officer of WellPoint Health Networks Inc., a for-profit managed health care
company, since 1992. Mr. Schaeffer was the Administrator of the U.S. Health Care
Financing Administration (HCFA) from 1978 to 1980. 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 II -- TERM EXPIRES 2000:
HERBERT W. BOYER, PH.D., 61, 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 Chairman of the Board as of January 2, 1998 and has been a Board
member
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since 1994. He is the Chairman of the Board's Science and Technology Committee
and is a member of the Audit Committee.
TAMARA J. ERICKSON, 43, is an independent consultant specializing in
corporate strategy and technology management. She is co-author of "Third
Generation R&D -- Managing the Link to Corporate Strategy," published in 1991.
From August 1995 through May 1996, Mrs. Erickson was Senior Vice President of
Arthur D. Little, Inc., a management consulting company, and Chairman of its
subsidiary, Innovation Associates. Prior to that, Mrs. 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. She is a
member of the Board of Directors of EG&G, Inc. Mrs. 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 and Science and Technology
Committees.
WILLIAM R. GRANT, 73, 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 Witco
Corporation, SmithKline Beecham p.1.c., Seagull Energy Corporation, Datamedic
Corp., MiniMed, Inc., Flex-Foot, Inc. and O.S.I. Corporation. Mr. Grant was
elected to the Board in 1989 and is Chairman of the Board's Organization and
Compensation Committee, and is a member of the Audit and Corporate Governance
Committees.
DAVID E.I. PYOTT, 44, became President and Chief Executive Officer in
January 1998. Previously, he was head of the Nutrition Division and a member of
the executive committee of Novartis AG from 1997 until December 1997 and had
held a similar position at Sandoz International AG, from 1995 to 1996, prior to
the merger of Sandoz and Ciba to form Norvartis. Also, while at Sandoz, Mr.
Pyott was President and Chief Executive Officer of Sandoz Nutrition Corp.,
Minneapolis, Minnesota (1992-1995), General Manager of Sandoz Nutrition,
Barcelona, Spain (1990-1992) and held other positions within the Sandoz
Nutrition group from 1980.
INFORMATION REGARDING THE BOARD OF DIRECTORS
MEETINGS AND COMMITTEES
The Board of Directors held five meetings during 1997 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 93% and all directors attended 75% or more of the
meetings of the Board and committees on which they served. 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 1997,
recommends to the Board of Directors the appointment of 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; 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.
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<PAGE> 8
Finance Committee -- The Finance Committee, which had four meetings in
1997, 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 1997. 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 five meetings in 1997, 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 20.
Science and Technology Committee -- The Science and Technology Committee
held two meetings in 1997. It undertakes in-depth reviews of the Company's
research and development programs and projects to evaluate the soundness and
risks associated with the technologies in which the Company is investing its
research and development efforts, and the capabilities of the R&D organization
to develop the technology.
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 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.
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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 1997, 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. During
1997 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, and is eligible to participate
in the 1989 Nonemployee Director Stock Plan and the Deferred Directors Fee
Program, both as described below.
Dr. Boyer became Chairman of the Board in January 1998. For such services,
he will receive a retainer of $250,000, attendance fees as described above, and
is eligible to participate in the 1989 Nonemployee Director Stock Plan and the
Deferred Directors Fee Program, both as described below. If approved by the
stockholders at the annual meeting, Dr. Boyer will receive a one-time grant of
5,000 shares of restricted stock, as described in greater detail on page 28.
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. Dr. Boyer, Mrs. Erickson and Messrs. Evans, Grant,
Greene, McCraw, Rosso, and Wendt chose to defer all or a portion of their
retainers and meeting fees for the period January 1, 1997 through December 31,
1997.
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. The Board has approved an amendment to the Director Plan to
increase grants of restricted stock from 600 shares per year to 900 shares per
year, with grants continuing to be made upon initial election to the Board and
upon reelection. In addition, the Board has approved a one-time grant of 5,000
shares of restricted stock to Dr. Boyer in connection with his appointment as
Chairman of the Board. The amendment does not become effective unless approved
by the stockholders at this meeting. The proposed amendment is described in
greater detail beginning on page 28.
STOCK OWNERSHIP GUIDELINES
At its meeting held in January 1997, 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. As of December 31, 1997, all ten nonemployee directors met their
ownership guidelines.
OTHER MATTERS
In June 1992, the Company entered into a joint venture with Ligand
Pharmaceuticals Incorporated ("Ligand") for the research and development and
commercial exploitation of pharmaceutical products based on retinoid technology.
Each company agreed to contribute $15 million to the venture over three years.
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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 through December 31, 1997, became a director of
Ligand shortly after the formation of the joint venture. Mr. Shepherd resigned
this directorship on October 3, 1997.
In June 1995, Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT")
succeeded to the operations of the joint venture. Mr. Shepherd became a director
of ALRT and Dwight J. Yoder, Senior Vice President, Controller and Principal
Accounting Officer of the Company, became the Chief Financial Officer of ALRT.
ALRT was funded by 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"). 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.
On September 24, 1997, the Company and Ligand announced that Ligand would
exercise its option to purchase all of the outstanding callable Common Stock of
ALRT and the Company would simultaneously exercise its option to purchase an
undivided one-half interest in all of the assets of ALRT for a cash payment to
Ligand of $8.9 million. The Company and Ligand also announced that they had
agreed to restructure the terms and conditions relating to their agreements
concerning the assets and technology formerly belonging to ALRT following
exercise of the options. At the closing of the ALRT option exercises on November
21, 1997, the Company paid Ligand $8.9 million and gave Ligand specified
royalty, license and other contractual rights to certain compounds formerly
belonging to ALRT. The Company received from Ligand $4.5 million which
represented payments related to compounds licensed to Ligand and $5.5 million
from ALRT which represented one-half of the cash in ALRT at the closing as well
as specified licenses, royalties and other contractual rights related to
compounds that had belonged to ALRT or to Ligand.
During 1997 the Company provided ALRT approximately $11.0 million in R&D
and administrative services. At December 31, 1997, Allergan Ireland owned
approximately 8.9% of the outstanding Common Stock of Ligand.
On December 31, 1997, the Company made an interest-free loan in the amount
of $500,000 to David E.I. Pyott, the incoming President and Chief Executive
Officer of the Company, to be used to purchase a residence in Orange County,
California. The loan is payable in full in five years.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1997, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with, except that Jeffrey B. D'Eliscu, an officer, filed
all reports since becoming an officer in a timely manner, but inadvertently
omitted reporting 19.9 shares acquired under a dividend reinvestment plan when
he filed his Form 3. He subsequently corrected his prior report.
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. 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
7
<PAGE> 11
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 five Committees are Audit, Finance, Organization & Compensation,
Corporate Governance and Science & Technology. 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.
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.
8
<PAGE> 12
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.
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.
9
<PAGE> 13
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.
10
<PAGE> 14
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.
11
<PAGE> 15
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 Corporate Governance Committee conducted its first assessment of Board
performance in January 1996; it conducted another assessment in September 1997.
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 20 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. The Board takes appropriate action based on the information and analysis
provided to it.
11. The Board probes management's thinking as appropriate in ways that are
focused on improving the performance of the Company.
12. Board membership reflects the right mix of experience, skills, perspectives
and diversity.
13. The Board appropriately reviews the performance of the CEO.
14. The Organization and Compensation Committee (the "OCC") regularly reviews
the performance of the senior officers.
15. The Audit Committee regularly reviews the ethics of the conduct of the
senior officers.
16. The OCC monitors performance and assures that correlation between executive
pay and Company performance is regularly considered by the Board and/or the
OCC.
12
<PAGE> 16
17. The OCC reviews succession plans for the CEO and senior management and
insures adequate channels of commitment through the executive session of the
Board.
18. The OCC is appropriately involved in senior management selection.
19. The trigger level for Board or committee involvement in major business
policies and decisions is meaningful and appropriate.
20. Taking everything into consideration involving the Board's performance, the
Board's performance is appropriate for the Company considering its size and
industry.
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 the Board of
Directors held in September 1997.
13
<PAGE> 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
BY MANAGEMENT
The following table sets forth information as of January 31, 1998 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 4 below, no officer or
director of the Company owns beneficially 1% or more of the Common Stock
outstanding.
<TABLE>
<CAPTION>
SHARES OF RIGHTS TO
COMMON STOCK ACQUIRE
BENEFICIALLY BENEFICIAL
BENEFICIAL OWNER OWNED(1)(2) OWNERSHIP(3) TOTAL
---------------- ------------ ------------ ---------
<S> <C> <C> <C>
CLASS III DIRECTORS NOMINEES:
Handel E. Evans.......................... 6,070 6,070
Gavin S. Herbert......................... 716,624(4) 716,624
Henry Wendt.............................. 39,165 39,165
Leslie G. McCraw(5)...................... 4,085 4,085
CLASS I DIRECTORS:
Howard E. Greene, Jr..................... 4,360 4,360
Lester J. Kaplan, Ph.D................... 19,397 104,600 123,997
Louis T. Rosso........................... 48,171 48,171
Leonard D. Schaeffer..................... 3,300 3,300
CLASS II DIRECTORS:
Herbert W. Boyer, Ph.D................... 3,300 3,300
Tamara J. Erickson....................... 3,940 3,940
William R. Grant......................... 14,911 14,911
David E.I. Pyott......................... 10,000 10,000
OTHER NAMED EXECUTIVE OFFICERS
William C. Shepherd...................... 99,471 515,000 614,471
Albert J. Moyer.......................... 2,810 15,000 17,810
Francis R. Tunney, Jr.................... 11,510 94,089 105,599
F. Michael Ball.......................... 1,031 9,600 10,631
All current directors and executive
officers
(24 persons, including those named
above)................................. 1,054,724 1,152,424 2,207,148(6)
</TABLE>
- ---------------
(1) In addition to shares held in the individual's sole name, this column
includes shares held by the spouse of the named person and shares held in
various 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,
1997.
(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
14
<PAGE> 18
amounts treated as having been invested in Common Stock of the Company. As
of January 31, 1998, 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........................... 1,290
Tamara J. Erickson......................... 5,396
Handel E. Evans............................ 9,748
William R. Grant........................... 10,727
Howard E. Greene, Jr....................... 4,934
Leslie G. McCraw........................... 9,139
Louis T. Rosso............................. 7,319
Leonard D. Schaeffer....................... 3,529
Henry Wendt................................ 9,494
</TABLE>
(3) Shares which the party or group has the right to acquire within 60 days
after January 31, 1998 upon the exercise of stock options.
(4) Includes 185,440 shares held in two trusts for which Mr. Herbert serves as
co-trustee and in which he or his sister has a beneficial interest, as well
as 37,000 shares held in a limited liability company which is owned by a
charitable remainder trust in which Mr. Herbert has a pecuniary interest.
Represents 1.1% of the shares outstanding as of January, 31, 1998.
(5) Mr. McCraw is currently a Class III Director but is not a nominee for
re-election. He will retire in April, 1998.
(6) Represents 3.3% of the shares outstanding as of January 31, 1998.
BY OTHERS
Management of the Company knows of no person, except as set forth below,
who is the beneficial owner of more than 5% of the Company's issued and
outstanding Common Stock.
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS BENEFICIALLY OWNED OF CLASS
------------------------------------- ------------------ --------
<S> <C> <C>
Swiss Bank Corporation and Brinson Partners, Inc........... 6,101,710(1) 9.4%
209 South LaSalle Street
Chicago, Illinois 60604-1295
State Farm Mutual Automobile Insurance Company and its
Related Entities......................................... 3,982,900(2) 6.1%
One State Farm Plaza
Bloomington, Illinois 61710
Wellington Management Company, LLP......................... 3,896,800(3) 6.0%
75 State Street
Boston, MA 02109
Certain Fidelity funds..................................... 3,354,672(4) 5.1%
82 Devonshire Street
Boston, MA 02109-3614
</TABLE>
- ---------------
(1) Based on a Schedule 13G, dated February 11, 1998, 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 23, 1998, filed with the Securities
and Exchange Commission by State Farm Mutual Automobile Insurance Company on
behalf of itself and related entities.
(3) Based on a Schedule 13G, dated January 12, 1998, filed with the Securities
and Exchange Commission by the named beneficial owner on behalf of itself
and related entities.
(4) Based on a Schedule 13G, dated February 14, 1998, filed with the Securities
and Exchange Commission by FMR Corp. on behalf of itself and related
entities.
15
<PAGE> 19
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, 1995, 1996 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL -----------------------
COMPENSATION RESTRICTED SECURITIES ALL
----------------- STOCK UNDERLYING OTHER
SALARY BONUS AWARD(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(2) ($)(3) ($)(4) (#) ($)(5)
--------------------------- ---- ------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
William C. Shepherd, 1997 686,667 180,000 61,000 15,270
Chairman of the Board, 1996 646,667 170,000 80,000 16,389
President & CEO(1) 1995 605,000 160,000 65,000 18,798
Lester J. Kaplan, Ph.D., 1997 283,433 135,000 24,000 13,318
Corporate Vice President, 1996 264,943 100,000 31,200 13,224
Science and Technology 1995 249,916 80,000 24,000 13,991
Albert J. Moyer, 1997 279,667 70,000 16,000 7,038
Corporate Vice President and CFO 1996 263,751 85,000 20,000 6,773
1995 105,132 30,000 59,500 20,000 5,903
Francis R. Tunney, Jr., 1997 274,650 70,000 16,000 7,911
Corporate Vice President, 1996 258,576 85,000 20,000 8,227
General Counsel and Secretary 1995 243,582 80,000 16,000 7,844
F. Michael Ball, 1997 255,500 60,000 44,400 37,677
Corporate Vice President and 1996 225,779 27,000 28,400 58,615
President, North America Region
</TABLE>
- ---------------
(1) Mr. Shepherd retired as a director and executive officer effective January
1, 1998.
(2) 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.
(3) 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.
(4) 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, 1997) were held by each of the named executives as of
December 31, 1997: Mr. Moyer, 2,000 ($67,125), and Mr. Ball, 400 ($13,425).
(5) The total amounts shown in this column for the 1997 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") payment in lieu of vacation ("Vac"), and sign-on
bonuses as follows:
<TABLE>
<CAPTION>
SIP ESOP INS VAC SIGN-ON BONUS
------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
Mr. Shepherd............. $2,375 $2,930 $9,965 -- --
Dr. Kaplan............... 4,000 2,930 907 $5,481 --
Mr. Moyer................ 4,000 2,930 108 -- --
Mr. Tunney............... 4,000 2,930 981 -- --
Mr. Ball................. 3,749 2,930 998 -- $30,000
</TABLE>
16
<PAGE> 20
STOCK OPTIONS
The following table shows information regarding stock options granted to
the named executive officers during 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL 1997 PER SHARE DATE VALUE ($)(2)
---- -------------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
William C. Shepherd...... 61,000 4.1% $27.00 4/22/07 815,735
Lester J. Kaplan, Ph.D... 24,000 1.6% $27.00 4/22/07 320,945
Albert J. Moyer.......... 16,000 1.1% $27.00 4/22/07 213,963
Francis R. Tunney, Jr.... 16,000 1.1% $27.00 4/22/07 213,963
F. Michael Ball.......... 16,000 1.1% $27.00 4/22/07 213,963
</TABLE>
- ---------------
(1) All options disclosed above were granted pursuant to the 1989 Incentive
Compensation Plan (the "Incentive Plan") on April 22, 1997 and become
exercisable 25% per year beginning April 22, 1998. 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 19.
(2) Based on the Black-Scholes model of option valuation to determine grant date
fair value, as prescribed under Statement of Financial Accounting Standards
No. 123 (SFAS No. 123), Accounting for Stock-Based Compensation. 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
1997 option grants, the following assumptions were used in the Black-Scholes
model: market price of stock, $27; exercise price of option, $27; expected
stock volatility, 44% (based on ten-year volatility); risk-free interest
rate, 6.9% (based on the 10-year zero coupon rate); expected life, ten
years; dividend yield, 1.9%.
OPTION EXERCISES AND HOLDINGS
The following table shows stock option exercises by the named executive
officers during 1997, including the aggregate value of gains on the date of
exercise. In addition, this table includes the number of shares covered by both
exercisable and non-exercisable stock options as of December 31, 1997. Also
reported are the
17
<PAGE> 21
values for "in-the-money" options which represent the positive spread between
the exercise price of any such existing stock options and the year-end price of
Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT 12/31/97(#) AT 12/31/97 ($) (1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William C. Shepherd........ 13,632 187,372 346,250 168,750 3,757,868 783,944
Lester J. Kaplan, Ph.D..... 2,182 17,430 104,600 63,400 1,126,673 278,760
Albert J. Moyer............ -- -- 15,000 41,000 38,125 143,125
Francis R. Tunney, Jr...... 16,364 171,666 94,089 43,000 1,044,013 202,510
F. Michael Ball............ -- -- 9,600 34,800 29,688 134,688
</TABLE>
- ---------------
(1) Based on the closing price of $33.5625 on the New York Stock Exchange of the
Company's Common Stock.
DEFINED BENEFIT PENSION PLANS
The Company has a defined benefit retirement plan (the "Pension Plan")
which provides pension benefits to U.S. 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 also has two supplemental retirement plans ("SRP") for certain
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.
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 49,200 65,500 81,900 98,300 114,700 119,700 124,700
$250,000 62,100 82,800 103,600 124,300 145,000 151,200 157,500
$300,000 75,100 100,100 125,200 150,200 175,300 182,800 190,300
$350,000 88,100 117,400 146,800 176,200 205,500 214,300 223,000
$400,000 101,100 134,700 168,400 202,100 235,800 245,800 255,800
$500,000 127,000 169,300 211,700 254,000 296,400 308,900 321,400
$600,000 153,000 203,900 254,900 305,900 356,900 371,900 386,900
$700,000 178,900 238,500 298,200 357,800 417,500 435,000 452,500
$800,000 204,900 273,100 341,400 409,700 478,000 498,000 518,000
$900,000 230,800 307,700 384,700 461,600 538,600 561,100 583,600
</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
18
<PAGE> 22
compensation table would be as follows: Mr. Shepherd, 34 years; Dr. Kaplan, 29
years; Mr. Moyer, 10 years; Mr. Tunney, 30 years; and Mr. Ball, 22 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 the impact of 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: David E.I. Pyott, who became the CEO in January
1998 -- three years; Messrs. Kaplan, Tunney, Moyer and Ball, and six other
corporate vice presidents -- two years; other covered executives (28
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.
The Organization and Compensation Committee has approved a severance pay
policy for Corporate Officers whose employment is terminated as a result of a
reduction in force, unacceptable performance or sale of a business unit where
the Corporate Officer is not offered similar employment with the acquiring
company. The amount of severance pay depends upon the Corporate Officer's years
of service with the Company. For Corporate Officers having 15 or more years of
service, the payment and benefits are substantially consistent with those
provided pursuant to their Change in Control Agreements described above. For
Corporate Officers 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 Officers 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.
William C. Shepherd retired from the Company on January 1, 1998. Pursuant
to the terms of a letter agreement between Mr. Shepherd and Allergan regarding
Mr. Shepherd's retirement, Allergan has agreed to pay Mr. Shepherd severance
payments totaling $3,210,000, on a semi-monthly basis, during the period
commencing January 1, 1998 and ending 36 months following such date (the
"Severance Pay Period"). In partial consideration of such severance payments,
Mr. Shepherd has agreed to provide consulting services to Allergan as requested
by Allergan's Chief Executive Officer for up to a maximum of 50 days per year
during the Severance Pay Period. In addition, pursuant to the terms of the
letter agreement, the vesting of all of Mr. Shepherd's outstanding unvested
options was accelerated as of January 1, 1998. Such options are exercisable by
Mr. Shepherd at any time prior to the earlier of (a) January 1, 2003 or (b) the
expiration of any such options in accordance with their terms. Under the terms
of the letter agreement, Allergan has also
19
<PAGE> 23
agreed to provide Mr. Shepherd with continued medical, dental, group term life,
disability and flexible spending account benefits, continued pension benefit
accruals and other miscellaneous perquisites and benefits during the Severance
Pay Period.
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 manner with
achievement of individual objectives and 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 1997, 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 individual and corporate 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 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 1997 included identifying and pursuing new business
opportunities, obtaining regulatory approvals
20
<PAGE> 24
for new products as well as new indications for existing products, introducing
new products into designated markets, identifying and implementing cost
reduction measures 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.
The Individual Objective component accounts for 75% of target bonus for
non-officers and 50% for officers.
The Corporate Financial component is funded according to the achievement of
a pre-established 1997 Earnings Per Share ("EPS") Range.
The EPS Target is based on corporate objectives established as part of the
annual operating plan process which includes a review of peer group company
performance. The bonus target for the Corporate Financial component is set at
100% when 100% of operating plan objectives for EPS is achieved.
For 1997, the EPS result was below the 1997 EPS Range, yielding no bonus
from the Corporate Financial component. Therefore, the Committee only approved
funding for payment of bonuses based on the achievement of the Individual
Objective component.
The following illustrates the bonus determination process used for 1997:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Employee's Individual Corporate Individual Individual
Bonus Objective + Financial Performance Bonus
Target Component Component Achievement Percentage
X X =
e.g. 35% 75% + 0% 100% 26.3%
</TABLE>
For bonus year 1997, the Committee approved a total bonus fund of
approximately $6.3 million for approximately 500 participating employees.
TOTAL ANNUAL CASH COMPENSATION (BASE SALARY PLUS BONUS)
Total cash compensation is set competitively at the 50th percentile, as
described in the section titled Base Salary, above, when annual operating plans
and targets are achieved. Top-quartile cash compensation can be attained only if
business results significantly exceed the operating plan.
INCENTIVE COMPENSATION PLAN
The 1989 Incentive Compensation Plan (the "Incentive Plan") authorizes the
granting of various stock-based incentive awards to officers and key employees
of the Company and its subsidiaries. The plan has been designed to:
- focus attention on building shareholder value through meeting
longer-term financial and strategic goals;
- link management's financial success to that of the shareholders via
broad-based participation of Allergan management employees
(approximately 300 managers received grants in 1997);
- balance long-term with short-term decision making; and
- encourage and create ownership and retention of the Company's stock.
STOCK PRICE INCENTIVE PLAN
The Board of Directors approved the Stock Price Incentive Plan ("SPIP")
effective January 1, 1998, subject to the approval of the Company's stockholders
at this annual meeting. The SPIP is designed to focus those executives at the
Corporate Vice President or higher level on specific strategic performance
targets and reward for the achievement of specified stock price goals.
21
<PAGE> 25
There are two levels of performance. If the stock price reaches $50 per
share for 20 consecutive trading days (as measured by the closing price on the
NYSE) within the three-year performance period, each participant would receive
100% of base salary. If the stock price reaches $60 under the same criteria,
each participant would receive 200% of base salary. Payments at each achievement
level are cumulative and can be paid in any year during the three-year period.
Payments, if any, can be made in cash or Allergan Common Stock at the discretion
of the Committee. The Proposal to approve the SPIP begins on page 25.
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. The
Allergan, Inc. Stock Price Incentive Plan, approved by the Board of Directors
subject to the approval of the Company's stockholders at this annual meeting, is
also designed to meet such performance-based criteria.
COMMITTEE ACTIVITIES
In 1997, the Committee had five formal meetings as well as many interim
discussions. The following summarizes the Committee's major activities:
- Recruited the new President and Chief Executive Officer, David E.I.
Pyott.
- Evaluated CEO performance.
- Reviewed and determined 1997 salary increases for each corporate officer
based on the officer's performance.
- Determined 1996 management bonus awards for corporate officers based on
assessment of their performance against objectives. Approved the 1997
Management Bonus Plan's corporate financial objective.
- Reviewed and recommended 1997 stock awards for executive officers as
well as for other participants, totaling approximately 300.
- Reviewed management development and succession plans.
- Recommended approval of the Stock Price Incentive Plan to the Board of
Directors.
- Recommended the election of 1997 corporate officers and the designation
of executive officers covered under Section 16 of the Securities
Exchange Act of 1934.
22
<PAGE> 26
- Reviewed executive stock ownership compared to the executive stock
ownership requirements established by the Committee. The 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.
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 Stock Price Incentive
Plan and Management Bonus Plan.
SALARY INCREASES
The named executive officers, other than the CEO, who had just retired,
received an average increase of 4.0% effective February 1, 1998 to reflect
performance and contributions.
MANAGEMENT BONUS PLAN AWARDS
At the January 1998 meeting, the Committee approved bonus awards for
executive officers, as described above.
Mr. Shepherd, the former CEO, received a Management Bonus Plan award of
$180,000, based on the Committee's assessment of Mr. Shepherd's achievements of
his objectives for the year. The Committee noted particularly the smooth
transition of leadership from Mr. Shepherd, prior to his retirement, to Mr.
Pyott and Dr. Boyer, the support that had been provided to the Research and
Development activities of the Company and Mr. Shepherd's willingness to support
the Europe/Africa/Middle East Region as part of his consulting role following
his retirement.
LONG-TERM INCENTIVE GRANTS
At the April 1997 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 1997 to executive officers were not affected in any significant
way by awards made in previous years.
The former CEO received 61,000 non-qualified stock options in April 1997,
which was equal to the guideline amount for the position. The Committee was
influenced by, among other things, Mr. Shepherd's leadership 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
Mrs. Tamara J. Erickson
Mr. Handel E. Evans
Mr. Leslie G. McCraw
23
<PAGE> 27
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Company's Organization and Compensation Committee is a
current or former officer or employee of the Company or any of its subsidiaries.
There are no compensation committee interlocks between the Company and other
entities involving Allergan executive officers and Allergan Board members who
serve as executive officers of such other entities.
Pharmaceutical Marketing Services Inc., of which Handel E. Evans, a
director of the Company and a member of the Organization and Compensation
Committee, is the Chairman and an executive officer, provided pharmaceutical
marketing research data to the Company during 1997 for which the Company paid
approximately $654,200 in the aggregate. Source Informatics, Inc., of which Mr.
Evans was a director, Chairman and executive officer, provided pharmaceutical
marketing research data to the Company during 1997 for which the Company paid
$1,471,000 in the aggregate.
The Company believes that these transactions were made on terms no less
favorable than that which could have been received by unaffiliated third
parties. The Company also believes that these transactions were not material to
the Company or to the companies with which the Director is affiliated.
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, 1992 and ending
December 31, 1997. The graph assumes that all dividends have been reinvested.
<TABLE>
<CAPTION>
Measurement Period S&P Health Care
(Fiscal Year Covered) Allergan S&P 500 Diversified
<S> <C> <C> <C>
Dec-92 100 100 100
Dec-93 89 110 95
Dec-94 113 112 111
Dec-95 131 153 164
Dec-96 146 188 207
Dec-97 140 251 302
</TABLE>
24
<PAGE> 28
APPROVAL OF THE
ALLERGAN, INC. STOCK PRICE INCENTIVE PLAN
PROPOSAL 2
GENERAL
The Company's Board of Directors has approved the Stock Price Incentive
Plan (the "SPIP"), subject to approval by the Company's stockholders. The
following is a summary of the principal terms of the SPIP and is qualified by
and subject to the actual provisions of the form of the SPIP attached to this
Proxy Statement as Exhibit A.
The purpose of the SPIP is to provide a means of paying incentive
compensation to certain key management employees who contribute materially to
the success of the Company. By relating incentive rewards of certain key
management employees to increases in market price of the Company's Common Stock,
the Company will be in a position to provide additional motivation and to reward
extraordinary performance by making those employees most responsible for such
performance participants in the Company's success and to better align their
interests with the interests of the Company's stockholders.
The officers of the Company at the corporate vice president or higher level
are eligible to be participants under the SPIP. The Company currently has 10
officers at the corporate vice president or higher level. Participants will be
selected by the committee administering the SPIP from among those persons
eligible. New participants added during the period from January 1, 1998 through
December 31, 1998 will participate in the SPIP without proration. New
participants added during the period from January 1, 1999 through December 31,
1999 will participate in the SPIP on the basis of a 50% proration. No new
participants may be added during the third calendar year of the SPIP.
A person will cease to be a participant upon the earlier of such person's
(i) death, (ii) retirement, or (iii) termination of eligibility as a participant
(including termination of employment). The participant must be an employee of
the Company on the date of the relevant goal achievement in order to receive any
dollar amount awarded to a participant ("Incentive Compensation") pursuant to
the SPIP with respect to that goal achievement.
ADMINISTRATION, AMENDMENT AND TERMINATION OF THE SPIP
The SPIP is administered by the Company's Organization and Compensation
Committee of the Board of Directors (the "Committee"), which is comprised solely
of two or more outside directors as defined in Section 162(m) of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
Subject to the express provisions of the SPIP, the Committee has the authority
to interpret the SPIP, to determine the terms and conditions of Incentive
Compensation, to make all determinations necessary or advisable for the
administration of the SPIP and to prescribe, amend and rescind rules and
regulations for the administration of the SPIP.
The Board of Directors may terminate the SPIP or modify or amend the SPIP
from time to time in such respects as it deems advisable. Unless the SPIP shall
theretofore have been terminated, it will automatically terminate on December
31, 2000 and the Committee will not have authority to award Incentive
Compensation after December 31, 2000. No termination or amendment of the SPIP
will reduce the amount of the benefit which a participant has already become
entitled to under the SPIP, unless such participant consents to such reduction.
INCENTIVE COMPENSATION
In the event that the closing price of the Company's Common Stock on the
New York Stock Exchange as reported in the Wall Street Journal (the "Stock
Price") is $50.00 per share (adjusted appropriately for any stock splits,
reverse stock splits or stock dividends) (the "First Goal") for twenty (20)
consecutive trading days at any time during the period beginning January 1, 1998
and ending December 31, 2000 (the "Performance Period"), each participant in the
SPIP will be entitled to an Incentive Compensation payment
25
<PAGE> 29
equal to 100% of such participant's base salary as of such twentieth day;
provided, however, if (i) the First Goal is achieved for ten (10) or more
consecutive trading days but less then the required twenty (20) consecutive
trading days and (ii) the Committee makes a good faith determination that the
failure to sustain the First Goal for the required twenty (20) consecutive
trading day period was predominately due to factors external to the Company's
performance, then each participant will be entitled to an Incentive Compensation
payment equal to 100% of such participant's base salary as of such twentieth
day. There may not be more than one (1) First Goal attained during the
Performance Period.
In the event that the Stock Price is $60.00 per share (adjusted
appropriately for any stock splits, reverse stock splits or stock dividends)
(the "Second Goal") for twenty (20) consecutive trading days at any time during
the Performance Period, each participant shall be entitled to an Incentive
Compensation payment equal to 200% of such participant's base salary as of such
twentieth day; provided, however, if (i) the Second Goal is achieved for ten
(10) or more consecutive trading days but less then the required twenty (20)
consecutive trading days and (ii) the Committee makes a good faith determination
that the failure to sustain the Second Goal for the required twenty (20)
consecutive trading day period was predominately due to factors external to the
Company's performance, then each participant will be entitled to an Incentive
Compensation payment equal to 200% of such participant's base salary as of such
twentieth day. There may not be more than one (1) Second Goal attained during
the Performance Period.
FORM OF PAYMENT AND SECURITIES SUBJECT TO SPIP
The Committee has the discretion to determine whether the Incentive
Compensation will be paid in cash as a lump sum, in Common Stock of the Company
or in any combination thereof. If the Committee elects to pay Incentive
Compensation in the Common Stock of the Company, in whole or in part, such
Common Stock will be valued at the average of the high and low prices of the
Company's Common Stock on the New York Stock Exchange as reported in the Wall
Street Journal for the day on which the Committee makes such election. All
Incentive Compensation will be paid within thirty (30) days of the Committee's
determination that Incentive Compensation will be paid in accordance with the
provisions of the SPIP, unless deferred by the participant in accordance with
any applicable program for deferring incentive compensation under which such
participant has made a valid election to defer all or part of such award.
Any Common Stock to be issued under the SPIP will be made available, at the
discretion of the Board of Directors, either from authorized but unissued shares
or from shares held in treasury.
DEATH OR TERMINATION OF EMPLOYMENT
In the event that a participant has amounts payable as Incentive
Compensation under the SPIP and dies prior to the payment of such amounts, the
amounts payable at the time of the participant's death will be paid to the
participant's beneficiary or, if no beneficiary was designated by the
participant, to the participant's estate.
In the event that a participant has amounts payable as Incentive
Compensation under the SPIP and retires or is no longer eligible to be a
participant prior to the payment of such amounts, the amounts payable at the
time the participant retires or at the time the participant's eligibility
changes will be paid to the participant.
CHANGE IN CONTROL
As of the effective time and date of any "change in control," the SPIP and
the participant's rights thereunder will automatically terminate, the Committee
will not have authority to award Incentive Compensation and no Incentive
Compensation will be paid, provided that if (i) the Committee previously
determined that Incentive Compensation should be paid in accordance with the
terms of the SPIP and such Incentive Compensation has not yet been paid in
accordance with the terms of the SPIP or (ii) the value of the per share "change
in control" consideration to be received by the Company's stockholders in such
"change in control" transaction, as determined in good faith by the Committee,
equals or exceeds the First Goal or the Second Goal, then the applicable
Incentive Compensation will be paid prior to or at the effective time of the
"change in control." A "change in control" for this purpose occurs if: (i) any
person or group becomes the
26
<PAGE> 30
beneficial owner of 50% or more of the Company's outstanding voting securities;
(ii) a change occurs in the majority of the incumbent directors (except for
changes approved by such members); (iii) a merger or other business combination
involving the Company is approved by the stockholders (other than a merger or
other transaction in which (A) the Company's stockholders immediately prior to
such transaction would continue to own 50% or more of the outstanding voting
securities of the Company or successor after the transaction is consummated and
(B) no person or group becomes a 50% or more beneficial owner of Company voting
securities); or (iv) a plan of complete liquidation or the sale of all or
substantially all of the Company's assets is approved by the stockholders.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the annual meeting of stockholders and
entitled to vote is required for approval of the SPIP.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL
OF THE SPIP.
APPROVAL OF THE AMENDMENT TO THE 1989 NONEMPLOYEE
DIRECTOR STOCK PLAN
PROPOSAL 3
GENERAL
The Company's Board of Directors has approved an amendment to the Company's
1989 Nonemployee Director Stock Plan ("Director Plan"), subject to approval by
the Company's stockholders at this meeting. The Director Plan was adopted in
1989 and was amended with stockholder approval in 1994 and 1996. The proposed
amendment will increase the number of shares of restricted stock which will be
awarded to each nonemployee director upon initial election or appointment as
well as upon each subsequent re-election and will change the number of shares of
stock which will vest as of the date of each subsequent regular meeting of
stockholders at which any directors are to be elected. In addition, the proposed
amendment will allow for a one-time grant of 5,000 shares of restricted stock to
be awarded to Dr. Herbert W. Boyer as a part of his director compensation for
his service, beginning in January 1998, as the Company's Chairman of the Board.
Dr. Boyer is not now, and never has been, an employee of the Company.
Currently, the Director Plan provides for an award to each nonemployee
director upon initial election or appointment as well as upon each subsequent
re-election of 600 shares multiplied by the number of years, including any
partial year as a full year for this purpose, of the applicable term of office
to be served. Grants of restricted stock made on and after such annual meeting
vest in equal installments of 600 shares as of the date of each subsequent
regular annual meeting of stockholders at which any directors are to be elected.
The proposed amendment, if approved, will implement the following changes: (i)
increase the number of shares of restricted stock which will be awarded to each
nonemployee director upon initial election or appointment as well as upon each
subsequent re-election to 900 shares multiplied by the number of years,
including any partial year as a full year for this purpose, of the applicable
term of office to be served; and (ii) modify the vesting schedule to provide
that grants of restricted stock made on and after such annual meeting will vest
in equal installments of 900 shares as of the date of each subsequent regular
annual meeting of stockholders at which any directors are to be elected; and
will authorize a one-time grant of 5,000 shares of restricted stock to Dr.
Boyer, effective on the date of this annual meeting and vesting at the rate of
1,667, 1,666 and 1,666 shares at the annual meetings of stockholders in 1999,
2000 and 2001, respectively.
The primary purpose of the proposed amendments to the Director Plan is to
increase the number of shares included in the automatic grants to nonemployee
directors in order to keep the total package of nonemployee director
compensation competitive with comparable publicly-traded companies.
A description of the principal features of the Director Plan, as proposed
to be amended, is set forth below.
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PURPOSE AND ELIGIBILITY
The purpose of the Director Plan is to enable the Company to attract and
retain the services of experienced and knowledgeable nonemployee directors and
to align further their interests with those of the stockholders of the Company
by providing for or increasing the proprietary interests of the nonemployee
directors in the Company.
Only members of the Board of Directors of the Company who are not employees
of the Company or of a parent or subsidiary corporation of the Company are
eligible to receive awards under the Director Plan. The Company currently has
ten nonemployee directors, including Mr. McCraw who is retiring from the Board
of Directors in April 1998.
ADMINISTRATION, AMENDMENT AND TERMINATION
The Director Plan is administered by the Board of Directors ("Board"). The
Board, in its absolute discretion, may at any time and from time to time
delegate to a committee of three or more persons appointed by the Board, all or
any part of the authority, powers and discretion of the Board under the Director
Plan.
The Board may at any time amend, suspend, or terminate the Director Plan,
provided that (i) no such action shall deprive the holder of a restricted stock
award under the Director Plan of such award without the consent of such holder;
(ii) the nondiscretionary manner in which restricted stock awards are made to
nonemployee directors under the Director Plan shall not be modified or amended
(provided that the number of shares to be included in each automatic grant may
be changed with the approval of the stockholders); and (iii) stockholder
approval is required for certain modifications including modifications to
increase the maximum number of shares authorized under the Director Plan, to
accelerate certain vesting schedules, to extend the duration of the Director
Plan, to materially modify the eligibility requirements, or to materially
increase the benefits accruing to recipients of awards under the Director Plan.
Unless previously terminated as to authority to grant new awards, the Director
Plan shall terminate on December 31, 1999.
RESTRICTED STOCK AWARDS
Under the Director Plan, as proposed to be amended, upon election,
re-election or appointment of a nonemployee director to the Board, such
nonemployee director shall automatically be granted an award consisting of 900
shares of restricted stock multiplied by the number of years, including any
partial year as a full year, which remain in the term of the person so elected,
re-elected or appointed. In addition, Dr. Boyer will be granted an award of
5,000 shares of restricted stock on the date of approval of the amendment by the
stockholders.
Participants under the Director Plan are not required to pay any purchase
price for the shares of Common Stock to be acquired pursuant to a restricted
stock award, unless otherwise required under applicable law or regulations.
Recipients of restricted stock are entitled to vote and to receive dividends on
the shares subject to the award from the original date through the vesting date
(at which time the recipient receives unrestricted ownership of the shares).
The shares awarded under the Director Plan are subject to: restrictions on
transferability; a vesting schedule; and a requirement that the certificates
representing such shares must contain a restrictive legend. The Director Plan,
as proposed to be amended, provides that, as of the date of each annual meeting
of stockholders following the date of a restricted stock award, the vesting
restrictions shall lapse and be removed with respect to 900 of the shares
covered by such restricted stock award. In the event that a recipient of a
restricted stock award under the Director Plan ceases to be a director for any
reason other than death or total disability, all unvested shares acquired under
the Director Plan by such recipient shall be returned to the Company. If a
recipient of a restricted stock award under the Director Plan ceases to be a
director because of death or total disability, the vesting restrictions shall
lapse and be removed with respect to all shares acquired by such recipient under
restricted stock awards pursuant to the Director Plan. In the event of a "change
in control," the vesting restrictions shall lapse and be removed with respect to
all shares acquired under restricted stock awards pursuant to the Director Plan.
A "change in control" for this purpose occurs if: (i) any person or
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group becomes the beneficial owner of 50% or more of the Company's outstanding
voting securities; (ii) a change occurs in the majority of the incumbent
directors (except for changes approved by such members); (iii) a merger or other
business combination involving the Company is approved by stockholders (other
than a merger or other transaction in which (A) the Company's stockholders
immediately prior to such transaction would continue to own 50% or more of the
outstanding voting securities of the Company or successor after the transaction
is consummated and (B) no person or group becomes a 50% or more beneficial owner
of Company voting securities); or (iv) a plan of complete liquidation or the
sale of all or substantially all of the Company's assets is approved by
stockholders.
SECURITIES SUBJECT TO DIRECTOR PLAN
The shares of Common Stock to be delivered under the Director Plan shall be
made available, at the discretion of the Board, either from authorized but
unissued shares of Common Stock or from shares of Common Stock held by the
Company as treasury shares, including shares purchased in the open market. Under
the Director Plan, the total number of shares of Common Stock which may be
issued or transferred pursuant to an award of restricted stock under the
Director Plan shall not exceed 100,000 shares. In addition, if, on or before
termination of the Director Plan, any shares of Common Stock subject to an award
of restricted stock shall not be issued or transferred and shall cease to be
issuable or transferable for any reason, or if such shares shall have been
reacquired by the Company pursuant to the restrictions imposed on such shares,
the shares not so issued or transferred and shares so reacquired shall no longer
be charged against such 100,000 share limit.
The maximum number of shares issuable under the Director Plan, the number
of shares to be included in each grant of restricted stock under the Director
Plan, the number and kind of shares then subject to restrictions, and the
repurchase price, if any, for each share of Common Stock subject to
restrictions, will be appropriately and proportionately adjusted to reflect
mergers, consolidations, sales or exchanges of all or substantially all of the
properties of the Company, reorganizations, recapitalizations,
reclassifications, stock dividends, stock splits, reverse stock splits,
spin-offs or other distributions with respect to such shares of Common Stock (or
any stock or securities received with respect to such Common Stock).
On February 27, 1998, the market price of the Company's Common Stock was
$35.00 per share.
FEDERAL INCOME TAX CONSEQUENCES
Under existing federal income tax provisions, a director who receives
shares of restricted stock under the Director Plan which are subject to
restrictions which create a "substantial risk of forfeiture" (within the meaning
of Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"))
will not normally realize any income, nor will the Company normally receive any
deduction for federal income tax purposes, in the year of the grant or award.
Such director will normally realize taxable income on the date the shares become
transferable or no longer subject to substantial risk of forfeiture or on the
date of their earlier disposition. The amount of such taxable income will be
equal to the amount by which the fair market value of the shares of Common Stock
on the date of such restrictions lapse (or the earlier date on which the shares
become transferable or are disposed of) exceeds their purchase price, if any. A
director may elect, however, to include in income in the year of grant the
excess of the fair market value of the shares of Common Stock (without regard to
any restrictions) on the date of grant. If this election is made, the director
will ordinarily not be entitled to recognize any loss thereafter attributable to
the shares as a result of forfeiture. This summary does not purport to be a
complete statement of the law and does not cover tax consequences under foreign,
state or local laws. In addition, unless an insider makes a valid election under
Section 83(b) of the Code, special rules may apply to insiders under Section
16(b) of the Securities Exchange Act of 1934.
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The table below summarizes certain information with respect to restricted
stock awards under the Director Plan:
NEW PLAN BENEFITS
ALLERGAN 1989 NONEMPLOYEE DIRECTOR STOCK PLAN
<TABLE>
<CAPTION>
DOLLAR VALUE NUMBER OF
NAME AT 12/31/97 SHARES
---- ------------- ---------
<S> <C> <C>
Nonemployee Directors Scheduled to Receive
Grants in 1998.......................... $439,669(1) 13,100(2)
</TABLE>
- ---------------
(1) Based on the closing price of $33.5625 on the New York Stock Exchange of the
Company's Common Stock on December 31, 1997.
(2) Represents only the aggregate number of restricted shares which will
automatically be awarded under the Director Plan to the three nonemployee
directors who are Class III nominees for election at the 1998 annual meeting
of stockholders as well as the grant of 5,000 shares of restricted stock to
be awarded to Dr. Boyer as a part of his director compensation for his
service, beginning in January 1998, as the Company's Chairman of the Board.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the annual meeting of stockholders and
entitled to vote is required for approval of the amendments to the Director
Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE PROPOSED AMENDMENTS TO THE 1989 NONEMPLOYEE DIRECTOR STOCK PLAN.
STOCKHOLDER PROPOSAL
PROPOSAL 4
Approval of the Stockholder Proposal set forth below requires the
affirmative vote of the majority of the votes which all stockholders present at
the meeting are entitled to cast with respect to such proposal.
STOCKHOLDER PROPOSAL REGARDING CUMULATIVE VOTING
John J. and/or Margaret R. Gilbert, trustees under the will of Minnie D.
Gilbert, 29 East 64th Street, New York, NY 10021-7043 (which trust owns 43
shares) have notified the Company in writing that they intend to present the
following resolution at the annual meeting:
RESOLVED: That the stockholders of Allergan, Inc., assembled in annual
meeting in person and by proxy, hereby request the Board of Directors to take
the steps necessary to provide for cumulative voting in the election of
directors, which means each stockholder shall be entitled to as many votes as
shall equal the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such votes for a single
candidate, or any two or more of them as he or she may see fit.
REASONS
California law still requires that unless stockholders have voted not to
have cumulative voting they will have it. Ohio also has the same provision.
The National Bank Act provides for cumulative voting. In many cases
companies get around it by forming holding companies without cumulative voting.
Banking authorities have the right to question the capability of directors to be
on banking boards. In many cases authorities come in after and say the director
or directors were not qualified. We were delighted to see the SEC has finally
taken action to prevent bad
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directors from being on boards of public companies. The SEC should have hearings
to prevent such persons becoming directors before they harm investors.
Many successful corporations have cumulative voting. Example, Pennzoil
defeated Texaco in that famous case. Texaco's recent problems might have also
been prevented with cumulative voting, getting directors on the Board to prevent
such things. Ingersoll-Rand, also having cumulative voting, won two awards.
Further, Union Pacific is a good example having troubles with their freight
shipments, which are backed up for a month. The merger with Southern Pacific is
part of the excuse. Just last year, Union Pacific took away cumulative voting
and put in a stagger system of electing directors.
Lockheed-Martin, as well as VWR Corporation, now have a provision that if
anyone has 40% or more of the shares cumulative voting applies; it does apply at
the latter company.
In 1995 American Premier adopted cumulative voting. Alleghany Power System
tried to take away cumulative voting, as well as put in a stagger system, and
stockholders defeated it, showing stockholders are interested in their rights.
Also, Hewlett Packard, a very successful company, has cumulative voting.
Another reason to have cumulative voting is to see that we have some
independent directors elected to the Board who will see that we end the stagger
system of electing directors, which more and more companies are now properly
doing.
If you agree, please mark your proxy for this resolution; otherwise it is
automatically cast against it, unless you have marked to abstain.
MANAGEMENT'S STATEMENT IN OPPOSITION
The present system of voting for the election of directors, under which the
holders of a majority of the shares elect a Board representing all stockholders,
has served this Corporation, and other large publicly traded companies, very
well and avoids the conflict created where a director is elected by a narrow
constituency.
The Board of Directors continues to believe that in a large publicly held
company such as Allergan, each director should feel a responsibility to
represent the stockholders as a whole and not any special group of stockholders.
Directors elected through cumulative voting could regard themselves as
representing only the special interests of the group that elected them.
Cumulative voting could thus lead to partisanship among the directors that could
tend to prevent harmonious, constructive relations among them, impede full and
free discussion and make it difficult to obtain the services of outstanding
individuals as directors.
In the Board's opinion, the present method of electing directors, where
each director is elected by majority vote of those present and voting, best
assures that the directors will guide the affairs of the Company for the benefit
of all stockholders.
IT IS, THEREFORE, RECOMMENDED THAT THE STOCKHOLDERS VOTE AGAINST THIS
PROPOSAL.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, independent auditors, audited the consolidated
financial statements of the Company for the fiscal year ended December 31, 1997.
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
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, 1997, accompanies the proxy material
being mailed to all stockholders. The Annual Report is not a part of the proxy
solicitation material.
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DEADLINE FOR STOCKHOLDER PROPOSALS
Any stockholder of the Company wishing to have a proposal considered for
inclusion in the Company's 1999 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 10, 1998.
OTHER BUSINESS
PRESENTED BY MANAGEMENT
As of the date of this Proxy Statement, management knows of no other
matters to be brought before the stockholders at the annual meeting. Should any
other matters properly come before the meeting, action may be taken thereon
pursuant to the proxies in the form enclosed, which confer discretionary
authority on the persons named therein or their substitutes with respect to such
matters.
PRESENTED BY STOCKHOLDERS
Pursuant to the Company's Restated Certificate of Incorporation only such
business shall be conducted at an annual meeting of stockholders as is properly
brought before the meeting. For business to be properly brought before an annual
meeting by a stockholder, in addition to any other applicable requirements,
timely notice of the matter must be first given to the Secretary of the Company.
To be timely, written notice must be received by the Secretary no less than 30
days nor more than 60 days prior to the meeting. If less than 40 days' notice or
prior public disclosure of the meeting has been given to stockholders, then
notice of the proposed business matter must be received by the Secretary not
later than ten days after the mailing of notice of the meeting or such public
disclosure. Any notice to the Secretary must include as to each matter the
stockholder proposes to bring before the meeting: (a) a brief description of the
proposal desired to be brought before the meeting and the reason for conducting
such business at the annual meeting; (b) the name and record address of the
stockholder proposing such business and any other stockholders known by such
stockholder to be supporting such proposal; (c) the class and number of shares
of the Company which are beneficially owned by the stockholder on the date of
such stockholder notice and by other stockholders known by such stockholder to
be supporting such proposal on the date of such stockholder notice; and (d) any
material interest of the stockholder in such business.
BY ORDER OF THE BOARD OF DIRECTORS
[SIG]
Francis R. Tunney, Jr.
Secretary
March 17, 1998
Irvine, California
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EXHIBIT A
ALLERGAN, INC.
STOCK PRICE INCENTIVE PLAN
ARTICLE I
PURPOSE OF THE PLAN
The purpose of this Stock Price Incentive Plan (the "Plan") is to provide a
means of paying incentive compensation to certain key management employees who
contribute materially to the success of Allergan, Inc. (the "Company"). By
relating incentive rewards of certain key management employees to increases in
market price of the Company's common stock, the Company will be in a position to
provide additional motivation and to reward extraordinary performance by making
those employees most responsible for such performance participants in the
Company's success and to align their interests with the interests of the
Company's stockholders.
ARTICLE II
EFFECTIVE DATE AND TERM OF PLAN
2.1 Effective Date of Plan. This Plan is adopted by the Committee
effective as of January 1, 1998, subject to stockholder approval. In the event
any Goal is achieved prior to the date of stockholder approval, the Committee
shall pay the amounts due to Participants under this Plan after such stockholder
approval is obtained along with interest at the prime rate from the latest time
such amounts otherwise would have been due to the Participants under this Plan.
2.2 Amendment and Termination of Plan. The Board may terminate this Plan
or modify or amend this Plan from time to time in such respects as it shall deem
advisable. Unless this Plan shall theretofore have been terminated as herein
provided, the Plan shall automatically terminate on December 31, 2000 and the
Committee shall not have authority to award Incentive Compensation after
December 31, 2000. No termination or amendment of this Plan under this Section
2.2 shall reduce the amount of the benefit which a Participant has already
become entitled to under Article 5, unless such Participant consents to such
reduction.
ARTICLE III
ADMINISTRATION OF THE PLAN
3.1. Administration. This Plan shall be administered by the Company's
Organization and Compensation Committee of the Board of Directors (the
"Committee"). The Committee shall be comprised solely of two or more outside
directors as defined in Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") and the regulations promulgated thereunder. No member of
the Committee may, while serving on the Committee, also be a Participant in this
Plan. The Committee shall administer this Plan in accordance with its terms.
3.2 Authority of the Committee. Subject to the express provisions of this
Plan, the Committee has the authority to interpret this Plan, to determine the
terms and conditions of Incentive Compensation, to make all determinations
necessary or advisable for the administration of this Plan, to prescribe, amend
and rescind rules and regulations for the administration hereof as it may deem
desirable, and otherwise to carry out the terms of this Plan. All
interpretations, determinations and actions by the Committee shall be final,
conclusive and binding. Any action taken by, or inaction of, the Committee
relating to this Plan shall be within the absolute discretion of the Committee
and shall be conclusive and binding upon all persons, subject only to compliance
with the express provisions hereof.
3.3 Organization and Operation of Committee. The Committee shall act by a
majority vote of its members or by unanimous written consent of its members. The
Committee may authorize any one or more of
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its members or any specifically designated officer of the Company to execute any
document or documents on behalf of the Committee. The Committee may appoint such
accountants, counsel, specialists, and other persons as it deems necessary or
desirable in connection with the administration of this Plan.
3.4 Reliance on Reports. Each member of the Committee and each member of
the Board shall be fully justified in relying or acting in good faith upon any
opinion or report made by the independent public accountants of this Company and
upon any other opinions, reports or information furnished in connection with
this Plan by any accountant, counsel, or other specialist (including financial
officers of the Company). In no event shall any person who is or shall have been
a member of the Committee or of the Board be liable for any determination made
or other action taken or any omission to act in reliance upon any such opinion,
report or information or for any action, or failure to act, if in good faith.
3.5 Records and Reports. The Committee shall keep a record of all its
proceedings and acts, and shall keep all such books of account, records and
other data as may be necessary for proper administration of this Plan.
3.6 Invalid Provisions. In the event that any provision of this Plan is
found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid and unenforceable provision were not contained herein.
3.7 Governing Law. This Plan shall be governed by and interpreted in
accordance with the internal laws of the State of California, without giving
effect to the principles of the conflicts of laws thereof.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION IN THE PLAN
4.1 Eligibility. To be eligible as a Participant under this Plan, an
employee must be an officer of the Company at the corporate vice president
(Grade 13) or higher level.
4.2 New Participants. Participants shall be selected by the Committee from
among those persons who become eligible under Section 4.1. New Participants
added during the period from January 1, 1998 through December 31, 1998 shall
participate in this Plan without proration. New Participants added during the
period from January 1, 1999 through December 31, 1999 shall participate in this
Plan on the basis of a 50% proration. No new Participants may be added during
the third calendar year of this Plan.
4.3 Duration of Participation. A person shall become a Participant upon
selection as a Participant pursuant to the preceding provisions of this Article
4. A person shall cease to be a Participant upon the earlier of such person's
(i) death, (ii) retirement, or (iii) termination of eligibility as a Participant
(including termination of employment). The Participant must be an employee of
the Company on the date of the relevant Goal achievement in order to receive any
Incentive Compensation with respect to that Goal achievement.
4.4 No Employment Rights. Neither this Plan nor any action taken hereunder
shall confer or be deemed to confer upon any employee any right to be retained
in the employ of the Company, or constitute any contract or agreement for
employment or interfere in any way with the right of the Company to reduce any
Participant's compensation or other benefits or to terminate the employment of
such Participant, with or without cause.
4.5 Nontransferability. A person's rights and interests under this Plan,
including amounts payable, may not be assigned, pledged, transferred or
otherwise hypothecated except, in the event of an employee's death, to his
designated beneficiary as provided in this Plan, or in the absence of such
designation, to his heirs, devisees or legatees by will or the laws of descent
and distribution.
4.6 Tax Withholding. The Company shall have the right to deduct any
Federal, state, local or foreign taxes or other charges required by law to be
withheld from payments made to participants under this Plan.
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4.7 Unsecured Obligations. Participants under this Plan shall not have any
interest in any fund or specific assets of the Company by reason of this Plan.
No trust fund shall be created in connection with this Plan, and there shall be
no funding of amounts which may become or are payable to any Participant.
ARTICLE V
DETERMINATION OF INCENTIVE COMPENSATION
5.1 First Goal. In the event that the First Goal is achieved for twenty
(20) consecutive trading days at any time during the Performance Period, each
Participant shall be entitled to an Incentive Compensation payment equal to 100%
of such Participant's Base Salary as of such twentieth day; provided, however,
that if (i) the First Goal is achieved for ten (10) or more consecutive trading
days but less than the required twenty (20) consecutive trading days and (ii)
the Committee makes a good faith determination that the failure to sustain the
First Goal for the required twenty (20) consecutive trading day period was
predominately due to factors external to the Company's performance, then each
Participant shall be entitled to an Incentive Compensation payment equal to 100%
of such Participant's Base Salary as of such twentieth day. Notwithstanding
anything herein to the contrary, there may not be more than one (1) First Goal
attained during the Performance Period.
5.2 Second Goal. In the event that the Second Goal is achieved for twenty
(20) consecutive trading days at any time during the Performance Period, each
Participant shall be entitled to an Incentive Compensation payment equal to 200%
of such Participant's Base Salary as of such twentieth day; provided, however,
that if (i) the Second Goal is achieved for ten (10) or more consecutive trading
days but less than the required twenty (20) consecutive trading days and (ii)
the Committee makes a good faith determination that the failure to sustain the
Second Goal for the required twenty (20) consecutive trading day period was
predominately due to factors external to the Company's performance, then each
Participant shall be entitled to an Incentive Compensation payment equal to 200%
of such Participant's Base Salary as of such twentieth day. Notwithstanding
anything herein to the contrary, there may not be more than one (1) Second Goal
attained during the Performance Period.
ARTICLE VI
PAYMENT OF INCENTIVE COMPENSATION
6.1 Form of Payment. The Committee shall have the discretion to determine
whether the Incentive Compensation shall be paid in cash as a lump sum, in
common stock of the Company or in any combination thereof. If the Committee
elects to pay Incentive Compensation in the common stock of the Company, in
whole or in part, such common stock shall be valued at the average of the high
and low prices of the Company's common stock on the New York Stock Exchange as
reported in the Wall Street Journal for the day on which the Committee makes
such election. All Incentive Compensation shall be paid within thirty (30) days
of the Committee's determination that Incentive Compensation shall be paid in
accordance with Article 5 hereof, unless deferred by the Participant in
accordance with any applicable program for deferring incentive compensation
under which such Participant has made a valid election to defer all or part of
such award.
6.2 Source of Shares. Any common stock to be issued under this Plan in
accordance with Section 6.1 will be made available, at the discretion of the
Board, either from authorized but unissued shares or from shares held in
treasury.
6.3 Death or Termination of Employment Prior to Full Payment.
(a) In the event that a Participant has amounts payable as Incentive
Compensation under this Plan in accordance with Article 5 or Article 7 and dies
prior to the payment of such amounts, the amounts payable at the time of the
Participant's death shall be paid to the Participant's beneficiary or, if no
beneficiary was designated by the Participant, to the Participant's estate.
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(b) In the event that a Participant has amounts payable as Incentive
Compensation under this Plan in accordance with Article 5 or Article 7 and
retires or is no longer eligible to be a Participant prior to the payment of
such amounts, the amounts payable at the time the Participant retires or at the
time the Participant's eligibility changes shall be paid to the Participant.
ARTICLE VII
REORGANIZATIONS
As of the effective time and date of any Change in Control this Plan and
the Participant's rights hereunder shall automatically terminate, the Committee
shall not have authority to award Incentive Compensation and no Incentive
Compensation shall be paid. Notwithstanding the foregoing, if (i) the Committee
previously determined that Incentive Compensation shall be paid in accordance
with Article 5 hereof and such Incentive Compensation has not yet been paid in
accordance with Article 6 hereof or (ii) the value of the per share Change in
Control consideration to be received by the Company's stockholders in such
Change in Control transaction, as determined in good faith by the Committee,
equals or exceeds the First Goal or the Second Goal, then the applicable
Incentive Compensation shall be paid prior to or at the effective time of the
Change in Control.
ARTICLE VIII
DEFINITIONS
Capitalized terms used in this Plan and not otherwise defined shall have
the meanings set forth below:
"Base Salary" shall mean the Participant's base annual compensation
excluding any overtime or other elements of compensation. Without limiting the
generality of the foregoing, Base Salary shall not include commissions, bonuses,
incentive compensation, automobile or other expense allowances or any other
compensation generally regarded as perquisites.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" means the following and shall be deemed to occur if any
of the following events occur:
(i) Any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the
Company's then outstanding voting securities;
(ii) Individuals who, as of the effective date hereof, constitute the
Board (the "Incumbent Board"), cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's stockholders, is approved by a vote of at least a majority of
the directors then comprising the Incumbent Board (other than an election
or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) shall, for the
purposes of this Plan, be considered as though such person were a member of
the Incumbent Board;
(iii) The stockholders of the Company approve a merger or
consolidation with any other corporation, other than
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of another entity) more than 50% of the
combined voting
A-4
<PAGE> 40
power of the voting securities of the Company or such other entity
outstanding immediately after such merger or consolidation, and
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
person acquires 50% or more of the combined voting power of the
Company's then outstanding voting securities; or
(iv) The stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or other
disposition by the Company of all or substantially all of the Company's
assets.
Notwithstanding the preceding provisions of this definition, a Change in
Control shall not be deemed to have occurred (1) if the "person" described in
the preceding provisions of this definition is an underwriter or underwriting
syndicate that has acquired the ownership of 50% or more of the combined voting
power of the Company's then outstanding voting securities solely in connection
with a public offering of the Company's securities or (2) if the "person"
described in the preceding provisions of this definition is an employee stock
ownership plan or other employee benefit plan maintained by the Company that is
qualified under the provisions of the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"First Goal" shall mean a Stock Price of $50.00 per share.
"Goal" shall mean the First Goal and the Second Goal, collectively.
"Incentive Compensation" shall mean the dollar amount awarded to a
Participant.
"Participant" means each officer of the Company (corporate vice president
or above) who is selected as a participant and who continues to be a participant
under the provisions of this Plan.
"Performance Period" shall mean the three (3) years beginning January 1,
1998 and ending December 31, 2000.
"Second Goal" shall mean a Stock Price of $60.00 per share.
"Stock Price" shall mean the closing price of the Company's common stock on
the New York Stock Exchange as reported in the Wall Street Journal. The Stock
Price described in the definition of the First Goal and the Second Goal shall be
adjusted appropriately (as determined by the Committee in good faith) for any
stock splits, reverse stock splits or stock dividends.
A-5
<PAGE> 41
[ALLERGAN LOGO] ALLERGAN
CONFIDENTIAL PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING APRIL 21, 1998
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 21, 1998, and at
any adjournments thereof, on all matters coming before the meeting.
Election of Directors, Nominees:
Handel E. Evans, Gavin S. Herbert, Henry Wendt
If this Proxy relates to shares held for the undersigned in the Allergan, Inc.
Employee Stock Ownership Plan, the Allergan, Inc. Savings and Investment Plan
and the Allergan, Inc. Puerto Rico Savings and Investment Plan, then, when
properly executed, it shall constitute instructions to the plan trustees to vote
in the manner directed herein.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES (SEE
REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
-----------------
SEE
REVERSE SIDE
-----------------
<PAGE> 42
- ------- Please mark your
X votes as in this 5893
- ------- example
------------------
This proxy when properly executed wil be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR election
of Directors, FOR proposals 2 and 3, and AGAINST proposal 4.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR election of Directors
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of Directors. (see reverse)
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposals 2 and 3.
The Board of Directors recommends a vote AGAINST proposal 4.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the Allergan, Inc. Stock Price
Incentive Plan.
3. Approval of the amaended 1989 Nonemployee
Director Stock Plan.
4. Stockholder Proposal Regarding Cumulative
Voting.
- --------------------------------------------------------------------------------
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'sConfidential Voting Policy is
described in the Proxy Statement
accompanying this Proxy.
NOTE: Please sign exactly 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
