<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 8, 2000
REGISTRATION NO. 333-50524
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALLERGAN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-1622442
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
2525 DUPONT DRIVE
IRVINE, CALIFORNIA 92612-1599
(714) 246-4500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
FRANCIS R. TUNNEY, JR.
ALLERGAN, INC.
2525 DUPONT DRIVE
IRVINE, CALIFORNIA 92612-1599
(714) 246-4500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPY TO:
RONALD S. BEARD, ESQ.
GIBSON, DUNN & CRUTCHER LLP
4 PARK PLAZA
IRVINE, CALIFORNIA 92614
(949) 451-3800
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement from the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
PROSPECTUS
$657,451,000
[LOGO]
Liquid Yield Option(TM) Notes due 2020
(Zero Coupon -- Subordinated)
-------------------------
THE OFFERING:
Allergan, Inc. issued the LYONs in a private placement on November 1, 2000
at an issue price of $608.41 per LYON (60.841% of principal amount at maturity).
This prospectus will be used by Selling Securityholders to resell their LYONs
and the common stock issuable upon conversion of their LYONs. Allergan will not
pay interest on the LYONs prior to maturity. Instead, on November 1, 2020, the
maturity date of the LYONs, a holder will receive $1,000 per LYON. The issue
price of each LYON represents a yield to maturity of 2.50% per year calculated
from November 1, 2000. The LYONs will be subordinated to all existing and future
senior indebtedness of Allergan.
CONVERTIBILITY OF THE LYONS:
Holders may convert their LYONs at any time on or before the maturity date,
unless the LYONs have previously been redeemed or purchased, into 5.7615 shares
of common stock of Allergan per LYON. The conversion rate may be adjusted for
certain reasons, but will not be adjusted for accrued original issue discount.
The common stock currently trades on the New York Stock Exchange under the
symbol "AGN." The last reported sale price on the New York Stock Exchange of the
common stock was $82 per share on December 7, 2000.
PURCHASE OF THE LYONS BY ALLERGAN AT THE OPTION OF THE HOLDER:
Holders may require Allergan to purchase all or a portion of their LYONs on
November 1, 2003 at a price of $655.49 per LYON, and on November 1, 2010 at a
price of $780.01 per LYON. Allergan may choose to pay the purchase price in cash
or common stock or a combination of cash and common stock. In addition, upon a
change in control of Allergan occurring on or before November 1, 2003, each
holder may require Allergan to repurchase all or a portion of such holder's
LYONs.
REDEMPTION OF THE LYONS AT THE OPTION OF ALLERGAN:
Allergan may redeem all or a portion of the LYONs at any time on or after
November 1, 2003.
INVESTING IN THE LYONS INVOLVES CERTAIN RISKS, WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
-------------------------
We will not receive any of the proceeds from the sale of the LYONs or the
common stock by the Selling Securityholders. The LYONs and the common stock may
be offered in negotiated transactions or otherwise, at market prices prevailing
at the time of sale or at negotiated prices. In addition, the common stock may
be offered from time to time through ordinary brokerage transactions on the New
York Stock Exchange. See "Plan of Distribution." The Selling Securityholders may
be deemed to be "Underwriters" as defined in the Securities Act. If any
broker-dealers are used by the Selling Securityholders, any commissions paid to
broker-dealers and, if broker-dealers purchase any LYONs or common stock as
principals, any profits received by such broker-dealers on the resale of the
LYONs or common stock, may be deemed to be underwriting discounts or commissions
under the Securities Act. In addition, any profits realized by the Selling
Securityholders may be deemed to be underwriting commissions.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
The date of this prospectus is December 8, 2000
-------------------------
(TM)Trademark of Merrill Lynch & Co., Inc.
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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Forward-Looking Statements.................................. i
Where You Can Find More Information......................... 1
Summary..................................................... 3
Risk Factors................................................ 6
Use of Proceeds............................................. 9
Ratio of Earnings to Fixed Charges.......................... 9
Price Range of Common Stock................................. 10
Dividend Policy............................................. 10
Description of LYONs........................................ 11
Description of Capital Stock................................ 24
Federal Income Tax Considerations........................... 27
Selling Securityholders..................................... 33
Plan of Distribution........................................ 34
Legal Matters............................................... 35
Experts..................................................... 35
</TABLE>
FORWARD-LOOKING STATEMENTS
ANY STATEMENTS CONTAINED IN THIS PROSPECTUS REFERRING TO OUR ESTIMATED OR
ANTICIPATED FUTURE RESULTS ARE FORWARD-LOOKING AND REFLECT OUR CURRENT ANALYSIS
OF EXISTING TRENDS AND INFORMATION. ACTUAL RESULTS MAY DIFFER FROM CURRENT
EXPECTATIONS BASED ON A NUMBER OF FACTORS AFFECTING OUR BUSINESSES, INCLUDING
THE INHERENT UNCERTANTIES ASSOCIATED WITH THE RESEARCH AND DEVELOPMENT PROCESS
AND REGULATORY APPROVAL PROCESS, TECHNOLOGICAL ADVANCES AND PATENTS ATTAINED BY
OUR COMPETITORS, COMPETITIVE CONDITIONS, AND CHANGING MARKET CONDITIONS,
INCLUDING THE PERFORMANCE AND ACCEPTANCE OF NEW PRODUCTS. THESE FORWARD-LOOKING
STATEMENTS REPRESENT OUR JUDGMENT ONLY AS OF THE DATE OF THIS PROSPECTUS. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED. AS A RESULT, YOU ARE
CAUTIONED NOT TO RELY ON THESE FORWARD-LOOKING STATEMENTS. WE DISCLAIM ANY
INTENT OR OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS.
i
<PAGE> 4
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended. You may read and copy this information at the
following locations:
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<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661
</TABLE>
You can also obtain copies of these documents at prescribed rates by
writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549. You may obtain information on the operation
of the Public Reference Room by calling (800) SEC-0330. The SEC also maintains
an internet world wide web site that contains reports, proxy statements and
other information about issuers, like us, who file documents electronically with
the SEC. The address of that website is: http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
us at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New
York, New York 10005.
We have filed with the SEC a registration statement on Form S-3 with
respect to the securities we are offering. The registration statement, together
with the exhibits and schedules filed with it, contains additional relevant
information about us and the securities offered that, as permitted by the rules
and regulations of the SEC, we have not included in this prospectus.
The SEC allows us to "incorporate by reference" in this prospectus the
information we file with the SEC, which means:
- incorporated documents are considered part of this prospectus;
- we can disclose important information to you by referring you to those
documents; and
- information that we file with the SEC will automatically update and
supersede the information in this prospectus and any information that was
previously incorporated.
We incorporate by reference the following documents and any filings we make
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 after the initial filing of the registration statement that
contains this prospectus and prior to the termination of this offering:
- Our Annual Report on Form 10-K for the year ended December 31, 1999;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000,
June 30, 2000 and September 29, 2000;
- Our Current Reports on Form 8-K filed on January 28, 2000 and November 1,
2000;
- Our Definitive Proxy Statement filed on March 16, 2000;
- The description of our common stock contained in our Registration
Statement on Form 8-A dated June 12, 1989, including any amendment or
report filed for the purpose of updating such description; and
- The description of our Preferred Share Purchase Rights contained in our
Registration Statement on Form 8-A dated February 1, 2000, including any
amendment or report filed for the purpose of updating such description.
We will furnish you without charge upon your written or oral request any or
all of the documents incorporated herein by reference. Requests should be
directed to Allergan, Inc., 2525 Dupont Drive, Irvine,
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<PAGE> 5
California 92612-1599, Attention: Francis R. Tunney, Jr., Corporate Vice
President -- Administration, General Counsel and Secretary, telephone: (714)
246-4500.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted. The information in this
prospectus is accurate only as of the date on the front cover of this
prospectus.
2
<PAGE> 6
SUMMARY
Because this is a summary, it may not contain all the information that may
be important to you. You should read this entire prospectus, including the
information incorporated by reference and the financial data and related notes,
before making an investment decision. When used in this prospectus, the terms
"we", "our" and "us" refer to Allergan, Inc. and its subsidiaries. On December
9, 1999 we implemented a two-for-one stock split effected as a dividend to
stockholders of record on November 18, 1999. The historical information in this
prospectus (or incorporated by reference) has been adjusted to reflect the 1999
stock split.
ALLERGAN, INC.
Allergan is a leading provider of eye care and specialty pharmaceutical
products throughout the world with products in the eye care pharmaceutical,
ophthalmic surgical device, over-the-counter contact lens care, movement
disorder, and dermatological markets. Our worldwide consolidated revenues are
principally generated by prescription and non-prescription pharmaceutical
products in the following areas:
- ophthalmology;
- skin care;
- neurotoxins;
- intraocular lenses and other ophthalmic surgical products; and
- contact lens care products.
We were originally incorporated in California in 1948, became known as
Allergan Corporation in 1950, and reincorporated in Delaware in 1977. In 1980,
we were acquired by SmithKline Beecham plc (then known as SmithKline
Corporation). We operated as a wholly-owned subsidiary of SmithKline from 1980
until 1989 when we again became a stand-alone public company through a spin-off
distribution by SmithKline.
Our principal executive offices are located at 2525 Dupont Drive, Irvine,
California 92612-1599. Our telephone number is (714) 246-4500.
RISK FACTORS
Prospective purchasers should carefully consider the factors discussed
under "Risk Factors."
3
<PAGE> 7
THE OFFERING
LYONS...................... $657,451,000 aggregate principal amount at maturity
of LYONs due November 1, 2020. We will not pay
interest on the LYONs prior to maturity. Each LYON
was issued at a price of $608.41 per LYON and has a
principal amount at maturity of $1,000.
MATURITY................... November 1, 2020.
YIELD TO MATURITY OF
LYONS...................... 2.50% per year (computed on a semi-annual bond
equivalent basis) calculated from November 1, 2000.
CONVERSION RIGHTS.......... Holders may convert the LYONs at any time on or
before the maturity date, unless the LYONs have
previously been redeemed or purchased. For each
LYON converted, we will deliver 5.7615 shares of
our common stock. The conversion rate may be
adjusted for certain reasons, but will not be
adjusted for accrued original issue discount. Upon
conversion, you will not receive any cash payment
representing accrued original issue discount; such
accrued original issue discount will be deemed paid
by the common stock received by you on conversion.
See "Description of LYONs -- Conversion Rights."
SUBORDINATION.............. The LYONs are unsecured and are subordinated to all
existing and future senior indebtedness of
Allergan. As of September 29, 2000, Allergan had
approximately $354.6 million of senior indebtedness
outstanding. The LYONs will also be effectively
subordinated to all other liabilities of our
subsidiaries. See "Description of
LYONs -- Subordination."
ORIGINAL ISSUE DISCOUNT.... We offered each LYON at an original issue discount
for United States federal income tax purposes equal
to the principal amount at maturity of each LYON
less the issue price to investors. You should be
aware that, although we will not pay interest on
the LYONs, U.S. investors must include accrued
original issue discount in their gross income for
United States federal income tax purposes prior to
the conversion, redemption, sale or maturity of the
LYONs (even if such LYONs are ultimately not
converted, redeemed, sold or paid at maturity). See
"Federal Income Tax Considerations -- Original
Issue Discount."
SINKING FUND............... None.
OPTIONAL REDEMPTION........ We may redeem all or a portion of the LYONs for
cash at any time on or after November 1, 2003, at
the redemption prices set forth in this prospectus.
See "Description of LYONS -- Redemption of LYONs at
the Option of the Company."
PURCHASE OF THE LYONS BY
ALLERGAN AT THE OPTION OF
THE HOLDER............... Holders may require us to purchase their LYONs:
- on November 1, 2003, at a price of $655.49 per
LYON, and
- on November 1, 2010, at a price of $780.01 per
LYON.
We may choose to pay the purchase price in cash or
common stock or a combination of cash and common
stock. See "Description of LYONs -- Purchase of
LYONs at the Option of the Holder."
4
<PAGE> 8
CHANGE IN CONTROL.......... Upon a change in control of Allergan occurring on
or before November 1, 2003, each holder may require
us to repurchase all or a portion of such holder's
LYONs at a price equal to the issue price of such
LYONs plus accrued original issue discount to the
date of repurchase. The term "change in control" is
defined in the "Description of LYONs -- Change in
Control Permits Purchase of LYONs at the Option of
the Holder" section of this prospectus.
OPTIONAL CONVERSION TO
SEMI-ANNUAL COUPON NOTE
UPON TAX EVENT........... From and after a Tax Event Date, at the option of
Allergan, interest in lieu of future original issue
discount shall accrue on each LYON from the Option
Exercise Date at 2.50% per year on the Restated
Principal Amount and shall be payable semi-annually
on each Interest Payment Date to holders of record
at the close of business on each Regular Record
Date immediately preceding such Interest Payment
Date. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months and
will accrue from the most recent date to which
interest has been paid or, if no interest has been
paid, from the Option Exercise Date. In such event,
the Redemption Price, Purchase Price and Change in
Control Purchase Price shall be adjusted as
described herein. However, there will be no changes
in the Holder's conversion rights. See "Description
of LYONs -- Optional Conversion to Semi-annual
Coupon Note upon Tax Event."
EVENTS OF DEFAULT.......... In the event of default, the Issue Price of the
LYONs plus the accrued original issue discount (or,
under certain circumstances, the Restated Principal
Amount plus accrued and unpaid interest) may be
declared immediately due and payable. These amounts
automatically become due and payable in the event
of bankruptcy, liquidation or related events,
subject to payment in full of all senior
indebtedness and certain other liabilities. See
"Description of LYONs -- Events of Default; Notice
and Waiver."
USE OF PROCEEDS............ Allergan will not receive any of the proceeds from
the sale by Selling Securityholders of the LYONs or
the common stock. See "Use of Proceeds."
TRADING.................... Our common stock currently trades on the New York
Stock Exchange under the symbol "AGN."
5
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RISK FACTORS
An investment in our securities involves a high degree of risk. You should
carefully consider the risks and uncertainties described below and the other
information in this prospectus and the documents incorporated by reference
herein before making an investment decision. If any of the following risks
actually occur, we could experience a material adverse effect on our business,
financial condition or operating results. This could result in a loss of all or
part of your investment.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. These statements may be identified by the use of words such
as "expects," "anticipates," "intends," "plans" and similar expressions. Our
actual results could differ materially from those discussed in these statements.
Factors that could contribute to these differences include those discussed below
and elsewhere in this prospectus and the documents incorporated by reference
herein.
WE MAY HAVE DIFFICULTY COMPETING WITH LARGER COMPANIES.
The pharmaceutical industry and other health care-related industries
continue to experience consolidation, resulting in larger, more diversified
companies with greater resources than ours. Among other things, these larger
companies can spread their research and development costs over much broader
revenue bases than us and can influence customer and distributor buying
decisions.
IF THE FDA APPROVES ANOTHER NEUROTOXIN, OUR BOTOX(R) SALES MAY BE ADVERSELY
AFFECTED.
We are currently the only manufacturer of an FDA-approved neurotoxin. We
are aware, however, of another company seeking FDA approval of a neurotoxin. If
such approval is granted, our sales of Botox(R) Purified Neurotoxin Complex
could be materially and negatively impacted.
WE COULD EXPERIENCE DIFFICULTIES CREATING BULK TOXIN NEEDED TO PRODUCE BOTOX(R)
PURIFIED NEUROTOXIN COMPLEX.
The manufacturing process to create bulk toxin raw material necessary to
produce Botox(R) Purified Neurotoxin Complex is technically complicated. Any
failure by us to maintain an adequate supply of bulk toxin and finished product
could result in an interruption in the supply of Botox(R) Purified Neurotoxin
Complex with a resulting decrease in sales of the product.
OUR CONTACT LENS CARE BUSINESS IS IMPACTED BY TRENDS IN THE CONTACT LENS AND
LENS CARE MARKETS.
Our contact lens care business continues to be impacted by trends in the
contact lens and lens care marketplace, including technological and medical
advances in surgical techniques for the correction of vision impairment. Cheaper
one-bottle chemical disinfection systems have gained popularity among soft
contact lens wearers instead of peroxide-based lens care products which
historically have been Allergan's strongest family of lens care products. Also,
the growing use and acceptance of daily contact lenses and laser correction
procedures, along with the other factors above, could have the effect of
reducing demand for lens care products generally. While we believe we have
established appropriate marketing and sales plans to mitigate the impact of
these trends upon our contact lens care business, no assurance can be given in
this regard.
WE COULD EXPERIENCE LOSSES DUE TO PRODUCT LIABILITY CLAIMS OR PRODUCT RECALLS OR
CORRECTIONS.
We have in the past been, and continue to be, subject to product liability
claims. In addition, we have in the past and may in the future recall or issue
field corrections related to our products due to manufacturing deficiencies,
labeling errors or other safety or regulatory reasons. There can be no assurance
that we will not experience material losses due to product liability claims or
product recalls or corrections.
6
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SALES OF OUR SURGICAL AND PHARMACEUTICAL PRODUCTS ARE IMPACTED BY PRICING
PRESSURES FROM THE GOVERNMENT AND MANAGED CARE ORGANIZATIONS.
Sales of our surgical and pharmaceutical products have been and are
expected to continue to be impacted by continuing pricing pressures resulting
from various government initiatives as well as from the purchasing and
operational decisions made by managed care organizations.
MEDICARE COVERAGE COULD BE EXPANDED TO INCLUDE PHARMACEUTICAL PRODUCTS.
A current political issue of debate in the United States is the propriety
of expanding Medicare coverage to include pharmaceutical products. If measures
to accomplish that coverage become law, and if these measures impose price
controls on our products, our revenues and financial condition are likely to be
materially and adversely affected.
OUR SALES OF PHARMACEUTICALS COULD BE NEGATIVELY AFFECTED BY THE REIMPORTATION
OF EXPORT PHARMACEUTICALS.
The United States Congress recently passed a law permitting the
reimportation of export pharmaceuticals in certain circumstances. If this law
results in substantial reimportation of pharmaceuticals, our United States sales
of pharmaceuticals could be materially and adversely affected.
OUR OPERATING RESULTS ARE SUBJECT TO FOREIGN CURRENCY FLUCTUATIONS.
We collect and pay a substantial portion of our sales and expenditures in
currencies other than the U.S. dollar. Therefore, fluctuations in foreign
currency exchange rates affect our operating results. We can provide no
assurance that future exchange rate movements will not have a material adverse
effect on our sales, gross profit or operating expenses.
WE MAY NOT BE ABLE TO OBTAIN PATENT PROTECTION FOR TECHNOLOGIES INCORPORATED
INTO OUR PRODUCTS.
Patent protection is generally important in the pharmaceutical industry.
Therefore, our future financial success may depend in part on obtaining patent
protection for technologies incorporated into our products. No assurance can be
given that patents will be issued covering any products, or that any existing
patents or patents issued in the future will be of commercial benefit. In
addition, it is impossible to anticipate the breadth or degree of protection
that any such patents will afford, and there can be no assurance that any such
patents will not be successfully challenged in the future. If we are
unsuccessful in obtaining or preserving patent protection, or if any of our
products rely on unpatented proprietary technology, there can be no assurance
that others will not commercialize products substantially identical to such
products. Furthermore, although we have a corporate policy not to infringe the
valid and enforceable patents of others, we cannot provide assurances that our
products will not infringe patents held by third parties. In such event,
licenses from such third parties may not be available or may not be available on
commercially attractive terms.
WE ARE SUBJECT TO POLITICAL AND ECONOMIC RISKS OF DOING BUSINESS IN FOREIGN
COUNTRIES.
Our business is also subject to other risks generally associated with doing
business abroad, such as political unrest and changing economic conditions
within countries where our products are sold or manufactured. Management cannot
provide assurances that it can successfully manage these risks or avoid their
effects.
WHOLESALER PURCHASES OF OUR PRODUCTS MAY DECLINE IF WHOLESALER PURCHASES EXCEED
CUSTOMER DEMAND.
We sell our pharmaceutical products primarily through wholesalers.
Wholesaler purchases may exceed customer demand, resulting in reduced wholesaler
purchases in later quarters. We can give no assurances that wholesaler purchases
will not decline as a result of this potential excess buying.
7
<PAGE> 11
OUR FUTURE PERFORMANCE DEPENDS UPON THE SUCCESSFUL INTRODUCTION OF NEW PRODUCTS.
Future performance will be affected by our introduction of new products and
FDA approval of new indications for our current products and indications. We
have allocated significant resources to the development and introduction of new
products. The successful development, regulatory approval and market acceptance
of the products cannot be assured.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH RESEARCH AND DEVELOPMENT AND THE
REGULATORY PROCESS.
There are intrinsic uncertainties associated with research and development
efforts and the regulatory process both of which are discussed in greater
details in the "Research and Development" and the "Government Regulation"
sections of our Annual Report on Form 10-K for the year ended December 31, 1999,
which are incorporated herein by reference.
OUR HOLDING COMPANY STRUCTURE RESULTS IN SUBSTANTIAL STRUCTURAL SUBORDINATION
AND MAY AFFECT OUR ABILITY TO MAKE PAYMENTS ON LYONS.
The LYONs are obligations exclusively of Allergan. We are a holding company
and, accordingly, substantially all of our operations are conducted through our
subsidiaries. As a result, our cash flow and our ability to service our debt,
including the LYONs, is dependent upon the earnings of our subsidiaries. In
addition, we are dependent on the distribution of earnings, loans or other
payments by our subsidiaries to us.
Our subsidiaries are separate and distinct legal entities. Our subsidiaries
have no obligation to pay any amounts due on the LYONs or to provide us with
funds for our payment obligations, whether by dividends, distributions, loans or
other payments. In addition, any payment of dividends, distributions, loans or
advances by our subsidiaries to us could be subject to statutory or contractual
restrictions. Payments to us by our subsidiaries will also be contingent upon
our subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the
LYONs to participate in those assets, will be effectively subordinated to the
claims of that subsidiary's creditors, including trade creditors. In addition,
even if we were a creditor of any of our subsidiaries, our rights as a creditor
would be subordinate to any security interest in the assets of our subsidiaries
and any indebtedness of our subsidiaries senior to that held by us. As of
September 29, 2000, the amount of debt of our subsidiaries which is senior to
the LYONs was approximately $132.8 million.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
IN CONTROL OFFER OR THE REPURCHASE REQUIRED BY THE INDENTURE.
Upon the occurrence of certain specific kinds of change in control events
occurring on or before November 1, 2003, and on the November 1, 2003 and
November 1, 2010 purchase dates, we will be required to offer to repurchase all
outstanding LYONs. However, it is possible that we will not have sufficient
funds at such time to make the required repurchase of LYONs or that restrictions
in our credit facility or other indebtedness will not allow such repurchases. In
addition, certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, would not
constitute a "Change in Control" under the Indenture. See "Description of
LYONs -- Purchase of LYONs at the Option of the Holder" and "-- Change in
Control Permits Purchase of LYONs at the Option of the Holder."
WE CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THESE LYONS.
We cannot assure you that an active trading market for the LYONs will
develop or as to the liquidity or sustainability of any such market, the ability
of the holders to sell their LYONs or the price at which holders of the LYONs
will be able to sell their LYONs. Future trading prices of the LYONs will depend
on many factors, including, among other things, prevailing interest rates, our
operating results, the price of our common stock and the market for similar
securities.
8
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USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the LYONs or
common stock by the selling securityholders. See "Selling Securityholders" for a
list of those entities receiving proceeds from sales of LYONs.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, --------------------------------
-------------------------------------- SEPTEMBER 29, SEPTEMBER 24,
1999 1998 1997 1996 1995 2000 1999
---- ------ ---- ---- ---- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges(1)....... 13.5 n/a(2) 11.0 7.0 8.0 11.1 13.3
</TABLE>
-------------------------
(1) The ratios of earnings to fixed charges were calculated by dividing fixed
charges into the sum of income before income taxes and fixed charges. Fixed
charges consist of interest and the portion of rent which is deemed to be
representative of an interest factor.
(2) In 1998, earnings were not sufficient to cover fixed charges by $33.4
million.
9
<PAGE> 13
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the New York Stock Exchange under the symbol
"AGN." The following table shows the high and low per share sale prices of our
common stock and the cash dividends declared per share for the periods indicated
as reported by the New York Stock Exchange. Stock prices and cash dividends per
share prior to December 10, 1999 have been restated to reflect the two-for-one
stock split:
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
---- --- --------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998:
First Quarter............................................. $19 1/2 $15 7/8 $0.065
Second Quarter............................................ 23 25/32 18 5/8 0.065
Third Quarter............................................. 31 7/16 22 5/8 0.065
Fourth Quarter............................................ 33 1/4 26 23/32 0.065
YEAR ENDED DECEMBER 31, 1999:
First Quarter............................................. 48 41/64 31 11/16 0.07
Second Quarter............................................ 55 1/2 41 5/16 0.07
Third Quarter............................................. 57 3/8 42 1/32 0.07
Fourth Quarter............................................ 57 13/16 41 0.07
YEAR ENDED DECEMBER 31, 2000:
First Quarter............................................. 63 15/16 44 1/2 0.08
Second Quarter............................................ 78 3/4 49 7/8 0.08
Third Quarter............................................. 90 5/16 64 3/4 0.08
Fourth Quarter through December 7......................... 92 5/8 67 1/8 0.08*
</TABLE>
-------------------------
* On October 20, 2000, our board of directors declared a quarterly cash dividend
of $0.08 per share, payable December 8, 2000, to stockholders of record on
November 17, 2000. The last reported sale price for our common stock as
reported on the New York Stock Exchange on December 7, 2000 was $82 per share.
DIVIDEND POLICY
Our declaration and payment of cash dividends in the future and the amount
thereof will depend upon our results of operations, financial condition, cash
requirements, future prospects, limitations imposed by credit agreements or debt
securities and other factors deemed relevant by our Board of Directors. No
assurance can be given that cash dividends will continue to be declared and paid
at historical levels or at all. Certain financial covenants set forth in our
bank credit line agreements and other financing agreements restrict our ability
to declare dividends.
10
<PAGE> 14
DESCRIPTION OF LYONS
The LYONs were issued under an Indenture dated as of November 1, 2000 (the
"Indenture"), between us and U.S. Bank Trust National Association, as trustee
(the "Trustee"). A copy of the form of Indenture will be made available to
prospective investors in the LYONs upon request to Allergan, and will be
available for inspection during normal business hours at the corporate trust
office of the Trustee. The following summaries of certain provisions of the
LYONs and the Indenture do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of the
LYONs and the Indenture, including the definitions therein of certain terms
which are not otherwise defined in this prospectus. Wherever particular defined
terms of the Indenture (or of the form of LYON which is a part of the Indenture)
are referred to, such defined terms are incorporated herein by reference. As
used in this "Description of LYONs," the "Company," "we," "our" or "us" refers
to Allergan, Inc., and does not include its subsidiaries.
GENERAL
On November 1, 2000, we issued $657,451,000 aggregate principal amount at
maturity of the LYONs in a private placement. The LYONs will mature on November
1, 2020. The principal amount at maturity of each LYON is $1,000 and will be
payable at the office of the Paying Agent, which initially will be an office or
agency of the Trustee, or an office or agency maintained by the Company for such
purpose, in the Borough of Manhattan, The City of New York.
The LYONs were offered at a substantial discount from their principal
amount at maturity. See "Federal Income Tax Considerations -- Original Issue
Discount." We will not make periodic payments of interest on the LYONs. Each
LYON was issued at an issue price ("Issue Price") of $608.41 per LYON. The
calculation of the accrual of Original Issue Discount (the difference between
the Issue Price and the principal amount at maturity of a LYON) in the period
during which a LYON remains outstanding will be on a semi-annual bond equivalent
basis using a 360-day year composed of twelve 30-day months. Accrual of Original
Issue Discount will commence from the issue date of the LYONs. Maturity,
conversion, purchase by us at the option of a Holder, or redemption of a LYON
will cause Original Issue Discount and interest, if any, to cease to accrue on
such LYON, under the terms and subject to the conditions of the Indenture. We
may not reissue a LYON that has matured or been converted, purchased by us at
the option of a Holder, redeemed or otherwise cancelled (except for registration
of transfer, exchange or replacement thereof).
LYONs may be presented for conversion at the office of the Conversion Agent
and for exchange or registration of transfer at the office of the Registrar,
each such agent initially being the Trustee.
FORM, DENOMINATION AND REGISTRATION
Global LYON; Book-Entry Form
Except as hereinafter described, the LYONs will be issued in registered
book-entry form, without coupons, in denominations of $1,000 principal amount at
maturity and integral multiples of $1,000. LYONs sold to qualified institutional
buyers (as defined under Rule 144A of the Securities Act) ("QIBs") will be
registered in book-entry form and will be represented by one or more global
LYONs without coupons (each, a "Global LYON") deposited with a custodian for and
registered in the name of a nominee of DTC in New York, New York. Beneficial
interests in any such Global LYON will be shown on, and transfers thereof will
be effected only through, records maintained by DTC and its direct and indirect
participants, and any such interest may not be exchanged for LYONs in
certificated form except in the limited circumstances described herein. The
LYONs will bear any required legends.
No service charge will be made for any registration of transfer or exchange
of LYONs, but the Company may require payment by a Holder of a sum sufficient to
cover any tax, assessment or other governmental charge payable in connection
therewith.
11
<PAGE> 15
Ownership of beneficial interests in a Global LYON will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests directly or indirectly through DTC participants. Upon the issuance of
the Global LYONs, DTC will credit, on its internal system, the respective
principal amounts of its DTC participants who will in turn credit the individual
beneficial interests represented by such Global LYONs. Ownership of beneficial
interests in the Global LYONs will be shown on, and the transfer of that
ownership will be effected through DTC participants and will be shown on,
records maintained by DTC (with respect to interests of participants) and the
records of participants (with respect to interests of persons other than
participants).
So long as DTC, or its nominee, is the registered owner or Holder of a
Global LYON, DTC or such nominee, as the case may be, will be considered the
sole owner or Holder of the LYONs represented by such a Global LYON for all
purposes under the Indenture and the LYONs. No beneficial owner of an interest
in a Global LYON will be able to transfer that interest except in accordance
with DTC's applicable procedures (in addition to those under the Indenture
referred to herein). If DTC or any successor depository notifies the Company
that it is unwilling or unable to continue as depository for a Global LYON or
ceases to be a "Clearing Agency" registered or in good standing under the
Exchange Act or other applicable statute or regulation and a successor
depository is not appointed by the Company within 90 days, or an Event of
Default has occurred and is continuing, DTC participants in such Global LYON
will receive physical delivery of LYONs in certificated form and will be
considered to be the owners or Holders of such LYONs under the Indenture or the
LYONs.
Payments on Global LYONs will be made to DTC or its nominee, as the
registered owner thereof. None of Allergan, the Trustee or any Paying Agent will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the Global
LYONs or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment in respect
of a Global LYON held by it or its nominee, will credit participants' accounts
with payment in amounts proportionate to their respective beneficial interests
in the principal amount of such Global LYON as shown on the records of DTC or
its nominee. We also expect that payments by participants to owners of
beneficial interests in such Global LYON held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments, however, will be the responsibility
of such participants.
Transfers between participants in DTC will be effected in accordance with
DTC rules and will be settled in same-day funds. The laws of some states,
however, require that certain persons take physical delivery of securities in
definitive form. LYONs will only be delivered in certificated form in the
limited circumstances described herein. Consequently, the ability to transfer
LYONs evidenced by the Global LYON will be limited to such extent.
DTC will take any action permitted to be taken by a Holder of LYONs
(including the presentation of LYONs for exchange as described below) only at
the direction of one or more participants to whose account interests in the
Global LYONs are credited and only in respect of such portion of the aggregate
principal amount of the LYONs as to which such participant or participants has
or have given such direction. However, if there is an Event of Default under the
LYONs, DTC will exchange the Global LYONs for LYONs in certificated form, which
it will distribute to its participants and which will be legended as set forth
under "Transfer Restrictions."
In case any LYON shall become mutilated, defaced, destroyed, lost or
stolen, we will execute and upon our request the Trustee will authenticate and
deliver a new LYON, of like tenor (including the same date of issuance) and
equal principal amount at maturity, registered in the same manner, dated the
date of its authentication in exchange and substitution for such LYON (upon
surrender and cancellation thereof) or in lieu of and substitution for such
LYON. In case such LYON is destroyed, lost or stolen, the applicant for a
substituted LYON shall furnish to us and the Trustee such security or indemnity
as may be required by them to hold each of them harmless, and, in every case of
destruction, loss or theft of such
12
<PAGE> 16
LYON, the applicant shall also furnish to us satisfactory evidence of the
destruction, loss or theft of such LYON and of the ownership thereof. Upon the
issuance of any substituted LYON, we may require the payment by the registered
Holder thereof of a sum sufficient to cover fees and expenses connected
therewith.
SUBORDINATION OF LYONS
Indebtedness evidenced by the LYONs is subordinated in right of payment as
set forth in the Indenture, to the prior payment in full of all existing and
future Senior Indebtedness (as defined herein). Upon any payment or distribution
of assets of Allergan to creditors in the event of any dissolution, winding-up,
liquidation or reorganization of Allergan, whether voluntary or involuntary, or
in bankruptcy, insolvency, receivership or other similar proceedings, the
holders of all Senior Indebtedness shall first be entitled to receive payment in
full of all amounts due or to become due thereon, or payment of such amounts
shall have been provided for, before the Holders of the LYONs shall be entitled
to receive any payment or distribution with respect to any LYONS.
By reason of the subordination described herein, in the event of
insolvency, upon any distribution of the assets of Allergan, (i) the Holders of
the LYONs are required to pay over their share of such distribution to the
trustee in bankruptcy, receiver or other person distributing the assets of
Allergan for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay all holders of Senior Indebtedness in
full and (ii) unsecured creditors of Allergan who are not Holders of LYONs or
holders of Senior Indebtedness of Allergan may receive less, ratably, than
holders of Senior Indebtedness of Allergan and may recover more, ratably, than
the Holders of LYONs.
The term "Senior Indebtedness" of Allergan means, without duplication, the
principal, premium (if any) and unpaid interest on all present and future (i)
our indebtedness for borrowed money, (ii) our obligations evidenced by bonds,
debentures, notes or similar instruments, (iii) all of our obligations under (a)
interest rate swaps, caps, collars, options, and similar arrangements, (b) any
foreign exchange contract, currency swap contract, futures contract, currency
option contract, or other foreign currency hedge, and (c) credit swaps, caps,
floors, collars and similar arrangements, (iv) indebtedness which we incur,
assume or guarantee in connection with the acquisition by us or one of our
subsidiaries of any business, properties or assets (except purchase-money
indebtedness classified as accounts payable under generally accepted accounting
principles), (v) all obligations and liabilities (contingent or otherwise) in
respect of our leases required, in conformity with generally accepted accounting
principles, to be accounted for as capitalized lease obligations on our balance
sheet and all obligations and the liabilities (contingent or otherwise) under
any lease or related document (including a purchase agreement) in connection
with the lease of real property which provides that we are contractually
obligated to purchase or cause a third party to purchase the leased property and
thereby guarantee a minimum residual value of the leased property to the lessor
and our obligations under such lease or related document to purchase or to cause
a third party to purchase such leased property, (vi) our reimbursement
obligations in respect of letters of credit relating to indebtedness or our
other obligations that qualify as indebtedness or obligations of the kind
referred to in clauses (i) through (v) of this paragraph, and (vii) our
obligations under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (i) through (vi) of this paragraph,
in each case unless in the instrument creating or evidencing the indebtedness or
obligation or pursuant to which the same is outstanding it is provided (A) that
such indebtedness or obligation is not superior in right of payment to the LYONs
or (B) that such indebtedness or obligation is subordinated to any of our other
indebtedness or obligation, unless such indebtedness or obligation expressly
provides that such indebtedness or obligation is senior in right of payment to
the LYONs.
The LYONs are effectively subordinated to all existing and future
liabilities of our subsidiaries. Any of our rights to participate in any
distribution of the assets of any of our subsidiaries upon the liquidation,
reorganization or insolvency of such subsidiary (and the consequent right of the
Holders of the LYONs to participate in those assets) will be subject to the
claims of the creditors (including trade creditors) of such
13
<PAGE> 17
subsidiary, except to the extent that our claims as a creditor of such
subsidiary may be recognized, in which case our claims would still be
subordinate to any security interest in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by us.
At September 29, 2000, we and our subsidiaries had outstanding
approximately $354.6 million of Senior Indebtedness (excluding obligations under
foreign exchange and interest rate swap contracts). In addition, we and our
consolidated subsidiaries had outstanding on such date foreign exchange
contracts and interest rate swap contracts to which the LYONs would have been
contractually or effectively subordinated. There is no restriction under the
Indenture on our incurring additional indebtedness, including Senior
Indebtedness.
CONVERSION RIGHTS
A Holder of a LYON may convert it into common stock at any time before the
close of business on November 1, 2020; provided, however, that if we call a LYON
for redemption, the Holder may convert it only until the close of business on
the Redemption Date. A LYON in respect of which a Holder has delivered a
Purchase Notice or a Change in Control Purchase Notice exercising the option of
such Holder to require us to purchase such LYON may be converted only if such
notice is withdrawn in accordance with the terms of the Indenture. A Holder may
convert a portion of such Holder's LYONs so long as such portion is $1,000
principal amount at maturity or an integral multiple of $1,000.
The initial Conversion Rate is 5.7615 shares of common stock per LYON,
subject to adjustment upon the occurrence of certain events described below. A
Holder entitled to a fractional share of common stock shall receive cash equal
to the then current market value of such fractional share.
On conversion of a LYON, a Holder will not receive any cash payment
representing accrued Original Issue Discount. Our delivery to the Holder of the
fixed number of shares of common stock into which the LYON is convertible
(together with the cash payment, if any, instead of fractional shares) will be
deemed to satisfy our obligation to pay the principal amount at maturity of the
LYON including the accrued Original Issue Discount attributable to the period
from the Issue Date through the Conversion Date. Thus, the accrued Original
Issue Discount is deemed to be paid in full rather than cancelled, extinguished
or forfeited. The Conversion Rate will not be adjusted at any time during the
term of the LYONs for such accrued Original Issue Discount. A certificate for
the number of full shares of common stock into which any LYON is converted (and
cash instead of fractional shares) will be delivered through the Conversion
Agent as soon as practicable following the Conversion Date. For a discussion of
the tax treatment of a Holder receiving common stock upon conversion, see
"Federal Income Tax Considerations -- Disposition or Conversion."
To convert a LYON into shares of common stock, a Holder must:
- complete and manually sign the conversion notice on the back of the LYON
(or complete and manually sign a facsimile of the conversion notice) and
deliver such notice to the Conversion Agent;
- surrender the LYON to the Conversion Agent;
- if required, furnish appropriate endorsements and transfer documents; and
- if required, pay all transfer or similar taxes.
Pursuant to the Indenture, the date on which all of the foregoing
requirements have been satisfied is the Conversion Date.
The Conversion Rate will be adjusted for:
- dividends or distributions on common stock payable in common stock or
other capital stock;
- subdivisions, combinations or certain reclassifications of common stock;
14
<PAGE> 18
- distributions to all holders of common stock of certain rights to
purchase common stock for a period expiring within 60 days at less than
the Quoted Price at the time; and
- distributions to such holders of our assets or debt securities or certain
rights to purchase our securities (excluding cash dividends or other cash
distributions from current or retained earnings other than any
Extraordinary Cash Dividend).
However, no adjustment need be made if Holders may participate in the
transaction or in certain other cases. In cases where the fair market value of
the portion of assets, debt securities or certain rights, warrants or options to
purchase our securities applicable to one share of common stock distributed to
stockholders equals or exceeds the Average Quoted Price of the common stock, or
such Average Quoted Price exceeds the fair market value of such portion of
assets, debt securities or rights, warrants or options so distributed by less
than $1.00, rather than being entitled to an adjustment in the Conversion Rate,
the Holder of a LYON upon conversion thereof will be entitled to receive, in
addition to the shares of common stock into which such LYON is convertible, the
kind and amount of assets, debt securities or rights, warrants or options
comprising the distribution that such Holder would have received if such Holder
had converted such LYON immediately prior to the record date for determining the
stockholders entitled to receive the distribution.
The stockholders rights plan under which any Rights are issued provides
that each share of common stock issued upon conversion of LYONs at any time
prior to the distribution of separate certificates representing such Rights will
be entitled to receive such Rights. There shall not be any adjustment to the
conversion privilege or Conversion Rate as a result of the issuance of such
Rights, the distribution of separate certificates representing the Rights, the
exercise or redemption of such Rights in accordance with any such Rights
Agreement, or the termination or invalidation of such Rights.
The Indenture permits us to increase the Conversion Rate from time to time.
If we are party to a consolidation, merger or binding share exchange or a
transfer of all or substantially all of our assets, the right to convert a LYON
into common stock may be changed into a right to convert it into the kind and
amount of securities, cash or other of our assets or another person which the
Holder would have received if the Holder had converted such Holder's LYONs
immediately prior to the transaction.
In the event of a taxable distribution to holders of common stock which
results in an adjustment of the Conversion Rate or in the event the Conversion
Rate is increased at our discretion, the Holders of the LYONs may, in certain
circumstances, be deemed to have received a distribution subject to Federal
income tax as a dividend. See "Federal Income Tax Considerations -- Constructive
Dividend."
In the event we exercise our option to have interest in lieu of Original
Issue Discount accrue on a LYON following a Tax Event, the Holder will be
entitled on conversion to receive the same number of shares of common stock such
Holder would have received if we had not exercised such option. If we exercise
such option, LYONs surrendered for conversion during the period from the close
of business on any Regular Record Date (as defined herein) next preceding any
Interest Payment Date (as defined herein) to the opening of business of such
Interest Payment Date (except LYONs to be redeemed on a date within such period)
must be accompanied by payment of an amount equal to the interest thereon that
the registered Holder is to receive. Except where LYONs surrendered for
conversion must be accompanied by payment as described above, no interest on
converted LYONs will be payable by us on any Interest Payment Date subsequent to
the date of conversion. See "-- Optional Conversion to Semi-annual Coupon Note
upon Tax Event."
REDEMPTION OF LYONS AT THE OPTION OF THE COMPANY
No sinking fund is provided for the LYONs. Prior to November 1, 2003, the
LYONs will not be redeemable at our option. Beginning on November 1, 2003, we
may redeem the LYONs for cash as a whole at any time, or from time to time in
part. We will give not less than 30 days' nor more than 60 days' notice of
redemption by mail to Holders of LYONs.
15
<PAGE> 19
The table below shows Redemption Prices of a LYON on November 1, 2003, at
each November 1, thereafter prior to maturity and at maturity on November 1,
2020, which prices reflect the accrued Original Issue Discount calculated to
each such date. The Redemption Price of a LYON redeemed between such dates would
include an additional amount reflecting the additional Original Issue Discount
accrued since the next preceding date in the table.
<TABLE>
<CAPTION>
(2)
ACCRUED (3)
(1) ORIGINAL ISSUE REDEMPTION
LYON DISCOUNT PRICE
REDEMPTION DATE ISSUE PRICE AT 2.50% (1)+(2)
--------------- ----------- -------------- ----------
<S> <C> <C> <C>
November 1, 2003................................ $608.41 $ 47.08 $ 655.49
November 1, 2004................................ 608.41 63.57 671.98
November 1, 2005................................ 608.41 80.48 688.89
November 1, 2006................................ 608.41 97.81 706.22
November 1, 2007................................ 608.41 115.57 723.98
November 1, 2008................................ 608.41 133.78 742.19
November 1, 2009................................ 608.41 152.46 760.87
November 1, 2010................................ 608.41 171.60 780.01
November 1, 2011................................ 608.41 191.22 799.63
November 1, 2012................................ 608.41 211.33 819.74
November 1, 2013................................ 608.41 231.96 840.37
November 1, 2014................................ 608.41 253.10 861.51
November 1, 2015................................ 608.41 274.77 883.18
November 1, 2016................................ 608.41 296.99 905.40
November 1, 2017................................ 608.41 319.76 928.17
November 1, 2018................................ 608.41 343.11 951.52
November 1, 2019................................ 608.41 367.05 975.46
At stated maturity.............................. 608.41 391.59 1,000.00
</TABLE>
If converted to semi-annual coupon notes following the occurrence of a Tax
Event, the LYONs will be redeemable at the Restated Principal Amount (as defined
below) plus accrued and unpaid interest from the date of such conversion through
the Redemption Date. However, in no event may the LYONs be redeemed prior to
November 1, 2003. See "-- Optional Conversion to Semi-annual Coupon Note upon
Tax Event."
If less than all of the outstanding LYONs are to be redeemed, the Trustee
shall select the LYONs to be redeemed in principal amounts at maturity of $1,000
or integral multiples of $1,000 by lot, pro rata or by any other method the
Trustee considers fair and appropriate. If a portion of a Holder's LYONs is
selected for partial redemption and such Holder converts a portion of such
LYONs, such converted portion shall be deemed (so far as may be) to be the
portion selected for redemption.
PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
On November 1, 2003 and on November 1, 2010 (each a "Purchase Date"), we
will become obligated to purchase, at the option of the Holder, any outstanding
LYON for which a written Purchase Notice has been delivered by the Holder to the
Paying Agent at any time from the opening of business on the date that is 20
business days prior to such Purchase Date until the close of business on such
Purchase Date and for which such Purchase Notice has not been withdrawn, subject
to certain additional conditions. The Purchase Price payable in respect of a
LYON will be $655.49 per LYON on November 1, 2003 and $780.01 per LYON on
November 1, 2010, which prices equal the Issue Price plus accrued Original Issue
Discount to the respective Purchase Dates. We may, at our option, elect to pay
the Purchase Price in cash or shares of our common stock, or any combination
thereof. For a discussion of the tax treatment of a Holder receiving cash,
common stock or any combination thereof, see "Federal Income Tax
Considerations -- Disposition or Conversion."
16
<PAGE> 20
If prior to a Purchase Date the LYONs have been converted to semi-annual
coupon notes following the occurrence of a Tax Event, the Purchase Price will be
equal to the Restated Principal Amount plus accrued and unpaid interest from the
date of such conversion to the Purchase Date. See "-- Optional Conversion to
Semi-annual Coupon Note upon Tax Event."
We will be required to give notice (the "Company Notice") on a date not
less than 20 business days prior to each Purchase Date to all Holders at their
addresses shown in the register of the Registrar (and to beneficial owners as
required by applicable law) stating, among other things:
- whether we will pay the Purchase Price of LYONs in cash or common stock
or any combination thereof (specifying the percentages of each);
- if we elect to pay in common stock, in whole or in part, the method of
calculating the Market Price (as defined below) of the common stock; and
- the procedures that Holders must follow to require us to purchase LYONs
from such Holders.
The Purchase Notice given by each Holder electing to require us to purchase
LYONs shall state:
- the certificate numbers of the LYONs to be delivered by such Holder for
purchase by us;
- the portion of the principal amount at maturity of LYONs to be purchased,
which portion must be $1,000 or an integral multiple of $1,000;
- that such LYONs are to be purchased by us pursuant to the applicable
provisions of the LYONs; and
- in the event we elect, pursuant to the Company Notice, to pay the
Purchase Price in common stock, in whole or in part, but such Purchase
Price is ultimately to be paid to such Holder entirely in cash because
any of the conditions to payment of the Purchase Price (or portion
thereof) in common stock is not satisfied prior to the close of business
on the Purchase Date (as described below) whether such Holder elects (1)
to withdraw such Purchase Notice as to some or all of the LYONs to which
it relates (stating the principal amount at maturity and certificate
numbers of the LYONs as to which such withdrawal shall relate), or (2) to
receive cash in respect of the entire Purchase Price for all LYONs (or
portions of LYONs) subject to such Purchase Notice.
If the Holder fails to indicate, in the Purchase Notice and in any written
notice of withdrawal, such Holder's choice with respect to the election
described in the final bullet point above, such Holder shall be deemed to have
elected to receive cash in respect of the entire Purchase Price for all LYONs
subject to such Purchase Notice in such circumstances. For a discussion of the
tax treatment of a Holder receiving cash instead of common stock, see "Federal
Income Tax Considerations -- Disposition or Conversion."
Any Purchase Notice may be withdrawn by the Holder by a written notice of
withdrawal delivered to the Paying Agent prior to the close of business on the
Purchase Date. The notice of withdrawal shall state the principal amount at
maturity and the certificate numbers of the LYONs as to which the withdrawal
notice relates and the principal amount at maturity, if any, which remains
subject to the Purchase Notice.
If we elect to pay the Purchase Price, in whole or in part, in shares of
our common stock, the number of shares of common stock to be delivered in
respect of the portion of the Purchase Price to be paid in common stock shall be
equal to such portion of the Purchase Price divided by the Market Price of a
share of common stock. No fractional shares of common stock will be delivered
upon any purchase by us of LYONs through the delivery of such common stock in
payment, in whole or in part, of the Purchase Price. Instead, we will pay cash
based on the Market Price for all fractional shares of common stock. See
"Federal Income Tax Considerations -- Disposition or Conversion."
The "Market Price" means the average of the Sale Prices of our common stock
for the five trading day period ending on (if the third Business Day prior to
the applicable Purchase Date is a trading day, or if not, then on the last
trading day prior to) the third Business Day prior to the applicable Purchase
Date, appropriately adjusted to take into account the occurrence, during the
period commencing on the first of
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such trading days during such five trading day period and ending on such
Purchase Date, of certain events that would result in an adjustment of the
Conversion Rate with respect to the common stock.
The "Sale Price" of our common stock on any date means the closing per
share sale price (or if no closing sale price is reported, the average of the
bid and ask prices or, if more than one in either case, the average of the
average bid and the average ask prices) on such date as reported in composite
transactions for the principal United States securities exchange on which our
common stock is traded or, if the common stock is not listed on a United States
national or regional securities exchange, as reported by the National
Association of Securities Dealers Automated Quotation System.
Because the Market Price of the common stock is determined prior to the
applicable Purchase Date, Holders of LYONs bear the market risk with respect to
the value of the common stock to be received from the date such Market Price is
determined to such Purchase Date. We may pay the Purchase Price (or any portion
of the Purchase Price) in common stock only if the information necessary to
calculate the Market Price is published in a daily newspaper of national
circulation.
Upon determination of the actual number of shares of common stock in
accordance with the foregoing provisions, we will publish such information on
our website (www.allergan.com) and in the Wall Street Journal or another daily
newspaper of national circulation.
Our right to purchase LYONs, in whole or in part, with common stock is
subject to our satisfying various conditions, including:
- the registration of the common stock under the Securities Act and the
Exchange Act, if required; and
- any necessary qualification or registration under applicable state
securities law or the availability of an exemption from such
qualification and registration.
If such conditions are not satisfied with respect to a Holder or Holders
prior to the close of business on the Purchase Date, we will pay the Purchase
Price of the LYONs of such Holder or Holders entirely in cash. See "Federal
Income Tax Considerations -- Disposition or Conversion." We may not change the
form of consideration (or components or percentages of components thereof) to be
paid once we have given the Company Notice to Holders of LYONs except as
described in the first sentence of this paragraph.
We will comply with the provisions of Rule 13e-4, Rule l4e-1 and any other
tender offer rules under the Exchange Act which may then be applicable and will
file Schedule TO or any other schedule required thereunder in connection with
any offer by us to purchase LYONs at the option of Holders.
Payment of the Purchase Price for a LYON for which a Purchase Notice has
been delivered and not validly withdrawn is conditioned upon delivery of such
LYON (together with necessary endorsements) to the Paying Agent at any time
(whether prior to, on or after the Purchase Date) after delivery of such
Purchase Notice. Payment of the Purchase Price for such LYON will be made
promptly following the later of the Purchase Date or the time of delivery of
such LYON. If the Paying Agent holds, in accordance with the terms of the
Indenture, money or securities sufficient to pay the Purchase Price of such LYON
on the business day following the Purchase Date, then, immediately after the
Purchase Date, such LYON will cease to be outstanding and the Original Issue
Discount on such LYON will cease to accrue, whether or not such LYON is
delivered to the Paying Agent, and all other rights of the Holder shall
terminate (other than the right to receive the Purchase Price upon delivery of
such LYON).
Our ability to purchase LYONs with cash may be limited by the terms of our
then existing borrowing agreements. No LYONs may be purchased for cash at the
option of Holders if there has occurred (prior to, on, or after the giving, by
the Holders of such LYONs, of the required Purchase Notice) and is continuing an
Event of Default with respect to the LYONs described under "-- Events of
Default; Notice and Waiver" (other than a default in the payment of the Purchase
Price with respect to such LYONs).
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CHANGE IN CONTROL PERMITS PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
In the event of any Change in Control (as defined below) of the Company
occurring on or prior to November 1, 2003, each Holder of LYONs will have the
right, at the Holder's option, subject to the terms and conditions of the
Indenture, to require us to purchase all or any portion (provided that the
principal amount at maturity must be $1,000 or an integral multiple thereof) of
the Holder's LYONs as of the date that is 35 business days after the occurrence
of such Change in Control (a "Change in Control Purchase Date") at a cash price
equal to the Issue Price plus accrued Original Issue Discount to the Change in
Control Purchase Date (the "Change in Control Purchase Price").
If prior to a Change in Control Purchase Date the LYONs have been converted
to semi-annual coupon notes following the occurrence of a Tax Event, the Company
will be required to purchase the LYONs at a cash price equal to the Restated
Principal Amount plus accrued and unpaid interest from the date of such
conversion to the Change in Control Purchase Date.
Within 15 business days after the occurrence of a Change in Control, we are
obligated to mail to the Trustee and to all Holders of LYONs at their addresses
shown in the register of the Registrar (and to beneficial owners as required by
applicable law) a notice regarding the Change in Control, which notice shall
state, among other things:
- the events causing a Change in Control and the date of such Change in
Control;
- the last date on which the purchase right may be exercised;
- the Change in Control Purchase Price;
- the Change in Control Purchase Date;
- the name and address of the Paying Agent and the Conversion Agent;
- the Conversion Rate and any adjustments to the Conversion Rate;
- that LYONs with respect to which a Change in Control Purchase Notice is
given by the Holder may be converted only if the Change in Control
Purchase Notice has been withdrawn in accordance with the terms of the
Indenture; and
- the procedures that Holders must follow to exercise these rights.
To exercise this right, the Holder must deliver a written notice (a "Change
in Control Purchase Notice") to the Paying Agent (initially the Trustee) prior
to the close of business on the Change in Control Purchase Date. The Change in
Control Purchase Notice shall state:
- the identifying numbers of the LYONs to be delivered by the Holder for
purchase by us;
- the portion of the principal amount at maturity of LYONs to be purchased,
which portion must be $1,000 or an integral multiple thereof; and
- that we are to purchase such LYONs pursuant to the applicable provisions
of the LYONs.
Any Change in Control Purchase Notice may be withdrawn by the Holder by a
written notice of withdrawal delivered to the Paying Agent prior to the close of
business on the Change in Control Purchase Date. The notice of withdrawal shall
state the principal amount at maturity and the identifying numbers of the LYONs
subject to the withdrawal notice and the principal amount at maturity, if any,
which remains subject to a Change in Control Purchase Notice.
Payment of the Change in Control Purchase Price for a LYON for which a
Change in Control Purchase Notice has been delivered and not validly withdrawn
is conditioned upon delivery of such LYON (together with necessary endorsements)
to the Paying Agent at any time (whether prior to, on or after the Change in
Control Purchase Date) after the delivery of such Change in Control Purchase
Notice. Payment of the Change in Control Purchase Price for such LYON will be
made promptly following the later of the Change in Control Purchase Date or the
time of delivery of such LYON. If the Paying Agent
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holds, in accordance with the terms of the Indenture, money sufficient to pay
the Change in Control Purchase Price of such LYON on the business day following
the Change in Control Purchase Date, then, immediately after such Change in
Control Purchase Date, Original Issue Discount on such LYON will cease to
accrue, whether or not such LYON is delivered to the Paying Agent, and all other
rights of the Holder shall terminate (other than the right to receive the Change
in Control Purchase Price upon delivery of the LYON).
Under the Indenture, a "Change in Control" of Allergan is deemed to have
occurred at such time as:
- any person, including its Affiliates and Associates, other than Allergan,
its subsidiaries or their employee benefit plans, files a Schedule 13D or
14D-1 (or any successor schedule, form or report under the Exchange Act)
disclosing that such person has become the beneficial owner of 50% or
more of the voting power of our common stock or other capital stock into
which the common stock is reclassified or changed, with certain
exceptions; or
- there shall be consummated any consolidation or merger of Allergan
pursuant to which the common stock would be converted into cash,
securities or other property, in each case other than a consolidation or
merger of the Company in which the holders of the common stock
immediately prior to the consolidation or merger have, directly or
indirectly, at least a majority of the total voting power in the
aggregate of all classes of capital stock of the continuing or surviving
corporation immediately after the consolidation or merger.
The Indenture does not permit our board of directors to waive our
obligation to purchase LYONs at the option of Holders in the event of a Change
in Control.
We will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act which may then be applicable and will
file Schedule TO or any other required schedule under the Exchange Act in
connection with any offer by us to purchase LYONs at the option of Holders upon
a Change in Control. The Change in Control purchase feature of the LYONs may in
certain circumstances make more difficult or discourage our takeover. The Change
in Control Purchase feature, however, is not the result of our knowledge of any
specific effort to accumulate shares of common stock or to obtain control of us
by means of a merger, tender offer, solicitation or otherwise, or part of a plan
by management to adopt a series of anti-takeover provisions. Instead, the Change
in Control purchase feature is a standard term contained in other LYONs
offerings that have been marketed by Merrill Lynch, and the terms of such
feature result from negotiations between Merrill Lynch and us.
We could, in the future, enter into certain transactions, including certain
recapitalizations, that would not constitute a Change in Control with respect to
the Change in Control purchase feature of the LYONs, but that would increase the
amount of indebtedness outstanding at such time. No LYONs may be purchased at
the option of Holders upon a Change in Control if there has occurred (prior to,
on or after the giving, by the Holders of such LYONs, of the required Change in
Control Purchase Notice) and is continuing an Event of Default with respect to
the LYONs (other than a default in the payment of the Change in Control Purchase
Price with respect to such LYONs).
OPTIONAL CONVERSION TO SEMI-ANNUAL COUPON NOTE UPON TAX EVENT
From and after the date (the "Tax Event Date") of the occurrence of a Tax
Event (as defined below), we shall have the option to elect to have interest in
lieu of future Original Issue Discount accrue at 2.50% per year on a principal
amount per LYON (the "Restated Principal Amount") equal to the Issue Price plus
Original Issue Discount accrued to the Tax Event Date or the date on which the
we exercise the option described herein, whichever is later (such date
hereinafter referred to as the "Option Exercise Date"). Such interest shall
accrue from the Option Exercise Date and shall be payable semi-annually on
November 1, and May 1, of each year (each an "Interest Payment Date") to holders
of record at the close of business on October 15 or April 15 (each a "Regular
Record Date") immediately preceding such Interest Payment Date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months and
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the Option Exercise Date.
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A "Tax Event" means that we shall have received an opinion from independent
tax counsel experienced in such matters to the effect that, on or after the date
of this prospectus, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof or
therein or (b) any amendment to, or change in, an interpretation or application
of such laws or regulations by any legislative body, court, governmental agency
or regulatory authority, in each case which amendment or change is enacted,
promulgated, issued or announced or which interpretation is issued or announced
or which action is taken, on or after the date of this prospectus, there is more
than an insubstantial risk that interest (including Original Issue Discount)
payable on the LYONs either (i) would not be deductible on a current accrual
basis or (ii) would not be deductible under any other method, in either case in
whole or in part, by us (by reason of deferral, disallowance, or otherwise) for
United States federal income tax purposes.
MERGER AND SALES OF ASSETS BY ALLERGAN
The Indenture provides that we may not consolidate with or merge into any
other person or convey, transfer or lease its properties and assets
substantially as an entirety to another person, unless among other items:
(i) the resulting, surviving or transferee person (if other than
Allergan) is organized and existing under the laws of:
(a) the United States, any state thereof or the District of
Columbia;
(b) any member country of the European Union; or
(c) if such merger, consolidation or other transaction would not
impair the rights of Holders, any other country;
(ii) such person assumes all of our obligations under the LYONs and
the Indenture; and
(iii) we or such successor person shall not immediately thereafter be
in default under the Indenture.
Upon the assumption of our obligations by such a person in such
circumstances, subject to certain exceptions, we shall be discharged from all
obligations under the LYONs and the Indenture. Although such transactions are
permitted under the Indenture, certain of the foregoing transactions occurring
on or prior to November 1, 2003 could constitute a Change in Control of Allergan
permitting each Holder to require us to purchase the LYONs of such Holder as
described above.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein shall
have happened and be continuing, either the Trustee or the Holders of not less
than 25% in aggregate principal amount at maturity of the LYONs then outstanding
may declare the Issue Price of the LYONs plus the Original Issue Discount on the
LYONs accrued (or if the LYONs have been converted to semi-annual coupon notes
following a Tax Event, the Restated Principal Amount, plus accrued and unpaid
interest) through the date of such declaration to be immediately due and
payable. In the case of certain events of bankruptcy or insolvency, the Issue
Price of the LYONs plus the Original Issue Discount accrued thereon (or if the
LYONs have been converted to semi-annual coupon notes following a Tax Event, the
Restated Principal Amount, plus accrued and unpaid interest) through the
occurrence of such event shall automatically become and be immediately due and
payable. Under certain circumstances, the Holders of a majority in aggregate
principal amount at maturity of the outstanding LYONs may rescind any such
acceleration with respect to the LYONs and its consequences. Interest shall, to
the extent permitted by law, accrue and be payable on demand upon a default in
the payment of the principal amount at maturity (or if the LYONs have been
converted to semi-annual coupon notes following a Tax Event, the Restated
Principal Amount), Issue Price, accrued Original Issue Discount (or if the LYONs
have been converted
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to semi-annual coupon notes following a Tax Event, accrued and unpaid interest),
Redemption Price, Purchase Price or Change in Control Purchase Price with
respect to any LYON and such interest shall be compounded semi-annually. The
accrual of such interest on overdue amounts shall be in lieu of, and not in
addition to, the continued accrual of Original Issue Discount.
Under the Indenture, an Event of Default includes any of the following:
(i) default in payment of the principal amount at maturity (or if the
LYONs have been converted to semi-annual coupon notes following a Tax
Event, the Restated Principal Amount), Issue Price, accrued Original Issue
Discount (or if the LYONs have been converted to semi-annual coupon notes
following a Tax Event, accrued and unpaid interest), Redemption Price,
Purchase Price or Change in Control Purchase Price with respect to any LYON
when such becomes due and payable;
(ii) our failure to comply with any of our other agreements in the
LYONs or the Indenture upon our receipt of notice of such default by the
Trustee or by Holders of not less than 25% in aggregate principal amount at
maturity of the LYONs then outstanding and our failure to cure (or obtain a
waiver of) such default within 90 days after our receipt of such notice;
(iii) (a) our failure to make any payment by the end of any applicable
grace period of indebtedness, which term as used in the Indenture means our
obligations (other than nonrecourse obligations) for borrowed money or
evidenced by bonds, debentures, notes or similar instruments
("Indebtedness") in an amount in excess of $75,000,000 and continuance of
such failure, or (b) the acceleration of Indebtedness in an amount in
excess of $75,000,000 because of a default with respect to such
Indebtedness without such Indebtedness having been discharged or such
acceleration having been cured, waived, rescinded or annulled, in the case
of subclause (a) or (b) of this clause (iii), for a period of 30 days after
written notice to us by the Trustee or to us and the Trustee by the Holders
of not less than 25% in aggregate principal amount at maturity of the LYONs
then outstanding; provided, however, that if any such failure or
acceleration referred to in (a) or (b) above shall cease or be cured,
waived, rescinded or annulled, then the Event of Default by reason thereof
shall be deemed not to have occurred; or
(iv) certain events of bankruptcy or insolvency of Allergan or any
Significant Subsidiary.
The Holders of a majority in aggregate principal amount at maturity of the
outstanding LYONs may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that such direction shall not be in
conflict with any law or the Indenture and subject to certain other limitations.
Before proceeding to exercise any right or power under the Indenture at the
direction of such Holders, the Trustee shall be entitled to receive from such
Holders reasonable security or indemnity satisfactory to it against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction.
No Holder of any LYON will have any right to pursue any remedy with respect
to the Indenture or the LYONs, unless
(i) such Holder shall have previously given the Trustee written notice
of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount at
maturity of the outstanding LYONs shall have made a written request to the
Trustee to pursue such remedy;
(iii) such Holder or Holders have offered to the Trustee reasonable
indemnity satisfactory to the Trustee;
(iv) the Holders of a majority in aggregate principal amount at
maturity of the outstanding LYONs have not given the Trustee a direction
inconsistent with such request within 60 days after receipt of such
request; and
(v) the Trustee shall have failed to comply with the request within
such 60-day period.
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Notwithstanding the foregoing, the right of any Holder (x) to receive
payment of the principal amount at maturity (or if the LYONs have been converted
to semi-annual coupon notes following a Tax Event, the Restated Principal
Amount), Issue Price, accrued Original Issue Discount (or if the LYONs have been
converted to semi-annual coupon notes following a Tax Event, accrued and unpaid
interest), Redemption Price, Purchase Price or Change in Control Purchase Price
with respect to any LYON and any interest in respect of a default in the payment
of any such amounts on such LYON, on or after the due date expressed in such
LYON, (y) to convert LYONs or (z) to institute suit for the enforcement of any
such payments or conversion, shall not be impaired or adversely affected without
such Holder's consent. The Holders of at least a majority in aggregate principal
amount at maturity of the outstanding LYONs may waive an existing default and
its consequences, other than (i) any default in any payment on the LYONs, (ii)
any default which constitutes a failure to convert any LYON in accordance with
its terms or (iii) any default in respect of certain covenants or provisions in
the Indenture which may not be modified without the consent of the Holder of
each LYON as described in "-- Modification" below.
We will be required to furnish to the Trustee annually a statement as to
any default by us in the performance and observance of its obligations under the
Indenture. The Trustee will be required to give notice to Holders of the LYONs
of any continuing default known to the Trustee within 90 days after the
occurrence thereof, unless such default shall have been cured or waived before
the giving of such notice; provided, that the Trustee may withhold such notice,
as to any default other than a payment default, if it determines in good faith
that withholding the notice is in the interests of the Holders.
MODIFICATION
Without the consent of any Holder of LYONs, we and the Trustee may amend
the Indenture to:
(i) cure any ambiguity, defect or inconsistency;
(ii) provide for the assumption by a successor corporation of our
obligations under the Indenture;
(iii) provide for uncertificated LYONs in addition to certificated
LYONs (so long as any uncertificated LYONs are in registered form for
purposes of the Internal Revenue Code);
(iv) make any change that does not adversely affect the rights of any
Holder of LYONs;
(v) make any change to comply with the Trust Indenture Act of 1939, or
to comply with any requirement of the Commission in connection with the
qualification of the Indenture under the Trust Indenture Act of 1939; or
(vi) add to our covenants or obligations under the Indenture or
surrender any right, power or option conferred by the Indenture on us.
Modification and amendment of the Indenture or the LYONs may be effected by
the Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount at maturity of the LYONs then
outstanding. However, without the consent of each Holder affected thereby, no
amendment may, among other things:
(i) reduce the principal amount at maturity, Restated Principal
Amount, Issue Price, Purchase Price, Change in Control Purchase Price or
Redemption Price with respect to any LYON, or extend the stated maturity of
any LYON or alter the manner or rate of accrual of Original Issue Discount
or interest, or make any LYON payable in money or securities other than
that stated in the LYON;
(ii) make any reduction in the principal amount at maturity of LYONs
whose Holders must consent to an amendment or any waiver under the
Indenture or modify the Indenture provisions relating to such amendments or
waivers;
(iii) make any change that adversely affects the right to convert any
LYON or the right to require us to purchase a LYON;
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(iv) impair the right to institute suit for the enforcement of any
payment with respect to, or conversion of, the LYONs; or
(v) modify the provisions of the Indenture relating to subordination
of the LYONs in a manner adverse to the Holders of the LYONs.
DISCHARGE OF THE INDENTURE
We may satisfy and discharge our obligations under the Indenture by
delivering to the Trustee for cancellation all outstanding LYONs or by
depositing with the Trustee, the Paying Agent or the Conversion Agent, if
applicable after the LYONs have become due and payable, whether at stated
maturity, or any Redemption Date, or any Purchase Date, or a Change in Control
Purchase Date, or upon conversion or otherwise, cash or common stock (as
applicable under the terms of the Indenture) sufficient to pay all of the
outstanding LYONs and paying all other sums payable under the Indenture by us.
LIMITATIONS OF CLAIMS IN BANKRUPTCY
If a bankruptcy proceeding is commenced in respect of the Company, the
claim of the Holder of a LYON is, under Title 11 of the United States Code,
limited to the Issue Price of the LYON plus that portion of the Original Issue
Discount that has a accrued from the date of issue to the commencement of the
proceeding. In addition, the Holders of the LYONs will be subordinated in right
of payment to Senior Indebtedness and effectively subordinated to the
indebtedness and other obligations of our subsidiaries. See "Risk Factors -- Our
Holding Company Structure Results in Substantial Structural Subordination and
May Affect Our Ability to Make Payments on LYONs."
INFORMATION CONCERNING THE TRUSTEE
U.S. Bank Trust National Association is the Trustee, Registrar, Paying
Agent and Conversion Agent under the Indenture. We may maintain deposit accounts
and conduct other banking transactions with the Trustee in the normal course of
business.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 305,000,000 shares. Those shares
consist of (1) 300,000,000 shares designated as common stock, $0.01 par value
per share, and (2) 5,000,000 shares designated as preferred stock, $0.01 par
value per share. As of September 29, 2000, 131,040,000 shares of common stock
(exclusive of treasury stock) were outstanding and no shares of preferred stock
were outstanding. On September 29, 2000, assuming the exercise of all
outstanding stock options, approximately 139,495,000 shares of common stock
(exclusive of treasury stock) would be outstanding.
COMMON STOCK
Holders of common stock are entitled to receive dividends declared by the
board of directors, out of funds legally available for the payment of dividends,
subject to the rights of holders of preferred stock. Recently, we have paid a
dividend of $0.08 per quarter. Each holder of common stock is entitled to one
vote per share. Upon any liquidation, dissolution or winding-up of our business,
the holders of common stock are entitled to share equally in all assets
available for distribution after payment of all liabilities and provision for
liquidation preference of shares of preferred stock then outstanding. The
holders of common stock have no preemptive rights and no rights to convert their
common stock into any other securities. There are also no redemption or sinking
fund provisions applicable to the common stock.
All outstanding shares of common stock are fully paid and nonassessable.
Our common stock is listed on the New York Stock Exchange under the symbol
"AGN." The transfer agent and registrar for the common stock is First Chicago
Trust Company of New York, a division of Equiserve.
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PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock in one or more
series and to fix the following terms of the preferred stock:
- designations, powers, preferences, privileges,
- relative participating, optional or special rights, and
- the qualifications, limitations or restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption and
liquidation preferences.
Any or all of these rights may be greater than the rights of the common
stock.
The board of directors, without stockholder approval, can issue preferred
stock with voting, conversion or other rights that could negatively affect the
voting power and other rights of the holders of common stock. Preferred stock
could thus be issued quickly with terms calculated to delay or prevent a change
in control of Allergan or make it more difficult to remove our management.
Additionally, the issuance of preferred stock may have the effect of decreasing
the market price of the common stock.
RIGHTS PLAN
On January 25, 2000 the Board of Directors adopted a Stockholder Rights
Plan.
In connection with the Rights Plan, the board of directors declared a
dividend of one preferred share purchase right (the "Rights") for each
outstanding share of common stock of Allergan outstanding at the close of
business on February 18, 2000 (the "Record Date"). Each Right entitles the
registered holder thereof, after the Rights become exercisable and until
February 18, 2010 (or the earlier redemption, exchange or termination of the
Rights), to purchase from us one one-hundredth ( 1/100) of a share of Series A
Junior Participating Preferred Stock, par value $.01 per share (the "Preferred
Shares"), at a price of $300.00 per one one-hundredth ( 1/100) of a Preferred
Share, subject to certain anti-dilution adjustments (the "Preferred Share
Purchase Price"). Until the earlier to occur of (i) ten (10) days following a
public announcement that a person or group of affiliated or associated persons
has acquired, or obtained the right to acquire, beneficial ownership of 15% or
more of the common stock (an "Acquiring Person") or (ii) ten (10) business days
(or such later date as may be determined by action of the board of directors
prior to such time as any person or group of affiliated persons becomes an
Acquiring Person) following the commencement or announcement of an intention to
make a tender offer or exchange offer the consummation of which would result in
the beneficial ownership by a person or group of 15% or more of the common stock
(the earlier of clauses (i) or (ii) being called the "Distribution Date"), the
Rights are evidenced, with respect to any of the common share certificates
outstanding as of the Record Date, by such common stock certificate. The Rights
will be transferred with and only with the common stock until the Distribution
Date or earlier redemption or expiration of the Rights. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the common stock
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights. The Rights will at no time have any
voting rights.
Each Preferred Share purchasable upon exercise of the Rights will be
entitled, when, as and if declared, to a minimum preferential quarterly dividend
payment of $1.00 per share but will be entitled to an aggregate dividend of 100
times the dividend, if any, declared per share of common stock. In the event of
liquidation, dissolution or winding up of Allergan, the holders of the Preferred
Shares will be entitled to a preferential liquidation payment of $100 per share
plus any accrued but unpaid dividends but will be entitled to an aggregate
payment of 100 times the payment made per share of common stock. Each Preferred
Share will have 100 votes and will vote together with the common stock. Finally,
in the event of any merger, consolidation or other transaction in which common
stock is exchanged, each Preferred Share will be entitled to receive 100 times
the amount received per share of common stock. Preferred Shares will
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not be redeemable. These Rights are protected by customary anti-dilution
provisions. Because of the nature of the Preferred Share's dividend, liquidation
and voting rights, the value of one one-hundredth of a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
share of common stock.
In the event that a Person becomes an Acquiring Person or if we were the
surviving corporation in a merger with an Acquiring Person or any affiliate or
associate of an Acquiring Person and the common stock was not changed or
exchanged, each holder of a Right, other than Rights that are or were acquired
or beneficially owned by the Acquiring Person (which Rights will thereafter be
void), will thereafter have the right to receive upon exercise that number of
shares of common stock having a market value of two times the then current
Preferred Share Purchase Price of one Right. In the event that, after a person
has become an Acquiring Person, we were acquired in a merger or other business
combination transaction or more than 50% of its assets or earning power were
sold, proper provision shall be made so that each holder of a Right shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction would have a market
value of two times the then current Purchase Price of one Right.
At any time after a Person becomes an Acquiring Person and prior to the
earlier of one of the events described in the last sentence in the previous
paragraph or the acquisition by such Acquiring Person of 50% or more of the then
outstanding Common Shares, the board of directors may cause us to exchange the
Rights (other than Rights owned by an Acquiring Person which have become void),
in whole or in part, for common stock at an exchange rate of one share of common
stock per Right (subject to adjustment).
The Rights may be redeemed in whole, but not in part, at a price of $.01
per Right (the "Preferred Share Redemption Price") by the board of directors at
any time prior to the time that an Acquiring Person has become such. The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the board of directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will
receive the Preferred Share Redemption Price.
The Rights will expire on February 18, 2010 (unless earlier redeemed,
exchanged or terminated). First Chicago Trust Company of New York is the Rights
Agent.
The Purchase Price payable, and the number of one one-hundredths of a
Preferred Share or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) upon the grant to holders of the
Preferred Shares of certain rights or warrants to subscribe for or purchase
Preferred Shares or convertible securities at less than the current market price
of the Preferred Shares or (iii) upon the distribution to holders of the
Preferred Shares of evidences of indebtedness, cash, securities or assets
(excluding regular periodic cash dividends at a rate not in excess of 125% of
the rate of the last regular periodic cash dividend theretofore paid or, in case
regular periodic cash dividends have not theretofore been paid, at a rate not in
excess of 50% of the average net income per share of Allergan for the four
quarters ended immediately prior to the payment of such dividend, or dividends
payable in Preferred Shares (which dividends will be subject to the adjustment
described in clause (i) of this paragraph)) or of subscription rights or
warrants (other than those referred to above).
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company beyond those as an existing stockholder,
including, without limitation, the right to vote or to receive dividends.
Any of the provisions of the Rights Agreement dated as of January 25, 2000
between us and the Rights Agent (the "Rights Agreement") may be amended by our
board of directors for so long as the Rights are then redeemable, and after the
Rights are no longer redeemable, we may amend or supplement the Rights Agreement
in any manner that does not adversely affect the interests of the holder of the
Rights.
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<PAGE> 30
One Right has been distributed to our stockholders for each share of common
stock owned of record by them on February 18, 2000. As long as the Rights are
attached to the common stock, we will issue one Right with each new share of
common stock so that all such shares will have attached Rights. We have reserved
1,500,000 Preferred Shares initially for issuance upon exercise of the Rights.
The rights are designed to assure that all of our stockholders receive fair
and equal treatment in the event of any proposed takeover of us and to guard
against partial tender offers, open market accumulations and other abusive
tactics to gain control of us without paying all stockholders a control premium.
The Rights will cause substantial dilution to a person or group that acquires
15% or more of our stock on terms not approved by our board of directors. The
Rights should not interfere with any merger or other business combination
approved by the board of directors at any time prior to the first date that a
Person or group has become an Acquiring Person.
ANTITAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN PROVISIONS OF ALLERGAN'S
CHARTER DOCUMENTS
Certain provisions of Delaware law and our certificate of incorporation may
also make more difficult the acquisition of us by tender offer, a proxy contest
or otherwise and the removal of officers and directors.
Delaware law prohibits a publicly-held Delaware corporation from engaging
in a business combination with an interested stockholder unless the business
combination is approved in a specified manner. Generally, an interested
stockholder is a person who, together with its affiliates and associates, owns
15% or more of the corporation's voting stock or owned 15% of such voting stock
within three years before the proposed business combination, or is affiliated
with the corporation.
Our certificate of incorporation provides that the Allergan board of
directors be divided into three classes, with staggered three-year terms. The
classification of our board makes it more difficult for our stockholders to
replace our board and for another party to obtain control of us by replacing the
board. Since our board has the power to retain and discharge our officers, these
provisions could also make it more difficult for stockholders or another party
to effect a change in management.
Our certificate of incorporation provides that for so long as we have a
class of stock registered under the Exchange Act, stockholder action can be
taken only at an annual or special meeting of stockholders and may not be taken
by written consent.
Our certificate of incorporation requires the affirmative vote of the
holders of at least two-thirds of our outstanding voting stock to amend the
provisions described above.
FEDERAL INCOME TAX CONSIDERATIONS
This is a summary of certain United States federal income tax
considerations relevant to holders of LYONs. This summary is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations,
Internal Revenue Service rulings and judicial decisions now in effect, all of
which are subject to change (possibly with retroactive effect) or different
interpretations. There can be no assurance that the Internal Revenue Service
will not challenge one or more of the conclusions described herein, and the
Company has not obtained, nor does the Company intend to obtain, a ruling from
the Internal Revenue Service with respect to the United States federal income
tax consequences of acquiring or holding LYONs.
This summary does not purport to deal with all aspects of United States
federal income taxation that may be relevant to a holder (for example, persons
subject to the alternative minimum tax provisions of the Code). Also, it is not
intended to be wholly applicable to all categories of investors, such as
insurance companies, tax-exempt organizations, mutual funds, retirement plans,
financial institutions, dealers in securities or foreign currency, persons that
hold the LYONs as part of a "straddle" or as a "hedge" against currency risk or
in connection with a conversion transaction, persons that have functional
currency other than the United States dollar and investors in pass-through
entities.
27
<PAGE> 31
This summary also does not discuss the tax consequences arising under the
laws of any state, local or foreign jurisdiction. In addition, this summary is
limited to original purchasers of LYONs who acquire LYONs at their issue price
within the meaning of Section 1273 of the Code and who will hold the LYONs and
common stock into which the LYONs may be converted as "capital assets" within
the meaning of Section 1221 of the Code.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP, CONVERSION OR OTHER
DISPOSITION OF LYONS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES AND THE CONSEQUENCES ARISING UNDER THE
LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
The Company has been advised by its counsel, Gibson, Dunn & Crutcher LLP,
that in such counsel's opinion the LYONs will be treated as indebtedness for
United States federal income tax purposes. Counsel has further advised the
Company that it is counsel's opinion that, while the following does not purport
to discuss all tax matters relating to the LYONs, based upon the LYONs being
treated as indebtedness, the following are the material federal income tax
consequences of the LYONs, subject to the qualifications set forth above.
As used in this discussion, the term "U.S. Holder" means a holder that, for
United States federal income tax purposes, is (i) a citizen or resident of the
United States, (ii) a corporation, partnership, or other entity created or
organized in or under the laws of the United States or of any State, (iii) an
estate the income of which is subject to United States federal income tax,
regardless of its source, or (iv) a trust if (a) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (b) one or more United States persons have the authority to control
all substantial decisions of the trust. The term "Non-U.S. Holder" means a
beneficial owner that is, for United States federal income tax purposes, not a
U.S. Holder.
ORIGINAL ISSUE DISCOUNT
The LYONs were issued at a substantial discount from their principal amount
at maturity. For United States federal income tax purposes, the difference
between the issue price (the initial price at which a substantial number of the
LYONs are sold for money) and the stated principal amount at maturity of each
LYON constitutes Original Issue Discount. U.S. Holders of the LYONs will be
required to include Original Issue Discount in income periodically over the term
of the LYONs before receipt of the cash or other payment attributable to such
income.
A U.S. Holder of a LYON must include in gross income for United States
federal income tax purposes the sum of the daily portions of Original Issue
Discount with respect to the LYON for each day during the taxable year or
portion of a taxable year on which such holder holds the LYON ("Accrued Original
Issue Discount"). The daily portion is determined by allocating to each day of
an accrual period a pro rata portion of an amount equal to the adjusted issue
price of the LYON at the beginning of the accrual period multiplied by the yield
to maturity of the LYON. The accrual period of a LYON may be of any length and
may vary in length over the term of the LYON, provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
occurs at the end of an accrual period or on the first day of an accrual period.
The adjusted issue price of the LYON at the start of any accrual period is the
issue price of the LYON increased by the Accrued Original Issue Discount for
each prior accrual period. Under these rules, U.S. Holders will have to include
in gross income increasingly greater amounts of Original Issue Discount in each
successive accrual period. Any amount included in income as Original Issue
Discount will increase a U.S. Holder's tax basis in the LYON.
We intend to treat the possibility of (i) an optional redemption on a
Change in Control, as described under "Description of LYONs -- Change of Control
Permits Purchase of LYONs at the Option of the Holder," and (ii) the additional
interest that would accrue on the LYONs as a result of our failure to cause the
LYONs to be registered under the Securities Act as described under "Description
of the LYONs -- Registration Rights" as remote under applicable Treasury
regulations. We do not intend to treat the possibilities described in (i) or
(ii) above as (x) affecting the determination of the yield to maturity of the
LYONs or (y) giving rise to any additional accrual of Original Issue Discount or
28
<PAGE> 32
recognition of ordinary income upon the redemption, sale or exchange of a LYON.
In the unlikely event that the interest rate on the LYONs is increased, then
such increased interest may be treated as increasing the amount of Original
Issue Discount on the LYONs includable by a U.S. Holder.
We will be required to furnish annually to the Internal Revenue Service and
to certain noncorporate U.S. Holders information regarding the amount of the
Original Issue Discount attributable to that year. For this purpose, we will use
a six-month accrual period which ends on the day in each calendar year
corresponding to the maturity day of the LYON or the date six months before such
maturity date.
DISPOSITION OR CONVERSION
Except as described below, gain or loss upon a sale or other disposition of
a LYON will generally be capital gain or loss (which will be long term if the
LYON is held for more than one year). Net capital gains of a non-corporate U.S.
Holder are, under certain circumstances, taxed at lower rates than items of
ordinary income. In the case of a non-corporate U.S. Holder, long-term capital
gains with respect to property held for more than one year are taxed at a
maximum 20% federal tax rate. Net capital gains of a corporate U.S. Holder are
taxed at the same rates as ordinary income, with a maximum federal rate of 35%.
The deductibility of capital losses is subject to limitations.
A U.S. Holder's conversion of a LYON into common stock is generally not a
taxable event (except with respect to cash received in lieu of a fractional
share which is taxable as ordinary interest income). The U.S. Holder's
obligation to include in gross income the daily portions of Original Issue
Discount with respect to a LYON will terminate prospectively on the date of
conversion. The U.S. Holder's basis in the common stock received on conversion
of a LYON will be the same as the U.S. Holder's basis in the LYON at the time of
conversion (exclusive of any tax basis allocable to a fractional share). The
holding period for the common stock received on conversion will include the
holding period of the converted LYON (assuming each is held as a capital asset)
except that the U.S. Holder's holding period for common stock attributable to
Accrued Original Issue Discount may commence on the day following the date of
conversion.
If a U.S. Holder elects to exercise its option to tender a LYON to the
Company on a Purchase Date and the Company issues common stock in satisfaction
of all or part of the Purchase Price, the exchange of the LYON for common stock
should qualify as a reorganization or an otherwise nontaxable transaction for
United States federal income tax purposes.
If the Purchase Price is paid solely in common stock, neither gain nor loss
would generally be recognized by the U.S. Holder, except as described below with
respect to a fractional share.
If the Purchase Price is paid in a combination of shares of common stock
and cash (other than cash received in lieu of a fractional share), gain (but not
loss) realized by the U.S. Holder would be recognized, but only to the extent
such gain does not exceed such cash.
A U.S. Holder's tax basis in the common stock received in the exchange will
be the same as the U.S. Holder's tax basis in the LYON tendered to us in
exchange for the common stock (exclusive of any tax basis allocable to a
fractional share interest as described below). However, this tax basis will be
decreased by the amount of cash (other than cash received in lieu of a
fractional share), if any, received in exchange and increased by the amount of
any gain recognized by the U.S. Holder on the exchange (other than gain with
respect to a fractional share).
The holding period for common stock received in the exchange will include
the holding period for the LYON tendered to us in exchange for the common stock
(assuming each is held as a capital asset). However, the holding period for
common stock attributable to Accrued Original Issue Discount may commence on the
day following the Purchase Date.
Cash received in lieu of a fractional share of common stock upon conversion
of a LYON or upon a put of a LYON to the Company on a Purchase Date should be
treated as a payment in exchange for the fractional share. Accordingly, if the
common stock is a capital asset in the hands of the U.S. Holder, the
29
<PAGE> 33
receipt of cash in lieu of a fractional share of common stock should generally
result in capital gain or loss, if any, measured by the difference between the
cash received for the fractional share and the holder's basis in the fractional
share.
If a U.S. Holder elects to exercise its option to tender a LYON to us on a
Purchase Date or a Change in Control Purchase Date and we deliver cash in
satisfaction of the purchase price, the U.S. Holder would recognize gain or
loss, measured by the difference between the amount of cash transferred by us to
the U.S. Holder and the U.S. Holder's basis in the tendered LYON. Gain or loss
recognized by the U.S. Holder would generally be capital gain or loss.
If a U.S. Holder sells a LYON in the market, it will be a taxable sale with
the same results to the U.S. Holder as a tender to us with a payment in cash.
Gain or loss upon a sale or other disposition of the common stock received
upon conversion of a LYON or in satisfaction of the Purchase Price of a LYON put
to us generally will be capital gain or loss if the common stock is held as a
capital asset (which gain or loss will be long-term if the holding period for
such common stock is more than one year). In the case of a non-corporate U.S.
Holder, long-term capital gains with respect to property held for more than one
year are taxed at a maximum 20% federal tax rate. Net capital gains of a
corporate U.S. Holder are taxed at the same rates as ordinary income, with a
maximum federal tax rate of 35%. The deductibility of capital losses is subject
to limitations.
CONSTRUCTIVE DIVIDEND
If at any time we make a distribution of property to our stockholders that
would be taxable to the stockholders as a dividend for United States federal
income tax purposes and, in accordance with the anti-dilution provisions of the
LYONs, the conversion rate of the LYONs is increased, such increase may be
deemed to be the payment of a taxable dividend to holders of the LYONs.
For example, an increase in the conversion rate in the event of
distributions of evidences of indebtedness or assets of Allergan or an increase
in the event of an Extraordinary Cash Dividend will generally result in deemed
dividend treatment to holders of the LYONs, but generally an increase in the
event of stock dividends or the distribution of rights to subscribe for common
stock will not. See "Description of LYONS -- Conversion Rights."
TAX EVENT
The modification of the terms of the LYONs by us upon a Tax Event as
described in "Description of LYONs -- Optional Conversion to Semi-annual Coupon
Note upon Tax Event," could possibly alter the timing of income recognition by
the holders with respect to the semi-annual payments of interest due after the
Option Exercise Date.
NON-U.S. HOLDERS
The payment of principal (including any Original Issue Discount included
therein), or interest if the LYONs are converted to semi-annual coupon notes
following the occurrence of a Tax Event, on a LYON by us or any paying agent to
a Non-U.S. Holder will not be subject to United States federal withholding tax,
provided that the Non-U.S. Holder:
(i) does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Allergan entitled to vote;
(ii) is not a controlled foreign corporation that is related to us
within the meaning of the Code; and
(iii) either (A) the Non-U.S. Holder certifies to the applicable payor
or its agent, under penalties of perjury, that it is not a U.S. Holder and
provides its name and address on an IRS Form W-8 (or a suitable substitute
form), or (B) a securities clearing organization, bank or other financial
institution, that holds customers' securities in the ordinary course of its
trade or business
30
<PAGE> 34
(a "financial institution") and holds the LYON, certifies under penalties
of perjury that such holder is not a U.S. Holder and IRS Form W-8 (or
suitable substitute form) has been received from the beneficial owner by it
or by a financial institution between it and the beneficial owner and
furnishes the payor with a copy thereof.
Dividends, if any, paid to a Non-U.S. Holder on the common stock (and,
after December 31, 2000, any deemed dividends resulting from an adjustment to
the Conversion Rate (see "Adjustment of Conversion Rate" above)) generally will
be subject to a 30% United States federal withholding tax, subject to reduction
if the Non-U.S. Holder is eligible for the benefits of an applicable income tax
treaty. Currently, for purposes of determining whether tax is to be withheld at
the 30% rate or at a reduced treaty rate, we will ordinarily presume that
dividends paid to an address in a foreign country are paid to a resident of such
country absent knowledge that such presumption is not warranted. Under Treasury
regulations effective for payments after December 31, 2000, Non-U.S. Holders
will be required to satisfy certain applicable certification requirements to
claim treaty benefits.
Except to the extent otherwise provided under an applicable tax treaty, a
Non-U.S. Holder generally will be taxed in the same manner as a U.S. Holder with
respect to Original Issue Discount, interest or dividends on a LYON or common
stock if such income is effectively connected with a U.S. trade or business.
Effectively connected income received by a corporate Non-U.S. Holder may also,
under certain circumstances, be subject to an additional "branch profits tax" at
a 30% rate (or, if applicable, a lower treaty rate), subject to certain
adjustments. Such effectively connected income will not be subject to
withholding tax if the Non-U.S. Holder delivers the appropriate form (currently
on an IRS Form 4224 and, beginning January 1, 2001, a Form W-8ECI) to the payor.
A Non-U.S. Holder generally will not be subject to the United States
federal income tax on gain realized on the sale, exchange or redemption of a
LYON, or the sale or exchange of common stock, unless:
(i) the Non-U.S. Holder is an individual present in the United States
for 183 days or more in the year of such sale, exchange or certain other
conditions are met;
(ii) the gain is effectively connected with the conduct of a U.S.
trade or business by such Non-U.S. Holder; or
(iii) in the case of the disposition of a LYON or the common stock, we
are a United States real property holding corporation at any time during
the shorter of the five-year period ending on the date of the disposition
or the period during which the Non-U.S. Holder held the LYON or common
stock. Allergan does not believe it is or is likely to become a United
States real property holding corporation.
A LYON held by an individual who at the time of death is not a citizen or
resident of the United States (as specially defined for United States federal
estate tax purposes) will not be subject to United States federal estate tax if
the individual did not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Allergan and, at the time of
the individual's death, payments with respect to such note would not have been
effectively connected with the conduct by such individual of a trade or business
in the United States. Common stock held by an individual who at the time of
death is not a citizen or resident of the United States (as specially defined
for United States federal estate tax purposes) will be included in such
individual's estate for United States federal estate tax purposes, unless an
applicable estate tax treaty otherwise applies.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting will apply to payments of interest (including
accruals of Original Issue Discount) or dividends, if any, made by us on, or the
proceeds of the sale or other disposition of, the LYONs or shares of common
stock with respect to certain non-corporate U.S. Holders, and backup withholding
at a rate of 31% may apply unless the recipient U.S. Holder of such payment
supplies a taxpayer identification number, certified under penalties of perjury,
as well as certain other information or otherwise establishes an exemption from
backup withholding. Any amount withheld under the backup
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<PAGE> 35
withholding rules will be allowable as a credit against the U.S. Holder's United
States federal income tax, provided that the required information is provided to
the IRS.
Under current Treasury regulations, backup withholding and information
reporting will not apply to payments of principal, including cash payments in
respect of Original Issue Discount, or interest, on a LYON by us or any agent
thereof to a Non-U.S. Holder if the Non-U.S. Holder certifies as to its Non-
U.S. Holder status under penalties of perjury or otherwise establishes an
exemption (provided that neither we nor our agent has actual knowledge that the
holder is a U.S. person or that the conditions of any other exemptions are not
in fact satisfied). We must report annually to the Internal Revenue Service and
to each Non-U.S. Holder that the amount of any dividends paid to, and the tax
withholding with respect to, such holder, regardless of whether any tax was
actually withheld. Copies of these information returns may also be made
available under the provisions of a specific treaty or agreement to the tax
authorities of the country in which the Non-U.S. Holder resides.
The payment of the proceeds in the disposition of LYONs or shares of common
stock to or through the United States office of a United States or foreign
broker will be subject to information reporting and backup withholding unless
the Non-U.S. Holder provides the certification described above or otherwise
establishes an exemption. The proceeds of the disposition effected outside the
United States by a Non-U.S. Holder of LYONs or shares of common stock to or
through a foreign office of a broker will not be subject to backup withholding
or information reporting. However, if such broker is a U.S. person, a controlled
foreign corporation of United States tax purposes, a foreign person, 50% or more
of whose gross income from all sources for certain periods is from activities
that are effectively connected with a United States trade or business, or, in
the case of payments made after December 31, 2000, a foreign partnership with
certain connections to the United States, information reporting requirements
will apply unless such broker has documentary evidence in its files of the
holder's Non-U.S. status and has no actual knowledge to the contrary or unless
the holder otherwise establishes an exemption. Amounts withheld under the backup
withholding rules do not constitute a separate United States federal income tax.
Rather, any amount withheld under the backup withholding rules will be refunded
or is allowable as a credit against the Non-U.S. Holder's federal income tax
liability, if any, provided that the required information or appropriate claim
for refund is provided to the Internal Revenue Service.
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<PAGE> 36
SELLING SECURITYHOLDERS
The LYONs were originally issued by us and sold by Merrill Lynch, Pierce,
Fenner & Smith Incorporated (the "Initial Purchaser") in a transaction exempt
from the registration requirements of the Securities Act to persons reasonably
believed by such Initial Purchaser to be "qualified institutional buyers" (as
defined by Rule 144A under the Securities Act). The Selling Securityholders
(which term includes their transferees, pledges, donees or successors) may from
time to time offer and sell pursuant to this prospectus any and all of the LYONs
and common stock.
Set forth below are the names of each Selling Securityholder, the principal
amount of LYONs that may be offered by such Selling Securityholder pursuant to
this prospectus and the number of shares of common stock into which such LYONs
are convertible. Unless set forth below, none of the Selling Securityholders has
had a material relationship with us or any of our predecessors or affiliates
within the past three years.
The following table sets forth certain information received by us on or
prior to December 7, 2000. However, any or all of the LYONs or common stock
listed below may be offered for sale pursuant to this prospectus by the Selling
Securityholders from time to time. Accordingly, no estimate can be given as to
the amounts of LYONs or common stock that will be held by the Selling
Securityholders upon consummation of any such sales. In addition, the Selling
Securityholders identified below may have sold, transferred, or otherwise
disposed of all or a portion of their LYONs since the date on which the
information regarding their LYONs was provided, in transactions exempt from the
registration requirements of the Securities Act.
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL COMMON
AMOUNT OF STOCK
LYONS AT PERCENTAGE OF OWNED COMMON STOCK
MATURITY THAT LYONS PRIOR TO REGISTERED
NAME MAY BE SOLD OUTSTANDING CONVERSION HEREBY(1)
---- ------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
1976 Distribution Trust F/B/O A.R.
Lauder/Zinterkhoffer...................... $ 32,000 * -- 184
1976 Distribution Trust F/B/O Jene A.
Lauder.................................... 32,000 * -- 184
AIG Soundshore Opportunity Holding Fund
Ltd. ..................................... 4,250,000 * -- 24,486
AIG Soundshore Strategic Holding Fund
Ltd. ..................................... 4,250,000 * -- 24,486
AIG/National Union Fire Insurance........... 2,035,000 * -- 11,725
Aloha Airlines Non-Pilots Pension Trust..... 375,000 * -- 2,161
Aloha Pilots Retirement Trust............... 210,000 * -- 1,210
American Fidelity Assurance Company......... 200,000 * -- 1,152
American Motorist Insurance Company......... 1,309,000 * -- 7,542
Amerisure Companies/Michigan Mutual
Insurance Co.............................. 550,000 * -- 3,169
Arapahoe County Colorado.................... 111,000 * -- 640
Arpeggo Fund, LP............................ 4,200,000 * -- 24,198
Associated Electric & Gas Insurance Services
Limited................................... 1,000,000 * -- 5,762
Attorney's Title Insurance Fund, Inc........ 500,000 * -- 2,881
Aventis Pension Master Trust................ 385,000 * -- 2,218
Banc of America Securities LLC.............. 500,000 * -- 2,881
Bank of Austria Cayman Island, Ltd.......... 2,500,000 * -- 14,404
Bay County PERS............................. 455,000 * -- 2,621
Blue Cross Blue Shield of Florida........... 2,000,000 * -- 11,523
Boilermaker -- Blacksmith Pension Trust..... 2,275,000 * -- 13,107
British Virgin Islands Social Security
Board..................................... 84,000 * -- 484
BS Debt Income Fund -- Class A.............. 25,000 * -- 144
C & H Sugar Company, Inc.................... 575,000 * -- 3,313
</TABLE>
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<PAGE> 37
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL COMMON
AMOUNT OF STOCK
LYONS AT PERCENTAGE OF OWNED COMMON STOCK
MATURITY THAT LYONS PRIOR TO REGISTERED
NAME MAY BE SOLD OUTSTANDING CONVERSION HEREBY(1)
---- ------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
CA State Automobile Assn Inter-Insurance.... $ 1,100,000 * -- 6,338
CALAMOS(R) Investment Trust................. 3,690,000 * -- 21,260
Income Fund -- CALAMOS(R) Investment Trust.. 2,370,000 * -- 13,655
CALAMOS(R) Advisors Trust................... 150,000 * -- 864
CALAMOS(R) Investment Trust................. 500,000 * -- 2,881
California State Automobile Inter
Insurance................................. 390,000 * -- 2,247
California State Automobile Retirement
Pension................................... 90,000 * -- 519
Capital Care, Inc........................... 60,000 * -- 346
CareFirst of Maryland, Inc.................. 275,000 * -- 1,584
Charitable Convertible Securities Fund...... 380,000 * -- 2,189
Charitable Income Fund...................... 150,000 * -- 864
Chrysler Corporation Master Retirement
Trust..................................... 2,960,000 * -- 17,054
City of Albany Pension Plan................. 215,000 * -- 1,239
City of Birmingham Retirement & Relief
System.................................... 1,800,000 * -- 10,371
City of Knoxville Pension System............ 520,000 * -- 2,996
City University of New York................. 271,000 * -- 17,285
Clinton Riverside Convertible Portfolio
Limited................................... 3,000,000 * -- 17,285
Continental Assurance Company............... 1,400,000 * -- 8,066
Continental Casualty Company................ 7,600,000 1.16 -- 43,787
Daimler Chrysler Corporation Emp. #1 Pension
Plan DTD 4/1/89........................... 5,665,000 * -- 32,639
DeAm Convertible Arbitrage Fund............. 3,500,000 * -- 20,165
Delta Air Lines Master Trust (c/o Oaktree
Capital Management, LLC).................. 1,065,000 * -- 6,136
Delta Airlines Master Trust................. 4,280,000 * -- 24,659
Dorinco Reinsurance Company................. 1,500,000 * -- 8,642
EB Convertible Securities Fund.............. 800,000 * -- 4,609
Elf Aquitaine............................... 400,000 * -- 2,305
Field Foundation of Illinois................ 40,000 * -- 230
Finance Factors Limited..................... 450,000 * -- 2,593
First Republic Bank......................... 175,000 * -- 1,008
Franklin and Marshall College............... 375,000 * -- 2,161
Free State Health Plan, Inc................. 80,000 * -- 461
GE Pension Trust............................ 2,800,000 * -- 16,132
Genesee County Employees' Retirement
System.................................... 475,000 * -- 2,737
Grady Hospital Foundation................... 243,000 * -- 1,400
Greek Catholic Union........................ 35,000 * -- 202
Greek Catholic Union II..................... 30,000 * -- 173
Group Hospitalization and Medical Services,
Inc....................................... 300,000 * -- 1,728
Gryphon Domestic III, LLC................... 12,200,000 1.86 -- 70,290
H.K. Porter Company, Inc.................... 60,000 * -- 346
Hawaiian Airlines Employees Pension
Plan -- IAM............................... 170,000 * -- 979
Hawaiian Airlines Pension Plan for Salaried
Employees................................. 35,000 * -- 202
Hawaiian Airlines Pilots Retirement Plan.... 330,000 * -- 1,901
HealthNow New York, Inc..................... 175,000 * -- 1,008
Independence Blue Cross..................... 235,000 * -- 1,354
Investcorp-SAM Fund Limited................. 13,000,000 1.98 -- 74,900
</TABLE>
34
<PAGE> 38
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL COMMON
AMOUNT OF STOCK
LYONS AT PERCENTAGE OF OWNED COMMON STOCK
MATURITY THAT LYONS PRIOR TO REGISTERED
NAME MAY BE SOLD OUTSTANDING CONVERSION HEREBY(1)
---- ------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
Island Insurance Convertible Account........ $ 310,000 * -- 1,786
Islands Holdings............................ 125,000 * -- 720
Jackson County Employees' Retirement
System.................................... 375,000 * -- 2,161
Kerr McGee Corporation...................... 1,750,000 * -- 10,083
Kettering Medical Center Funded Depreciation
Account................................... 145,000 * -- 835
Key Trust Convertible Securities Fund....... 160,000 * -- 922
Key Trust Fixed Income Fund................. 210,000 * -- 1,210
Knoxville Utilities Board Retirement
System.................................... 335,000 * -- 1,930
Lancer Securities Cayman.................... 1,400,000 * -- 8,066
Local Universities Support Corporation...... 108,000 * -- 622
Louisiana Workers' Compensation
Corporation............................... 325,000 * -- 1,872
Lydian Overseas Partners Master Fund........ 13,000,000 1.98 -- 74,900
Macomb County Employees' Retirement
System.................................... 325,000 * -- 1,872
Merrill Lynch Insurance Group............... 569,000 * -- 3,278
Morgan Stanley & Co......................... 15,000,000 2.28 -- 86,423
Motion Picture Industry Health
Plan -- Active Member Fund................ 345,000 * -- 1,988
Motion Picture Industry Health
Plan -- Retiree Member Fund............... 175,000 * -- 1,008
Nabisco Holdings............................ 67,000 * -- 386
Nalco Chemical Company...................... 750,000 * -- 4,321
Nashville Electric Service.................. 325,000 * -- 1,872
New Orleans Firefighters Pension/Relief..... 252,000 * -- 1,452
New York Life Insurance and Annuity
Corporation............................... 1,250,000 * -- 7,202
New York Life Insurance Company............. 11,250,000 1.71 -- 64,817
Norcal Mutual Insurance Company............. 400,000 * -- 2,305
Occidental Petroleum........................ 433,000 * -- 2,495
OCM Convertible Trust....................... 1,355,000 * -- 7,807
Ohio Bureau of Workers Compensation......... 302,000 * -- 1,740
Oxford, Lord, Abbett & Co................... 2,750,000 * -- 15,844
Pacific Specialty (Convertibles)............ 850,000 * -- 4,897
Palladin Securities......................... 1,050,000 * -- 6,050
Parker/Key Convertible Securities Fund...... 180,000 * -- 1,037
Partner Reinsurance Company Ltd............. 590,000 * -- 3,399
Penn Treaty Network American Insurance
Company................................... 460,000 * -- 2,650
PGEP III LLC................................ 1,050,000 * -- 6,050
Physicians' Reciprocal Insurers Account
#7........................................ 2,000,000 * -- 11,523
PIMCO Convertible Fund...................... 5,900,000 * -- 33,993
Port Authority of Allegheny County
Retirement and Disability Allowance Plan
for the Employees Represented by Local 85
of the Amalgamated Transit Union.......... 2,520,000 * -- 14,519
Potlatch-First Trust Company of St. Paul.... 300,000 * -- 1,728
PRIM Board.................................. 6,050,000 * -- 34,857
Queens Health Plan.......................... 125,000 * -- 720
Radian Guaranty, Inc........................ 2,500,000 * -- 14,404
</TABLE>
35
<PAGE> 39
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL COMMON
AMOUNT OF STOCK
LYONS AT PERCENTAGE OF OWNED COMMON STOCK
MATURITY THAT LYONS PRIOR TO REGISTERED
NAME MAY BE SOLD OUTSTANDING CONVERSION HEREBY(1)
---- ------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
Ramius Capital Group Holdings, Ltd.......... $ 700,000 * -- 4,033
Raytheon Master Pension Trust............... 876,000 * -- 5,047
RCG Latitude Master Fund.................... 800,000 * -- 4,609
Ret Pension Plan of the CA State Automob.... 350,000 * -- 2,017
Rhapsody Fund LP............................ 14,600,000 2.22 -- 84,118
RJR Reynolds................................ 220,000 * -- 1,268
Shell Pension Trust......................... 831,000 * -- 4,788
Southern Farm Bureau Life Insurance......... 3,350,000 * -- 19,301
SPT......................................... 1,830,000 * -- 10,544
Standard Insurance Company.................. 450,000 * -- 2,593
Starvest Combined Portfolio................. 2,475,000 * -- 14,260
Starvest Managed Portfolio.................. 200,000 * -- 1,152
State Employees' Retirement Fund of the
State of Delaware......................... 1,495,000 * -- 8,613
State of Connecticut Combined Investment
Funds..................................... 3,290,000 * -- 18,955
State of Maryland Retirement System......... 5,923,000 * -- 34,125
State of Mississippi Health Care Trust
Fund...................................... 1,600,000 * -- 9,218
State of Oregon/SAIF Corporation............ 14,750,000 2.24 -- 84,982
Teacher's Insurance and Annuity
Association............................... 7,000,000 1.06 -- 40,331
The Cockrell Foundation..................... 125,000 * -- 720
The Dow Chemical Company Employees'
Retirement Plan........................... 4,550,000 * -- 26,215
The Fondren Foundation...................... 145,000 * -- 835
The Grable Foundation....................... 216,000 * -- 1,244
UBS AG, London Branch....................... 11,000,000 1.67 -- 63,377
UBS O'Connor LLC f/b/o UBS Global Equity
Arbitrage Master Limited.................. 7,500,000 1.14 -- 43,211
UBS Warburg LLC............................. 54,650,000 8.31 -- 314,866
Unifi, Inc. Profit Sharing Plan and Trust... 230,000 * -- 1,325
United Food and Commercial Workers Local
1262 and Employers Pension Fund........... 1,140,000 * -- 6,568
University of South Florida................. 550,000 * -- 3,169
University of South Florida Foundation...... 80,000 * -- 461
Van Kampen Harbor Fund...................... 13,700,000 2.08 2,635,165(2) 78,933
Van Waters & Rogers, Inc. Retirement Plan... 650,000 * -- 3,745
Vanguard Convertible Securities Fund,
Inc....................................... 3,725,000 * -- 21,462
Victory Convertible Securities Fund......... 580,000 * -- 3,342
Victory Invest Quality Bond Fund............ 90,000 * -- 519
All other Holders of LYONs or future
transferees,
pledges, donees or successors of any such
Holders(3)(4)............................. 317,222,000 48.3 -- 1,827,675
------------ ----- --------- ---------
Total..................................... $657,451,000 100.0 2,635,165 3,787,904
============ ===== ========= =========
</TABLE>
-------------------------
* Less than 1%
(1) Assumes conversion of all of the Holder's LYONs at a conversion rate of
5.7615 shares of common stock per $1,000 principal amount at maturity of the
LYONs. However, this conversion rate will be subject to adjustment as
described under "Description of the LYONs -- Conversion Rights." As a
36
<PAGE> 40
result, the amount of common stock issuable upon conversion of the LYONs may
increase or decrease in the future.
(2) Van Kampen Asset Management, Inc. is the investment advisor to the Van
Kampen Harbor Fund and has discretionary authority over its portfolio. Van
Kampen Asset Management, Inc. is also the investment advisor to a number of
other funds. Those funds hold an aggregate amount of 2,635,165 shares of
common stock of the Company.
(3) Information about other Selling Securityholders will be set forth in
prospectus supplements, if required.
(4) Assumes that any other Holders of LYONs, or any future transferees,
pledgees, donees or successors of or from any such other Holders of LYONs,
do not beneficially own any common stock other than the common stock
issuable upon conversion of the LYONs at the initial conversion rate.
The preceding table has been prepared based upon information furnished to
us by the Selling Securityholders in the table. From time to time, additional
information concerning ownership of the LYONs and common stock may rest with
certain Holders thereof not named in the preceding table, with whom we believe
we have no affiliation.
The Selling Securityholders listed in the above table may have sold or
transferred, in transactions exempt from the registration requirements of the
Securities Act, some or all of their LYONs since the date on which the
information is presented in the above table. Information about the Selling
Securityholders may change from over time. Any changed information will be set
forth in prospectus supplements.
Because the Selling Securityholders may offer all or some of their LYONs or
the underlying common stock from time to time, we can not estimate the amount of
the LYONs or the underlying common stock that will be held by the Selling
Securityholders upon the termination of any particular offering. See "Plan of
Distribution."
PLAN OF DISTRIBUTION
The LYONs and the common stock are being registered to permit public
secondary trading of such securities by the holders thereof from time to time
after the date of this prospectus. We have agreed, among other things, to bear
all expenses (other than underwriting discounts and selling commissions) in
connection with the registration and sale of the LYONs and the common stock
covered by this prospectus.
We will not receive any of the proceeds from the offering of LYONs or the
common stock by the Selling Securityholders. We have been advised by the Selling
Securityholders that the Selling Securityholders may sell all or a portion of
the LYONS and common stock beneficially owned by them and offered hereby from
time to time on any exchange on which the securities are listed on terms to be
determined at the times of such sales. The Selling Securityholders may also make
private sales directly or through a broker or brokers. Alternatively, any of the
Selling Securityholders may from time to time offer the LYONs or the common
stock beneficially owned by them through underwriters, dealers or agents, who
may receive compensation in the form of underwriting discounts, commissions or
concessions from the Selling Securityholders and the purchasers of the LYONs and
the common stock for whom they may act as agent. The aggregate proceeds to the
Selling Securityholders from the sale of the LYONs or common stock offering by
them hereby will be the purchase price of such LYONs or common stock less
discounts and commissions, if any.
The LYONs and common stock may be sold from time to time in one or more
transactions at fixed offering prices, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. Such prices will
be determined by the Holders of such securities or by agreement between such
Holders and underwriters or dealers who may receive fees or commissions in
connection therewith.
37
<PAGE> 41
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the LYONs and the underlying common stock or
otherwise, the Selling Securityholders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short sales of the
LYONs and the underlying common stock in the course of hedging their positions.
The Selling Securityholders may also sell the LYONs and underlying common stock
short and deliver LYONs and the underlying common stock to close out short
positions, or loan or pledge LYONs and the underlying common stock to
broker-dealers that in turn may sell the LYONs and the underlying common stock.
To our knowledge, there are currently no plans, arrangements or
understandings between any Selling Securityholders and any underwriter,
broker-dealer or agent regarding the sale of the LYONs and the underlying common
stock by the Selling Securityholders. Selling Securityholders may not sell any
or all of the LYONs and the underlying common stock offered by them pursuant to
this prospectus. In addition, we cannot assure you that any such Selling
Securityholder will not transfer, devise or gift the LYONs and the underlying
common stock by other means not described in this prospectus. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A
rather than pursuant to this prospectus.
The outstanding common stock is listed for trading on the New York Stock
Exchange.
The Selling Securityholders and any broker and any broker-dealers, agents
or underwriters that participate with the Selling Securityholders in the
distribution of the LYONs or the common stock may be deemed to be "underwriters"
within the meaning of the Securities Act, in which event any commission received
by such broker-dealers, agents or underwriters and any profit on the resale of
the LYONs or the common stock purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The LYONs were issued and sold on November 1, 2000 in transactions exempt
from the registration requirements of the Securities Act to persons reasonably
believed by the Initial Purchaser to be "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act). We have agreed to indemnify the
Initial Purchaser and each Selling Securityholder, and each Selling
Securityholder had agreed to indemnify us, the Initial Purchaser and each other
Selling Shareholder against certain liabilities arising under the Securities
Act.
The Selling Securityholders and any other persons participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of the LYONs and the underlying common stock by the Selling
Securityholders and any other such person. In addition, Regulation M of the
Exchange Act may restrict the ability of any person engaged in the distribution
of the LYONs and the underlying common stock to engage in market-making
activities with respect to the particular LYONs and the underlying common stock
being distributed for a period of up to five business days prior to the
commencement of such distribution. This may affect the marketability of the
LYONs and the underlying common stock and the ability of any person or entity to
engage in market-making activities with respect to the LYONs and the underlying
common stock.
We will use our best efforts to keep the registration statement of which
this prospectus is a part effective until the earlier of (i) the sale pursuant
to the registration statement of all the securities registered thereunder and
(ii) the expiration of the holding period applicable to such securities held by
persons that are not our affiliates under Rule 144(k) under the Securities Act
or any successor provision, subject to certain permitted exceptions in which
case we may prohibit offers and sales of LYONs and common stock pursuant to the
registration statement to which this prospectus relates.
38
<PAGE> 42
LEGAL MATTERS
The validity of the authorization and issuance of the securities offered
hereby is being passed upon for us by Gibson, Dunn & Crutcher LLP, Irvine,
California.
EXPERTS
The consolidated financial statements and schedule of Allergan, Inc. as of
December 31, 1999 and 1998, and for each of the years in the three-year period
ended December 31, 1999, have been incorporated herein by reference and in the
registration statement in reliance upon the report of KPMG LLP, independent
auditors, incorporated by reference, herein and upon the authority of said firm
as experts in accounting and auditing.
39
<PAGE> 43
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$657,451,000
LOGO
Liquid Yield Option(TM) Notes due 2020
(Zero Coupon -- Subordinated)
And
3,787,904 Shares of Common Stock
-------------------------
PROSPECTUS
-------------------------
December 8, 2000
(TM)TRADEMARK OF MERRILL LYNCH & CO., INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 44
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following table sets forth the estimated expenses of the issuance and
distribution of the securities being registered, all of which will be paid by
the Registrant.
<TABLE>
<S> <C>
Registration fee............................................ $114,659
Trustee fees................................................ 11,000
Printing expenses........................................... 15,000
Legal fees and expenses..................................... 20,000
Accounting fees and expenses................................ 7,000
Other....................................................... 5,000
--------
Total..................................................... $172,659
========
</TABLE>
-------------------------
* All amounts are estimated pursuant to Item 511 of Regulation S-K except
Commission's registration fee.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a Delaware corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suite or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no cause to believe his conduct was
unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if he or she acted under similar standards to
those set forth above, except that no indemnification may be made in respect to
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determined that despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to be indemnified for such
expenses which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsection (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against such officer
or director and incurred by him or her in any such capacity or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify him or her against such liabilities under Section 145.
II-1
<PAGE> 45
As permitted by Section 102(b)(7) of the DGCL, the Company's Certificate of
Incorporation provides that a director shall not be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
However, such provision does not eliminate or limit the liability of a director
for acts or omissions not in good faith or for breaching his or her duty of
loyalty, engaging in intentional misconduct or knowingly violating the law,
paying a dividend or approving a stock repurchase which was illegal, or
obtaining an improper personal benefit. The Company's Certificate of
Incorporation requires that directors and officers be indemnified to the maximum
extent permitted by Delaware law.
The Company has entered into indemnity agreements with each of its
directors and officers. These indemnity agreements require that the Company pay
on behalf of each director and officer party thereto any amount that he or she
is or becomes legally obligated to pay because of any claim or claims made
against him or her because of any act or omission or neglect or breach of duty,
including any actual or alleged error or misstatement or misleading statement,
which he or she commits or suffers while acting in his or her capacity as a
director and/or officer of the Company and solely because of his or her being a
director and/or officer. Under the DGCL, absent such an indemnity agreement,
indemnification of a director or officer is discretionary rather than mandatory
(except in the case of a proceeding in which a director or officer is successful
on the merits). Consistent with the Company's Bylaw provision on the subject,
the indemnity agreements require the Company to make prompt payment of defense
and investigation costs and expenses at the request of the director of officer
in advance of indemnification, provided that the recipient undertakes to repay
the amounts if it is ultimately determined that he or she is not entitled to
indemnification for such expense and provided further that such advance shall
not be made if it is determined that the director or officer acted in bad faith
or deliberately breached his or her duty to the Company or its stockholders and,
as a result, it is more likely than not that it will ultimately be determined
that he or she is not entitled to indemnification under the terms of the
indemnity agreement. The indemnity agreements made the advance of litigation
expenses mandatory absent a special determination to the contrary, whereas under
the DGCL absent such an indemnity agreement, such advance would be
discretionary. Under the indemnity agreement, the Company would not be required
to pay or reimburse the director of officer for his or her expenses in seeking
indemnification recovery against the Company. By the terms of the indemnity
agreement, its benefits are not available if the director or officer has other
indemnification or insurance coverage for the subject claim or, with respect to
the matters giving rise to the claim, (i) received a personal benefit, (ii)
violated Section 16(b) of the Exchange Act or analogous provisions of law, or
(iii) committed certain acts of dishonesty. Absent the indemnity agreement,
indemnification that might be made available to directors and officers could be
changed by amendments to the Company's Certificate of Incorporation or Bylaws.
The Company has a policy of directors' liability insurance which insures
the directors and officers against the cost of defense, settlement or payment of
a judgment under certain circumstances.
II-2
<PAGE> 46
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference
herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
4.1 Indenture, dated as of November 1, 2000, by and between
Allergan, Inc. and U.S. Bank
Trust National Association, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K filed on November 1, 2000)
4.2 Form of Liquid Yield Option Note due 2020 (included in
Exhibit 4.1)
4.3 Registration Rights Agreement, dated as of November 1, 2000,
by and between Allergan, Inc. and Merrill Lynch, Pierce,
Fenner and Smith Incorporated (incorporated by reference to
Exhibit 4.2 to the Company's Current Report on Form 8-K
filed on November 1, 2000)
5.1 Opinion of Gibson, Dunn & Crutcher LLP (previously filed
with the Company's Registration Statement on Form S-3, filed
November 22, 2000)
8.1 Opinion of Gibson, Dunn & Crutcher LLP as to certain U. S.
federal income tax matters (previously filed with the
Company's Registration Statement on Form S-3, filed November
22, 2000)
12.1 Computation of Ratio of Earnings to Fixed Charges
(previously filed with the Company's Registration Statement
on Form S-3, filed November 22, 2000)
23.1 Consent of KPMG LLP, independent auditors
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5.1)
23.3 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
8.1)
24.1 Power of Attorney of certain directors and officers of
Allergan, Inc. (previously filed with the Company's
Registration Statement on Form S-3, filed November 22, 2000)
25.1 Statement of Eligibility of Trustee on Form T-1 (previously
filed with the Company's Registration Statement on Form S-3,
filed November 22, 2000)
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Registration Statement.
II-3
<PAGE> 47
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 (other than the
provisions relating to insurance), or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 48
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on December 7, 2000.
ALLERGAN, INC.
By: /s/ FRANCIS R. TUNNEY, JR.
------------------------------------
Francis R. Tunney, Jr.
Corporate Vice
President - Administration
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated this 7th day of December, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ DAVID E. I. PYOTT* President and Chief Executive Officer,
----------------------------------------- Director (Principal Executive Officer)
David E. I. Pyott
/s/ ERIC K. BRANDT* Corporate Vice President and Chief
----------------------------------------- Financial Officer (Principal Financial
Eric K. Brandt Officer)
/s/ JAMES M. HINDMAN* Senior Vice President and Controller
----------------------------------------- (Principal Accounting Officer)
James M. Hindman
Director
-----------------------------------------
Prof. Ronald M. Cresswell,
Hon. D.Sc., F.R.S.E.
/s/ HERBERT W. BOYER, PH.D.* Chairman of the Board
-----------------------------------------
Herbert W. Boyer, Ph.D.
Director
-----------------------------------------
Handel E. Evans
/s/ MICHAEL R. GALLAGHER* Director
-----------------------------------------
Michael R. Gallagher
/s/ WILLIAM R. GRANT* Director
-----------------------------------------
William R. Grant
/s/ GAVIN S. HERBERT* Chairman Emeritus, Director
-----------------------------------------
Gavin S. Herbert
</TABLE>
II-5
<PAGE> 49
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ LESTER J. KAPLAN, PH.D.* Director
-----------------------------------------
Lester J. Kaplan, Ph.D.
/s/ KAREN R. OSAR* Director
-----------------------------------------
Karen R. Osar
Director
-----------------------------------------
Louis T. Rosso
/s/ LEONARD D. SCHAEFFER* Director
-----------------------------------------
Leonard D. Schaeffer
/s/ ANTHONY H. WILD, PH.D.* Director
-----------------------------------------
Anthony H. Wild, Ph.D.
</TABLE>
---------------------------------------------------------------------
*By /s/ FRANCIS R. TUNNY, JR.
------------------------------
Francis R. Tunney, Jr.
Attorney-in-fact
II-6
<PAGE> 50
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
4.1 Indenture, dated as of November 1, 2000, by and between
Allergan, Inc. and U.S. Bank Trust National Association, as
Trustee (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on November 1,
2000)
4.2 Form of Liquid Yield Option Note due 2020 (included in
Exhibit 4.1)
4.3 Registration Rights Agreement, dated as of November 1, 2000,
by and between Allergan, Inc. and Merrill Lynch, Pierce,
Fenner and Smith Incorporated (incorporated by reference to
Exhibit 4.2 to the Company's Current Report on Form 8-K
filed on November 1, 2000)
5.1 Opinion of Gibson, Dunn & Crutcher LLP (previously filed
with the Company's Registration Statement on Form S-3, filed
November 22, 2000)
8.1 Opinion of Gibson, Dunn & Crutcher LLP as to certain U. S.
federal income tax matters (previously filed with the
Company's Registration Statement on Form S-3, filed November
22, 2000)
12.1 Computation of Ratio of Earnings to Fixed Charges
(previously filed with the Company's Registration Statement
on Form S-3, filed November 22, 2000)
23.1 Consent of KPMG LLP, independent auditors
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5.1)
23.3 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
8.1)
24.1 Power of Attorney of certain directors and officers of
Allergan, Inc. (previously filed with the Company's
Registration Statement on Form S-3, filed November 22, 2000)
25.1 Statement of Eligibility of Trustee on Form T-1 (previously
filed with the Company's Registration Statement on Form S-3,
filed November 22, 2000)
</TABLE>
