Chancery Court of Delaware. PS FUND 1, LLC, …blogs.reuters.com/alison-frankel/files/2014/09/pershingv...PS FUND 1, LLC, PERSHING SQUARE CAPITAL..., 2014 WL 4386165

PS FUND 1, LLC, PERSHING SQUARE CAPITAL..., 2014 WL 4386165...

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2014 WL 4386165 (Del.Ch.) (Trial Pleading)Chancery Court of Delaware.

PS FUND 1, LLC, PERSHING SQUARE CAPITAL MANAGEMENT, L.P., ValeantPharmaceuticals International, Inc., and Valeant Pharmaceuticals International, Plaintiffs,

v.ALLERGAN, INC., David E.i. Pyott, Michael R. Gallagher, Deborah Dunsire, Trevor M. Jones, Louis J.

Lavigne, Jr., Peter J. McDonnell, Timothy D. Proctor, Russell T. Ray and Henri A. Termeer, Defendants.

No. 10057-CB.September 2, 2014.

Plaintiffs' Verified Amended Complaint For Declaratory And Injunctive Relief

Young Conaway Stargatt & Taylor, LLP, David C. McBride (# 408), Martin S. Lessner (#3109), Christian Douglas Wright (#3554), Tammy L. Mercer (# 4957), Benjamin Z. Grossberg (# 5615), 1000 North King Street, Rodney Square, Wilmington,Delaware 19801, Telephone: (302) 571-6600, for PS Fund 1, LLC and Pershing Square Capital Management, L.P.

Of Counsel: Jay P. Lefkowitz, Matthew Solum, John P. Del Monaco, Danielle R. Sassoon, Kirkland & Ellis LLP, 601 LexingtonAvenue, New York, New York 10022, (212) 446-4800.

Skadden, Arps, Slate, Meagher & Flom LLP, Robert S. Saunders (# 3027), Ronald N. Brown, III (# 4831), Brian D. King (#5028), Arthur R. Bookout (# 5409), 920 North King Street, Wilmington, Delaware 19801, Telephone: (302) 651-3000, forValeant Pharmaceuticals International, Inc. and Valeant Pharmaceuticals International.

Of Counsel: Brian T. Frawley, Sullivan & Cromwell LLP, 125 Broad Street, New York, New York 10004, (212) 558-4000.

Plaintiffs PS Fund 1, LLC (“PS Fund 1”) and Pershing Square Capital Management, L.P. (together, “Pershing Square”),together with Valeant Pharmaceuticals International, Inc. and Valeant Pharmaceuticals International (together, “Valeant” andcollectively with Pershing Square, “Plaintiffs”) by and through their undersigned counsel, allege the following for their VerifiedAmended Complaint against Defendants Allergan, Inc. (“Allergan” or the “Company”), David E.I. Pyott, Michael R. Gallagher,Deborah Dunsire, Trevor M. Jones, Louis J. Lavigne, Jr., Peter J. McDonnell, Timothy D. Proctor, Russell T. Ray and HenriA. Termeer (the “Allergan Directors” or the “Board,” and together with Allergan, the “Defendants”):

Preliminary Statement

1. This is an action to enforce the Certificate of Incorporation right of holders of 25% of Allergan's stock to call a specialmeeting. In accordance with Allergan's Amended and Restated Certificate of Incorporation (the “Certificate”), on August 22,2014, PS Fund 1 delivered to Allergan special meeting requests from shareholders who are record holders and who beneficiallyown in aggregate 31% of the outstanding common stock of Allergan. The purpose of the special meeting is to allow shareholdersto vote on a number of important issues affecting the core functions and direction of the Company: (1) to remove the onerousand unreasonable requirements in the Company's bylaws for calling a special meeting; (2) to remove a majority of the Board;and (3) to recommend a slate of highly qualified and independent replacement directors who will respond in good faith tomerger and exchange offers by Valeant.

2. A special meeting is the one safety valve that protects shareholders in the circumstances presented here. Allergan's entrenchedBoard has refused to engage with Valeant regarding Valeant's multiple premium merger proposals, including Valeant's June18, 2014 exchange offer (the “Exchange Offer”). The Board reflexively adopted a “Rights Plan” (or “poison pill”) with a

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10% trigger that precludes Allergan shareholders from tendering into the Exchange Offer. Entrenched behind a preclusivepoison pill, Defendants are simultaneously pursuing an alternative to Valeant's Exchange Offer. Allergan's CEO has warnedshareholders that Allergan is looking to execute-before a special meeting ever takes place-a management-friendly alternativebusiness transaction that does not require shareholder approval. And just this past week, reports have surfaced that Allergan hasapproached Salix Pharmaceuticals Ltd. and at least one other company about striking a takeover deal as early as next month. Thepurpose of Allergan's hasty effort to consummate an acquisition while leaving the Rights Plan in place is to coerce shareholdersinto a board-sponsored alternative transaction that precludes shareholders from accepting the Exchange Offer, or even fromexpressing support for it at a special meeting.

3. Now, the Board is using a Board-adopted bylaw of dubious validity (the “Special Meeting Bylaw”) in its Amended andRestated Bylaws (the “Bylaws”) and contrived litigation to preclude the special meeting. A true and correct copy of the Bylawsis attached to this complaint as Exhibit A, and the Special Meeting Bylaw is Article II, Section 3 thereof. Indeed, by its priorconduct and statements, including authorizing the filing of a tactical federal lawsuit, captioned Allergan, Inc. et. al v. ValeantPharmaceuticals International Inc. et. al, Case No. 8:14-01214 (C.D. Cal. Aug. 1, 2014) (the “California Lawsuit”), the AllerganBoard has made very clear (prior even to receiving the special meeting requests) that it is determined not to call the specialmeeting requested by the shareholders. In fact, by Allergan's own account, the fundamental purpose of the California Lawsuit isto obtain a declaration that the special meeting requests were obtained in violation of the securities laws, which under Allergan's(invalid) Special Meeting Bylaw would purportedly allow it to reject those requests.

4. By waiting to file the California Lawsuit until it believed PS Fund 1 was poised to deliver the necessary requests for a specialmeeting, Allergan laid bare its motivations to obstruct any special meeting of shareholders. Allergan has known for monthsthe facts underlying the claims advanced in the California Lawsuit; the lawsuit's strategic timing, broad dissemination to thepress, and choice of federal forum were carefully designed to erect further roadblocks in the way of shareholders' rights. Indeed,Allergan seeks no substantive relief (other than a non-existent “rescission” remedy undoing PS Fund l's purchases of Allerganstock), but only a declaration that a fully complete solicitation was conducted, four months ago, in violation of federal law.Allergan claims that the California court “is the only court with jurisdiction to adjudicate” whether the special meeting requestswere obtained in violation of federal law, which Allergan now asserts the federal court must resolve before the Board, or eventhis Court, can consider whether the special meeting requests are proper.

5. For that purported reason, Allergan requested that the California court grant it an “expedited” proceeding, but Allergan hasnot sought preliminary injunctive relief. Instead, Allergan asked for an after-the-fact trial on the merits to start no earlier than110 days after the receipt of the requisite requests for a meeting. Allergan's proposed timing is based on its contention that itsboard of directors does not have to determine even whether to schedule a meeting until 120 days after receiving the requests.On that schedule, a meeting would not be held until sometime in 2015, all while Allergan solicits revocations of the specialmeeting requests and/or interposes sufficient delay to subsume a special meeting into Allergan's next annual meeting.

6. PS Fund 1 and the other shareholders submitting special meeting requests have fully complied with the requirements inAllergan's Certificate for calling a special meeting. The requesting shareholders have also fully complied with the requirementsof the Special Meeting Bylaw as they may reasonably be interpreted and equitably applied under these circumstances. PS Fund 1has asked Allergan to recognize that the consents submitted by PS Fund 1 and the other requesting shareholders comply with theSpecial Meeting Bylaw. Regrettably, Allergan's scorched-earth approach and penchant for erecting obstacles to its shareholders'franchise leave no doubt that Allergan will not voluntarily comply with the shareholders' rights under the Certificate. A trueand correct copy of the Certificate is attached to this complaint as Exhibit B.

7. The two influential and leading proxy advisory firms-Institutional Shareholder Services (“ISS”) and Glass Lewis & Co.(“Glass Lewis”)-have also reached the same conclusions about the current Board's conduct and motivations. For instance,ISS observed that there “appear to be serious governance issues” at Allergan, and that the Board is operating based on the“conviction [that] anything outside of the defensive perimeter should be scorched.” Glass Lewis concluded that Allergan'spersistent “obstructive” behavior is “more indicative of a board concerned with entrenching its position than seeking to enhance



shareholder value.” True and correct copies of the ISS and Glass Lewis reports are attached to this complaint as Exhibits Cand D, respectively.

8. In light of these circumstances, Valeant, PS Fund 1, and the Allergan shareholders have no option but to seek judicial reliefto compel a special meeting as soon as reasonably possible, but in any event before Defendants execute, consummate, or reachany binding agreement or understanding on any alternative transaction (including one with a breakup fee or one that is notsubject to a shareholder vote), stock repurchase, recapitalization, or other defensive transaction.

9. Under the Certificate, a “[s]pecial meeting[] of the stockholders of the Corporation ... shall be called by the Secretary uponthe written request of the holders of record of at least twenty-five percent (25%) of the outstanding shares of common stock ofthe Corporation at the time such request is validly submitted by the holders of such requisite percentage of such outstandingshares, subject to and in compliance with this Article 10 and the Bylaws of the Corporation.” PS Fund 1 has submitted thewritten requests of holders of record who beneficially own in aggregate 31% of the outstanding common stock of Allergan.To the extent that Allergan's Special Meeting Bylaw creates reasonable procedural or ministerial processes for submitting suchrequests, the shareholders submitting special meeting requests have complied with that Bylaw.

10. However, in violation of Delaware law, the Special Meeting Bylaw adopted by the Allergan Board purports to do muchmore than create such a reasonable process. Rather, that Bylaw alters and contradicts certain provisions of the Certificate, whichno bylaw is permitted to do. In addition, the Special Meeting Bylaw creates substantive conditions to the right granted in theCertificate that are not set forth in the Certificate and find no precedent or support in the Certificate, which no bylaw is permittedto do. Finally, the Special Meeting Bylaw purports to create procedural hurdles to the submission of requests that materiallyimpair the ability of the shareholders to exercise the right granted in the Certificate, and are not reasonable or necessary to theoperation of the right granted in the Certificate. Indeed, the Special Meeting Bylaw imposes preconditions on the exercise ofa Charter-given special meeting right that together are invasive, unnecessary, and prohibitive to a degree that is unparalleledfor North American public companies. The total effect of enforcing the Special Meeting Bylaw as written is to deprive theshareholders of the right granted in the Certificate. The Special Meeting Bylaw, therefore, is invalid, and it has frustrated-andif not enjoined, will continue to frustrate-the exercise of the Allergan shareholder franchise.

11. Notwithstanding the clear evidence of shareholder support for a special meeting, and despite their hollow protestationsabout respecting the shareholder franchise, Defendants are making every effort to ensure that a special meeting never takesplace and shareholder views about Valeant's offer are never heard. The Defendants have made clear their intention to strictlyenforce the Special Meeting Bylaw regardless of the efforts of shareholders to comply with the obligations purportedly imposedby that Bylaw. The Special Meeting Bylaw is facially invalid in whole or part as an impermissible infringement of the rightsgranted to the shareholders in the Certificate. But even if the Special Meeting Bylaw were facially valid, it operates in anunreasonable and inequitable manner under the circumstances here. Any attempt by the Allergan Board to interpret the SpecialMeeting Bylaw to support a refusal to schedule a special meeting, particularly in the context of a corporate control contest, isunreasonable, a breach of the Board members' fiduciary duties to Allergan shareholders, and fails to provide the shareholdersa fair and reasonable opportunity to exercise the franchise rights granted in the Certificate.

12. Thus, Plaintiffs seek a Declaratory Judgment and corresponding injunctive relief that (1) PS Fund 1 and the supportingshareholders have validly requested a special meeting under the Certificate and satisfied any valid provisions of the Bylaws;(2) the Special Meeting Bylaw is invalid in its entirety or, alternatively, invalid to the extent the special meeting requestsdo not comply with the purported requirements of the Special Meeting Bylaw, because that Bylaw impermissibly infringesthe shareholders' Certificate-granted rights, and operates in an unreasonable, inequitable, and unfair manner; (3) the AllerganDirectors breached their fiduciary duties by enforcing the unreasonable Special Meeting Bylaw and attempting to block, or atthe very least substantially delay, a special meeting in contravention of shareholders' rights under the Certificate; and (4) theAllergan Directors are breaching their fiduciary duties by attempting to execute an alternative management-friendly transactionprior to the date of the special meeting solely to preclude Valeant's Exchange Offer and preempt any opportunity for shareholdersto decide the fate of their Company. Plaintiffs seek an Order (1) finding that Allergan shareholders have validly exercised



their right to call a special meeting in accordance with the Certificate and any valid and reasonably applied aspects of theSpecial Meeting Bylaw, and (2) directing Allergan to schedule the special meeting as soon as reasonably possible, but in anyevent before Defendants execute, consummate, or reach any binding agreement or understanding on any alternative transaction(including one with a breakup fee or one that is not subject to a shareholder vote), stock repurchase, recapitalization, or otherdefensive transaction.

Parties

13. At all times relevant to this action, Plaintiff PS Fund 1, a Delaware limited liability company, has been a shareholder ofAllergan.

14. Pershing Square Capital Management, L.P. is a Delaware limited partnership and the non-member manager of PS Fund 1.

15. Valeant Pharmaceuticals International, Inc. (“VPI”) is a publicly traded company with its principal place of business inLaval, Quebec, Canada. It is a shareholder of Allergan, and a member of PS Fund 1 LLC.

16. Valeant Pharmaceuticals International is a Delaware corporation with its principal place of business in New Jersey, anda member of PS Fund 1 LLC.

17. Defendant Allergan is a Delaware Corporation with its principal place of business at 2525 Dupont Drive, Irvine, California92612. Allergan can be served through its registered agent, The Prentice-Hall Corporation System, Inc., 2711 Centerville Road,Suite 400, Wilmington, Delaware 19808.

18. Defendant David E.I. Pyott is the Chairman and Chief Executive Officer of Allergan. He has been Allergan's CEO sinceJanuary 1998. He became the Chairman of Allergan's Board in 2001. In the years 2011, 2012, and 2013, Pyott was paid anaverage of $15.7 million annually by Allergan. A majority of shareholders voted to remove Mr. Pyott from his role as Chairmanat Allergan's 2014 annual meeting, but he still retains his Chairman position.

19. Defendant Michael R. Gallagher is a director of Allergan, and has been since 2006. Allergan paid Gallagher $424,355in 2013. At Allergan's 2014 meeting, Gallagher received a vote “against” recommendations from ISS and Glass Lewis andwithhold votes from 33% of Allergan's shareholders.

20. Defendant Deborah Dunsire is a director of Allergan, and has been since 2004. Allergan paid Dunsire $390,349 in 2013.

21. Defendant Trevor M. Jones is a director of Allergan, and has been since 2004. Allergan paid Jones $451,021 in 2013. In2014, Jones received a vote “against” recommendation from Glass Lewis.

22. Defendant Louis J. Lavigne, Jr. is a director of Allergan, and has been since 2005. Allergan paid Lavigne $450,732 in 2013.

23. Defendant Peter J. McDonnell is a director of Allergan and was appointed to Allergan's Board in 2013. Allergan paidMcDonnell $427,232 in 2013. In 2014, McDonnell received a vote “against” recommendation from Glass Lewis.

24. Defendant Timothy D. Proctor is a director of Allergan, and has been since 2013. Allergan paid Proctor $429,232 in 2013.

25. Defendant Russell T. Ray is a director of Allergan, and has been since 2003. Allergan paid Ray $473,732 in 2013.

26. Defendant Henri A. Termeer is a director of Allergan, and has been since January 24, 2014.



27. Defendants Pyott, Gallagher, Dunsire, Jones, Lavigne, McDonnell, Proctor, Ray and Termeer collectively constitute thefull Board of Directors of Allergan.

Jurisdiction

28. This Court has jurisdiction over this matter pursuant to 10 Del. C. § 341 and 8 Del. C. § 111.

Background Facts

I. Allergan Shareholders Overwhelmingly Approve a Special Meeting Right, But Allergan's Board Adopts BylawAmendments to Frustrate that Right.

29. In March 2012, Allergan shareholders proposed a resolution that would have allowed holders of 10% of Allergan's sharesto call a special meeting. Allergan's Board recommended against the proposal, telling shareholders in the Company's March15, 2012 Schedule 14A that “[a] special meeting ... should generally occur only when either fiduciary obligations or strategicconcerns require that matters be addressed expeditiously.” This resolution received the affirmative support of approximately55.3% of voted shares.

30. A year later, facing increased shareholder pressure for a special meeting right, Allergan's Board relented and recommendedin favor of a Certificate amendment, but increased the trigger to require 25% of the Company's outstanding common stock to calla special meeting. At the April 30, 2013 Annual Meeting, shareholders approved the amendment in a landslide, with affirmativesupport from more than 99% of voted shares. The Board stated in its March 8, 2013 Schedule 14A (the “March 8, 2013 Proxy”)that the purpose of the amendment was to give shareholders “a powerful means to consider and approve stockholder-sponsoredaction and timely effect changes.” A true and correct copy of the March 8, 2013 Proxy is attached to this complaint as Exhibit E.

31. At the same time, however, the Board unilaterally enacted the Special Meeting Bylaw, which sought to undo the “powerful”and “timely” weapon given to shareholders in the Certificate. The Certificate provision makes generic reference to the Bylaws,but the Special Meeting Bylaw does more than create a procedure or ministerial process to facilitate and order the method bywhich the rights created in the Certificate may be exercised. Rather, that Bylaw purports to alter and contradict certain provisionsof the Certificate, which no bylaw is permitted to do. In addition, that Bylaw creates substantive conditions to the right grantedin the Certificate that are not set forth in the Certificate and find no precedent or support in the Certificate, which no bylaw ispermitted to do. Finally, that Bylaw purports to create procedural hurdles to the submission of requests that materially impairthe ability of the shareholders to exercise the right granted in the Certificate and are not necessary to the operation of the rightsgranted in the Certificate.

32. In sum, the Special Meeting Bylaw does not facilitate or order a process by which the right granted in the Certificate mayoperate. Rather, it varies the terms of the Certificate, adds terms and conditions to the right granted in the Certificate that are notin the Certificate, and operates in a manner that fundamentally undermines the right granted in the Certificate. These onerous,technical, and highly complicated requirements in the Special Meeting Bylaw would, if enforced in the manner threatenedby Allergan, make it impossible, as a practical matter, for shareholders to call a special meeting. In addition to the Allerganshareholders (owning in aggregate 31% of Allergan's outstanding common stock) who have submitted special meeting requests,many other Allergan shareholders would have joined the special meeting request if not for the onerous and unlawful terms ofthe Special Meeting Bylaw.

33. Allergan's Bylaws were based on a form peddled by its long-time outside counsel Latham & Watkins LLP to the firm'scorporate clients. Notably, while Latham's form bylaws are extremely unfriendly to shareholders and unreasonably impingeon the special meeting right, Allergan's Board approved a modified set of bylaws that dramatically exacerbate the flaws in theLatham model. For example, as explained below, Allergan's Special Meeting Bylaw imposes extensive informational disclosurerequirements on all shareholders who submit special meeting requests, not solely the lead shareholder who is spearheading

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the meeting and soliciting proxies in connection therewith. By contrast, the Latham model only imposes these disclosurerequirements on the lead shareholder.

34. At the time the shareholders approved the Certificate of Incorporation amendment, the Company did not properly disclosethat the Special Meeting Bylaw it then proposed to adopt contained provisions that-if fully enforced-would contradict theCertificate provision, create conditions and qualifications to the rights set forth in the Certificate that were not set forth inthe Certificate and for which there was no basis or precedent in the Certificate, and qualify the special meeting right out ofexistence. To be sure, the Company attached a copy of the proposed set of Bylaw amendments to the March 8, 2013 Proxy,but Allergan sought no shareholder approval of any bylaw amendment. The Company's explanation of the potential Bylawamendments was a misleading summary that did not disclose the extent to which the bylaw amendment fundamentally alteredthe right granted in the Certificate and downplayed the magnitude of the changes as a set of “procedural and informationalrequirements,” which included that “requesting stockholder's notice must provide certain information regarding the businessproposed to be conducted, and as to the stockholder giving notice and any person or entity acting in concert with the stockholdergiving notice.” (Ex. E, at 16.)

A. The Special Meeting Bylaw Is Flatly Inconsistent With the Certificate of Incorporation.

35. The right to call a special meeting of the shareholders is set out in Allergan's Certificate in a single sentence comprising fivelines of text and a total of 65 words. (See Ex. B, Art. 10.) By contrast, the Special Meeting Bylaw that purports to implementthat clear and unambiguous shareholder right spans five single-spaced pages of Allergan's Bylaws, comprising some 3,025complex and in many ways incoherent words. (See Ex. A, Art. II, § 3.) Those words further adopt and incorporate reams ofadditional requirements from elsewhere in the Certificate and Bylaws, as well as from the federal proxy rules (which Allerganproceeds to broaden massively).

36. The provisions of the Special Meeting Bylaw contradict the express terms of the Certificate of Incorporation in certainimportant respects. For example:

a. The Certificate provides that a special meeting “shall be called ... upon the written request of holders of record.” However,the Special Meeting Bylaw requires that the requests be submitted by, and information be provided about, defined “ProposingPersons” that include a plethora of persons other than the record holder, such as “any participant (as defined in paragraphs (a)(ii)-(vi) of Instruction 3 to Item 4 of [SEC] Schedule 14A) with such stockholder in such solicitation,” “any ... associate (withinthe meaning of Rule 12b-2 under the Securities Exchange Act of 1934 ...) of such stockholder or beneficial owner,” and “anyother person with whom such stockholder or such beneficial owner (or any of their respective associates or other participantsin such solicitation) is Acting in Concert.” A person is defined as Acting in Concert “if such person knowingly acts (whetheror not pursuant to an express agreement, arrangement or understanding) in concert or in parallel with, or towards a commongoal with such other person, relating to changing or influencing the control of the corporation or in connection with or as aparticipant in any transaction having that purpose or effect,” subject to certain further conditions and exceptions. “Associate”under SEC Rule 12b-2 is an exceedingly broad term, and includes, among other things, any entity in which the “person is anofficer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities,” any“trust or other estate” as to which the person is a trustee or similar fiduciary or substantial beneficiary, and the spouse andcertain other relatives of the person.

b. The Certificate provides that a special meeting must be called if requested by “the holders of record of at least twenty-fivepercent (25%) of the outstanding shares of common stock of the Corporation.” However, the Special Meeting Bylaw providesthat a special meeting may only be called if the Proposing Persons “have a Net Long Beneficial Ownership (as defined below) ofat least the Requisite Percentage” and only if those Proposing Persons (including every solicited shareholder and its associates)provide detailed and invasive information about themselves. Net Long Beneficial Ownership is defined as something morethan record ownership of over 25% of the outstanding shares. Specifically, Net Long Beneficial Ownership is defined as “thoseshares of common stock of the Corporation as to which the stockholder or Proposing Person, as applicable, possesses (i) the



sole power to vote or direct the voting, (ii) the sole economic incidents of ownership (including the sole right to profits and solerisk of loss), and (iii) the sole power to dispose of or direct the disposition.”

c. The Certificate provides that computation of whether the requisite percentage of stock has requested a meeting is made “atthe time such request is validly submitted by the holders of such requisite percentage of such outstanding stock.” However, theSpecial Meeting Bylaw provides that a Proposing Person's sale of Allergan shares following the delivery of special meetingrequests (as well as the loan of shares to third parties) constitutes an automatic proportional revocation of such requests, andAllergan has advised its shareholders that any shares sold after the request is delivered will not count toward the computationof the requisite percentage.

d. Most fundamentally, the Certificate requires that the special meeting be held if the necessary requests are submitted. Nowheredoes the Certificate provide to the Allergan Board any discretion to delay or not call the meeting, or to require continuouslyupdated shareholder submissions in order to validate the called meeting. Yet the Special Meeting Bylaw provides that the Boardmay decline to call the special meeting and, instead, may call some other meeting within 120 days. That Bylaw provides thisdiscretion to the Board even in the event that the requests comply in every respect with all the terms and conditions of the Bylaws.The Special Meeting Bylaw also provides discretion to the Board to cancel a validly called special meeting if the requestingshareholders fail to comply with the requirement that they supply updated information through the date of the meeting, bringingthe percentage of support in compliance with the Special Meeting Bylaw below 25% of the shares. In addition, the obscurewording of the Special Meeting Bylaw might be interpreted (incorrectly) to give the Board discretion to decline to call a specialmeeting if a single special meeting request form fails to comply with the bylaws, even if the remaining valid special meetingrequests continue to include more than 25% of the outstanding shares.

e. The Certificate grants a right to call a special meeting to the then “holders of record of at least twenty-five percent (25%) of theoutstanding shares of common stock of the Corporation.” The Special Meeting Bylaw, on the other hand, qualifies the universeof shareholders who are eligible to call a special meeting. Among other things, that Bylaw inconsistently deems ineligible anyshareholder that does not represent its intent to hold the Allergan stock through the date of the special meeting.

f. While the Certificate provides that the meeting “shall be called by the Secretary upon the written request” of the requisiteshareholders, the Special Meeting Bylaw inconsistently provides in Article II Section 3(B)(1) that the “Secretary shall notaccept, and shall consider ineffective,” special meeting requests that comply with the Certificate if, for example, (i) the SpecialMeeting Request is received by the Corporation during the period commencing ninety (90) days prior to the first anniversaryof the date of the immediately preceding annual meeting, (ii) the Board calls an annual or special meeting of shareholders (inlieu of calling the Shareholder Requested Special Meeting) “in accordance with section (B)(3) of this Section 3,” (iii) a SimilarItem is already included in the Corporation's notice as an item of business to be brought before a meeting of the shareholdersthat has been called but not yet held, or (iv) such Special Meeting Request was made in a manner that involved a violationof Regulation 14A under the Exchange Act, or other applicable law. Taken together, these conditions substantially limit thewindow of time between annual meetings for shareholders to exercise their right to call a special meeting.

B. The Special Meeting Bylaw Adds New Conditions to the Certificate Rights That Are Not Contained in the Certificate.

37. The Special Meeting Bylaw also creates conditions to the right granted in the Certificate that are not set forth in the Certificateand find no precedent or support in the Certificate, for example:

a. While the Certificate does not require that any particular purpose be identified-much less that each request must identify thesame purpose and business to be acted upon-the Special Meeting Bylaw requires that each special meeting request identify thesame purpose or purposes and the same matters to be acted upon at the meeting.

b. The Special Meeting Bylaw requires that each Proposing Person (including Associates) must make exhaustive disclosures,as outlined below. On the other hand, the Certificate does not require any disclosures, much less the voluminous and expansive



disclosures required by that Bylaw, the requirements of which are onerous on their face and would (if fully enforced) bepreclusive in practice.

c. Although the Certificate does not impose any time limits on when the requests may be submitted, the Special Meeting Bylawprovides that requests will not be honored if received within 90 days of the anniversary of the last annual meeting, regardlessof whether or not an annual meeting is scheduled.

d. The Certificate does not impose any limitation on the reasons for which a special meeting may be called. Yet the SpecialMeeting Bylaw provides that requests will not be honored if “a substantially similar item (a ‘Similar Item’) to that includedin the Special Meeting Request was presented at any meeting of stockholders held within one year prior to the receipt by theCorporation of the Special Meeting Request.”

e. While the Certificate does not provide that the right of any group of shareholders to request a special meeting is voided ifthe Allergan Board unilaterally declares that “such Special Meeting Request was made in a manner that involved a violation ofRegulation 14A under the Exchange Act,” the Special Meeting Bylaw purports to give the Board such authority. Any personwho solicits proxies in violation of Regulation 14A will be subject to whatever sanctions and remedies a court may imposeas appropriate on the finding of such a violation, but the Certificate does not permit the Allergan Board to void the requestssubmitted on the mere declaration by the Board that some real or imagined violation occurred.

C. The Special Meeting Bylaw Contains Expansive and Onerous Disclosure Requirements.

38. The Special Meeting Bylaw also imposes extremely expansive and onerous disclosure requirements on parties submittingspecial meeting requests. Rather than impose a disclosure obligation on only the lead proposing shareholder (as is the case inthe Latham & Watkins model on which the Special Meeting Bylaw was based), that Bylaw demands that every shareholderwho submits a special meeting request disclose significant information about itself. In other words, the disclosure requirementshere are not limited to PS Fund 1 or Valeant, but extend to every Proposing Person.

39. To further complicate matters, the definition of “Proposing Person” is not limited to the Allergan shareholders seeking themeeting. Instead, the universe of “Proposing Persons” who supposedly are obligated to provide expansive information extendsto innumerable third parties having no interest in or relevance to the matter. Indeed, the Special Meeting Bylaw purports torequire disclosures from any submitting shareholder's “Associates,” which is broadly defined to include (i) any entity in whichthe shareholder directly or indirectly beneficially owns 10% or more of any class of any equity security; (ii) any entity in whichthe shareholder is an officer or limited or general partner; (iii) any trust in which the shareholder is a trustee or similar fiduciaryor has a substantial beneficial ownership interest; and (iv) any relative of the shareholder who shares the same home as thebeneficial owner. (Ex. A, Art. 2, § 3(A)(5)(a).)

40. By way of example, Pershing Square Capital Management, L.P.-PS Fund 1's manager and controller-has almost 100entities and persons that fit the strict definition of “associate.” For large numbers of these individuals and entities, the Allerganshareholder has no control over the third-party individual or entity and no ability to cause the third-party to supply theinformation described in the Bylaws. Even if this information could be obtained by requesting shareholders, it is completelyirrelevant to Allergan and would provide no benefit to Allergan because those third parties have nothing to do with thesolicitation at hand and, in any event, Allergan would have no way of verifying the information. The only purpose of thesepurported disclosure requirements is to make it impossible, or at the very least profoundly difficult, for shareholders to makea special meeting request.

41. With this expansive definition of “Proposing Person,” the Special Meeting Bylaw then requires that each Proposing Persondisclose:



• Information regarding every Proposing Person of the sort that would be required under the federal proxy rules from a personpublicly soliciting proxies under Regulation 14a, including, for example, the Proposing Person's trading history in Allerganshares (id., Art. 2, § 3(A)(5)(d)(vi) (incorporating Item 5(b)(1)(vi) of Rule 14a-101));

• “Such other information and representations as would be required by Article 12 of the [Certificate] and Section 9 of ArticleII of [the] Bylaws” (id., Art. 2, § 3(A)(4));

• The Proposing Person's Allergan holdings or other interests (id., Art. 2, §§ 3(A)(5)(d), 3(A)(5)(d)(i)-(ii));

• “Any material pending or threatened action, suit or proceeding ... in which such Proposing Person is, or is reasonably expectedto be made, a party or material participant involving the Corporation or any of its officers, directors or employees” (id., Art.2, § 3(A)(5)(d)(iii));

• “Any other material relationship between such Proposing Person ... and the Corporation, any affiliate of the Corporation, anyofficer, director or employee of the Corporation or any affiliate thereof, or any principal competitor of the Corporation” (id.,Art. 2, § 3(A)(5)(d)(iv)); and

• “Any direct or indirect material interest in any material contract or agreement of such Proposing Person with the Corporation,any affiliate of the Corporation or any principal competitor of the Corporation” (id., Art. 2, § 3(A)(5)(d)(v)).

42. These invasive requirements demand expansive disclosure of information that has no relevance to evaluating a specialmeeting request, but which may be highly sensitive to shareholders and their “associates.” For example, the Special MeetingBylaw requires a Proposing Person to disclose sensitive details about family members, or any non-profit for which the ProposingPerson sits on the board, or interests or investments in (undefined) “competitors” of Allergan.

II. Defendants Refuse to Consider Offers from Valeant and Take Steps to Entrench Themselves.

43. Valeant has made multiple premium offers to merge with Allergan, but the Board has refused to engage with Valeant andrejected these offers. Publicly, Defendants have attacked Valeant and raised materially inaccurate and unsubstantiated criticismof Valeant's business model, its business practices, and its senior management. Behind the scenes, it has lobbied investors andother interested parties to disregard Valeant's offers.

44. On April 22, 2014, Valeant delivered a public proposal to Defendants to acquire all outstanding shares of Allergan for a per-share price of $48.30 in cash and 0.83 shares of Valeant stock, representing a nominal value of $160.69 per share as of April22. Hours later, the Allergan Board adopted a Rights Agreement or so-called “poison pill” (the defined term “Rights Plan”).

45. The Rights Plan is triggered if any shareholder becomes the “Beneficial Owner” of ten percent (10%) or more of outstandingCompany shares. Allergan's Board has broad authority to redeem the rights or amend the Rights Plan to exempt premium offers.But the Allergan Directors have not done so, and plainly do not intend to do so.

46. Allergan told shareholders that the purpose of the Rights Plan was “to provide the Board with adequate time to fully assessany proposal.” But the Board refused to fairly consider the Valeant offer, rejecting it without discussing the offer or negotiatingwith Valeant.

47. In May of 2014, Valeant twice revised and improved its cash and stock offer to represent a 55% premium to Allergan'sunaffected stock price (i.e., prior to the Valeant deal). The market reacted favorably to each offer, but the Allergan Directorsdid not budge. On June 10, 2014, the Allergan Directors rejected Valeant's revised offer without ever speaking to Valeant andwithout conducting any due diligence on Valeant's business. In an interview that same day with The Wall Street Journal, Pyott



admitted that the Allergan Directors were completely uninformed about the value of the revised offer's stock component, tellingthe Journal “[t]he only part [of the revised offer] we do know how to value is the U.S. dollar portion.”

48. On June 18, 2014, Valeant filed a Schedule TO and Form S-4 with the SEC, seeking to commence the Exchange Offer.Defendants responded by recommending that Allergan shareholders not tender.

49. In any event, Valeant cannot close the Exchange Offer because Defendants have left in place the Rights Plan, which willbe triggered if Valeant accepts tendered shares. Thus, the shareholders are being precluded from receiving the benefits of theExchange Offer if they desire to do so.

III. Defendants Seek to Silence Their Shareholders.

50. Meanwhile, faced with a Board that would not even listen to and engage with a would-be acquirer, Pershing Squareand Valeant decided to solicit the views of all Allergan shareholders. To that end, on May 13, 2014, Pershing Square filedpreliminary proxy materials with the SEC on Schedule 14A soliciting revocable proxies from the Company's shareholders tovote at a meeting of the Company's shareholders on a non-binding resolution urging the Board to promptly engage in good faithdiscussions with Valeant regarding its proposed merger.

51. While Allergan told the market that the proposed shareholder referendum should be ignored and afforded no weight, itworked in back channels to persuade the SEC that the shareholder referendum was not regulated by the SEC proxy rules. Thiswas an underhanded way to thwart the referendum: if Pershing Square could not solicit and obtain non-binding votes from othershareholders via the SEC's proxy rules, it risked triggering the poison pill based upon the definition of beneficial ownershipunder the Rights Plan, whereby Pershing Square might be deemed to have “agreements, arrangements or understandings” notexempted from the scope of the Rights Plan's definition of ownership.

52. Despite Defendants' efforts to silence their own shareholders, PS Fund 1 was not deterred. After feedback from shareholdersthat Allergan's intransigence made it pointless to seek a referendum and that PS Fund 1 should instead present a clear path forcompleting a deal, PS Fund 1 shifted gears. On June 2, 2014, PS Fund 1 began the process of calling a special meeting byfiling a preliminary solicitation statement on Schedule 14A (the “Preliminary Proxy”) to solicit the necessary commitmentsfrom 25% of Allergan's outstanding shares. In particular, PS Fund 1 sought to call a special meeting for the purpose of, amongother things, (1) removing six of the nine members of the Allergan Board; (2) recommending a slate of highly qualified andindependent replacement directors; (3) removing the onerous disclosure and other requirements the Bylaws purport to imposeon shareholders calling a special meeting; and (4) requesting that Allergan's Board promptly engage in good faith discussionswith Valeant. A true and correct copy of the Preliminary Proxy is attached to this complaint as Exhibit F.

53. Hoping to chill shareholder participation in Pershing Square's special meeting effort or at least delay Pershing Square'sprogress, Allergan created uncertainty about whether efforts to obtain the required 25% shareholder threshold for calling aspecial meeting might trigger the 10% Beneficial Owner threshold in the Rights Plan. If that were the case, the special meetingright would have been rendered a nullity: shareholders would be unable to collaborate to satisfy the purported requirementsof the Bylaws without triggering the pill. After Allergan refused to alleviate shareholder concern by adequately explaining itsposition, PS Fund 1 filed a declaratory judgment action in this Court on June 12, 2014, seeking clarification that assisting andcoordinating with shareholders regarding the submission of special meeting requests would not trigger the Rights Plan. Afterthe Court granted PS Fund l's motion for expedition, which Allergan opposed (consistent with its delay-at-any-cost strategy),Allergan ultimately agreed to a stipulated order that allowed PS Fund l's efforts to call a Special Meeting to proceed.

54. On June 16, 2014, Allergan filed a Preliminary Revocation Solicitation Statement on Schedule 14A with the SEC forthe purpose of actively soliciting shareholders not to submit special meeting requests and to revoke any special meetingrequests already submitted. Thus, not only did PS Fund 1 have to navigate the complicated set of procedural and informationalrequirements in the Bylaws, it had to do so in the face of an active campaign by Defendants to undermine those efforts. In



contrast to the several dozen page special meeting request, Allergan contends that shareholders may revoke those consentsby checking a box. Unconstrained by any bylaw provisions restricting the Board's activity, Allergan took the position that itsrevocation campaign would continue through the date of the special meeting itself, during which time Allergan would seek toobtain revocations of shareholders' special meeting requests, which purportedly would allow the Board to cancel the meetingaltogether if the revocations brought support below the requisite 25% of outstanding shares.

IV. PS Fund 1 Undertakes the Process of Calling a Special Meeting.

55. Since filing its definitive proxy materials on July 11, 2014 (the “Definitive Proxy”), PS Fund 1 has met with shareholdersin order to gather the requisite support for a special meeting. A true and correct copy of the Definitive Proxy is attached tothis complaint as Exhibit G.

56. In addition to providing proxy cards, PS Fund 1 provided shareholders with various prepared forms to help them complywith the Bylaws, including a Special Meeting request form, an instruction letter to the Depository Trust Company (“DTC”),a written request form for a Special Meeting from DTC's nominee (Cede & Co.), and a form of letter from the brokeragefirm, bank nominee, or other institution necessary to verify a shareholder's beneficial ownership. Then, Pershing Square and itsadvisors worked with supportive shareholders to complete the necessary forms, even creating a website to help shareholdersfind the forms and information they needed to satisfy the onerous Bylaw requirements.

57. Not surprisingly, these efforts to comply with the Bylaws have met with resistance from shareholders; even those whosupport a special meeting view the onerous disclosure requirements as invasive, unnecessary, and prohibitive.

58. The Special Meeting Bylaw requirements are even more prohibitive with the poison pill in place. Because PS Fund 1 cannotown more than 10% of Allergan shares, it must collect additional requests from more than 15% of shareholders to call a specialmeeting. And the Special Meeting Bylaw imposes the same disclosure obligations on each requesting party, not only the leadproposing shareholder.

59. Shareholders have objected that the disclosure requirements demand confidential, commercially-sensitive information, aswell as information controlled by third parties with no obligation-and no incentive-to cooperate. In particular, shareholdershave balked at disclosing information regarding entities or persons who are not Allergan shareholders, but who fall within thedefinition of “Proposing Persons” because they are “associates,” spanning various business and personal relationships. (SeeEx. A, Art. 2, § 3(A)(5)(a).)

60. Large institutional shareholders, who manage funds with holdings in hundreds of different companies, have also objectedthat confidentiality and practical concerns make it extremely difficult if not impossible for them-and especially their numerous“associates”-to disclose any:• “material pending or threatened action, suit or proceeding ... in which such Proposing Person is, or is reasonably expectedto be made, a party or material participant involving the Corporation or any of its officers, directors or employees” (id., Art.2, § 3(A)(5)(d)(iii));

• “material relationship between such Proposing Person ... and the Corporation, any affiliate of the Corporation, any officer,director or employee of the Corporation or any affiliate thereof, or any principal competitor of the Corporation” (id., Art. 2,§ 3(A)(5)(d)(iv));

• “direct or indirect material interest in any material contract or agreement of such Proposing Person with the Corporation, anyaffiliate of the Corporation or any principal competitor of the Corporation” (id., Art. 2, § 3(A)(5)(d)(v)); and

• “other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or otherfiling required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the



business proposed to be brought before the meeting” (id., Art. 2, § 3(A)(5)(d)(vi)), which would include, among other things,two years of historical information regarding trading in Allergan stock.

61. In the case of shareholders who provide investment management services to third party mutual and pension funds, disclosureof the identities of those underlying funds would amount to a revelation of confidential, even proprietary information. Similarly,shareholders have objected to disclosing their two-year trading history in Allergan stock (and that of their “associates”), whichthey consider highly confidential information as it may reveal a proprietary investment strategy or internal risk managementpolicies. In fact, in some cases, providing this information would violate the shareholder's internal policies regarding thedisclosure of proprietary trading strategies.

62. Other shareholders complained that forcing beneficial owners to become record holders is contrary to the modem reality thatmany investors own their shares in street name, creates numerous procedural and compliance issues, and imposes unnecessary

cost. 1 In addition, shareholders protested that it is inconsistent with sound business practices to represent an intention to holdAllergan shares through the date of the requested special meeting, especially given the ability and determination of Allerganto delay a special meeting. Forces beyond a shareholder's control may alter the investment landscape and counsel in favorof selling shares during that period. Moreover, registered investment companies (including mutual funds) expressed concernthat the requirement to become a record holder would violate Section 17f of the Investment Company Act and rules adoptedthereunder, which govern the custody of investment company assets.

63. Despite these various objections, shareholders remained determined to call a special meeting and PS Fund 1 amassedthe necessary support. In accordance with the Certificate, PS Fund 1 collected special meeting requests representing inaggregate 31% of Allergan's outstanding shares, and submitted those requests to the Company earlier today (the “DeliveredRequests”). The Delivered Requests fully comply with the Bylaws as they may reasonably be interpreted and enforced underthe circumstances. A true and correct copy of the Delivered Requests is attached to this complaint as Exhibit K, which has beenfiled under seal because the requests contain confidential information.

64. The information contained in the submitted requests is comprehensive and extensive:• The Delivered Requests have all “been dated and delivered to the Secretary within sixty (60) days of the earliest dated SpecialMeeting Request.” Indeed, all of the Delivered Requests were delivered to Defendants on the same day (see Ex. A, Art. 2,§ 3(A)(ii));

• Each of the Delivered Requests has been signed by a Proposing Person that is a holder of record (see id., Art. 2, § 3(A));

• Each of the Delivered Requests “identifies the same purpose or purposes of the Stockholder Requested Special Meeting andthe same matters proposed to be acted on at such meeting” (see id., Art. 2, § 3(A)(i));

• The Delivered Requests have not been delivered “during the period commencing ninety (90) days prior to the first anniversaryof the date of the immediately preceding annual meeting of stockholders and ending on the date of the final adjournment ofthe next annual meeting” (see id., Art. 2, § 3(B)(l)(b));

• No “identical or substantially similar item ... to that included in the [Delivered Requests] was presented at any meeting ofstockholders held within one year prior to receipt by the Corporation of” the Delivered Requests (see id., Art. 2, § 3(B)(l)(c));

• Each of the Delivered Requests contains “a representation that such Proposing Person intends to hold the shares of theCorporation ... through the date of the Stockholder Requested Special Meeting” (see id. Art. 2, § 3(A)(l)(c));



• Each of the Delivered Requests contains “an acknowledgement ... that any reduction in such Proposing Person's Net LongBeneficial Ownership ... shall constitute a revocation of such Special Meeting Request to the extent of such reduction” (seeid., Art. 2, § 3(A)(1)(d));

• To the extent reasonably possible, each Proposing Person who submitted a Delivered Request will “update and supplementthe information ... [provided], so that the information provided ... shall be true and correct as of the record date for notice ofthe Stockholder Requested Special Meeting and as of the date that is ten (10) business days prior to the Stockholder RequestedSpecial Meeting” (see id., Art. 2, § 3(B)); and

• To the extent reasonably possible, each of the Delivered Requests contains disclosures required under Article II, Sections3(A)(2) and 3(A)(5)(d) of the Bylaws, regarding:

• For each Proposing Person, the information required by the federal proxy rules, including each Proposing Person's tradinghistory in Allergan shares (see id., Art. 2, § 3(A)(5)(d)(vi) (incorporating Item 5(b)(1)(vi) of Rule 14a-101));

• “Such other information and representations as would be required by Article 12 of the [Certificate] and Section 9 of ArticleII of [the] Bylaws” (see id., at Art. 2, § 3(A)(4));

• The Proposing Person's Allergan holdings or other interests (see id., Art. 2, §§ 3(A)(5)(d), 3(A)(5)(d)(i)-(ii));

• “[A]ny material pending or threatened action, suit or proceeding ... in which such Proposing Person is, or is reasonablyexpected to be made, a party or material participant involving the Corporation or any of its officers, directors or employees”(see id., Art. 2, 3(A)(5)(d)(iii));

• “[A]ny other material relationship between such Proposing Person ... and the Corporation, any affiliate of the Corporation, anyofficer, director or employee of the Corporation or any affiliate thereof, or any principal competitor of the Corporation” (seeid., Art. 2, § 3(A)(5)(d)(iv)); and

• “[A]ny direct or indirect material interest in any material contract or agreement of such Proposing Person with the Corporation,any affiliate of the Corporation or any principal competitor of the Corporation” (see id., Art. 2, § 3(A)(5)(d)(v)).

65. The amount of information shareholders have supplied is staggering, and not required by the Certificate. As one illustrationof how burdensome these requirements are, the attached special meeting requests, together with supporting materials, comprisemore than 1,500 pages of documentation (indeed, the longest set of request materials from a single holder is 174 pages longand includes no fewer than 85 unique signatures). (See Exhibit K.)

66. The Delivered Requests fully comply with the only requirements set forth in the Certificate: They are submitted by “holdersof record of at least twenty-five percent (25%) of the outstanding shares of common stock of the Corporation at the timesuch request is validly submitted.” Moreover, the Delivered Requests fully comply with any valid requirements of the SpecialMeeting Bylaw as it may reasonably be interpreted and validly applied under these circumstances.

V. The Influential Stockholder Advisory Firms ISS and Glass Lewis Find That Allergan's Special Meeting Bylaw IsUnusual, Onerous, Unnecessary, and an Attempt by Allergan to Undercut the Shareholders' Right to Call a SpecialMeeting.

67. The influential shareholder advisory firms ISS and Glass Lewis have also voiced objections to the Special Meeting Bylawand Allergan's stated reasons for the applicability of that Bylaw.



68. On August 6, 2014, ISS released a report advising Allergan shareholders to provide their consent to Pershing Square'scall for a special meeting. The report noted that “there appear to be significant governance issues which could be addressedthrough the proposed special meeting.” (Ex. C, at 4.) ISS criticized Allergan's Special Meeting Bylaw for imposing “unusualand unnecessary constraints on the right to call special meetings.” (Id. at 9 (emphasis added).) For example, ISS observed theabsurdness of that Bylaw's disclosure requirements: “Because [‘Proposing Person’] is so broadly defined, moreover-in a worldof institutional investors with hundreds of billions in assets and countless individual investors, beneficiaries, managed accounts,etc.-it quickly daisy chains into a vast web of ‘associates' for whom the institutional shareholder trying to comply with theinformation request has no information rights to begin with.” (Id. at 10.) ISS noted that shareholders found these constraints tobe a burden on the ability to exercise their Certificate right: “In calls with investors considering whether to support the requestfor special meeting, ISS heard repeatedly that the additional procedural and information requirements laid out by the Allerganbylaws imposed a significant burden, and the opportunity to eliminate them at this special meeting was increasingly becominga meaningful reason to persist in calling the special meeting.” (Id. at 9 (emphasis added).)

69. Moreover, ISS flatly rejected Allergan's defense of its Special Meeting Bylaw as an attempt to “strike a balance betweencorporate democracy and the risk these rights might be misused.” In particular, ISS wrote:

Asked once again, in summary, to reconcile how the extensive bylaw constraints the board had placed on theright to call special meetings was an appropriate response to a shareholder mandate, rather than an attemptto frustrate shareholders' exercise of their governance rights, the lead independent director offered that theboard had been informed by its advisors that such bylaw constraints were common at other companies.Asked to provide the names of ten such companies, the company responded several days later with a freshseven-page memo from its external counsel listing twenty companies with at least one similar provision intheir bylaws [and further rationale]. [An ISS review of the memo showed that] the Allergan bylaws are farmore restrictive than any of the comparator companies the board apparently reviewed, with no discernableadvantage for Allergan shareholders.

(Id. at 8 (emphasis added).) ISS concluded that “there is little credible reason to believe the Allergan board has in any meaningfulway struck an appropriate balance between the ability of shareholders to exercise their governance rights and the risk someshareholder might somehow abuse those rights.” (Id. at 10.)

70. On August 4, 2014, Glass Lewis released a report advising Allergan shareholders to provide their consent to PershingSquare's call for a special meeting. (Ex. D, at 7.) That report similarly criticized Allergan's Special Meeting Bylaw:• “The written request process is highly unique and involves many technical steps of shareholders if they determine toparticipate.” (Id. at 1.)

• The Bylaws “are both disproportionately time consuming and dense.” (Id. at 7.)

• The Bylaws “operate more as a strong deterrent to those investors contemplating a special meeting requisition not otherwisesupported by the board.” (Id. at 7.)

71. Glass Lewis concluded:

All other things equal, we believe Allergan's bylaws leave its board in a position of leverage whenconsidering a shareholder-supported special meeting request. The challenges attendant to this cumbersomeprocess are readily evident as an extension of the options made available to shareholders - investors electingto participate in Pershing Square's Written Request process must satisfy a myriad of significant and ongoingadministrative hurdles, while the board can, and will, contemporaneously seek to nullify these effortsthrough a decidedly simpler proxy solicitation process to be conducted up until the date of the prospective



special meeting. In our opinion, this procedural dichotomy casts a rather dubious light on the seriousnessof the board's desire to be responsive to investors.

(Id. at 6 (emphasis added).)

VI. Defendants' Recent Actions Make Clear That They Intend to Try to Prevent a Special Meeting.

72. Defendants' recent actions have confirmed that a special meeting is the only way to give shareholders an opportunity toconsider Valeant's offer. With the poison pill in place, shareholders have been unable to act upon Valeant's Exchange Offer.But that has not stopped the Defendants from pursuing alternative deals that would not require shareholder approval in orderto preclude or substantially impair the Exchange Offer.

73. In recent months, Pyott stated that (1) Allergan was considering potential stock repurchases and that Allergan could leverageup to make a $10 billion acquisition with “no sweat”; (2) he had met with Allergan investors to discuss increasing Allergan'sdefenses to the Exchange Offer by leveraging up to buy back $10 billion of Allergan stock or issue a special dividend; and (3)Allergan has more than $14 billion in free cash flow to fund the defensive transactions Defendants are exploring.

74. Pyott has taken no pains to conceal that the purpose of executing an alternative transaction is to moot the special meeting. OnAllergan's July 21, 2014 earnings call for the second quarter of 2014 (the “July 21, 2014 Earnings Call”), Pyott told the marketthat Allergan was considering alternative transactions, and that “whatever we need to do can be done before a special meetingis held.” Pyott's comments betrayed the Board's intention, upon Allergan's determination that it has received a valid specialmeeting request, to refuse to call a special meeting and, instead, to schedule a board-sponsored meeting up to 120 days or moreafter the submission of the Delivered Requests. (See Ex. A, Art. 2, § 3(B)(3).) This tactic would have the effect of precludingany special meeting and postponing any other meeting so that the Board will have more time to consummate an alternativetransaction. A true and correct copy of the transcript of the July 21, 2014 Earnings Call is attached to this complaint as Exhibit H.

75. In explaining how the Board would analyze potential alternative transactions, Pyott differentiated between the standardthat would be applied to an “all-cash deal,” which would not require shareholder approval, on the one hand, and a transactionrequiring shareholder approval, on the other hand-noting that a transaction requiring shareholder approval would have to be“very compelling” in light of the Valeant proposal. The fact that, in Pyott's mind, an “all-cash deal” would not have to be “verycompelling,” encapsulates Defendants' self-interested mindset and disdain for the interests of shareholders.

76. In recent weeks, Allergan has taken steps to make good on its threat to unilaterally consummate an alternative transactionbefore honoring any request for a special meeting. And on August 19, 2014, the Wall Street Journal reported that Allerganhas approached Salix Pharmaceuticals Ltd.-whose $10 billion market cap is approximately 33% of Allergan's unaffected size-and at least one other company about striking a takeover deal as early as next month. The purpose of Allergan's hasty effort toconsummate an acquisition while leaving the Rights Plan in place is to coerce shareholders into a board-sponsored alternativetransaction before shareholders have an opportunity to express support for the Exchange Offer, let alone accept it. A true andcorrect copy of the August 19, 2014 Wall Street Journal article is attached to this complaint as Exhibit I.

VII. Defendants File an Eleventh Hour Frivolous Lawsuit in California to Delay the Special Meeting.

77. On August 1, 2014, Defendants filed the California Lawsuit alleging that Valeant, Pershing Square, PS Fund 1, and WilliamA. Ackman of Pershing Square have violated certain provisions of the securities laws governing tender offers, includingRegulation 14A under the Exchange Act. The timing of Defendants' lawsuit alone reveals that this suit is nothing more thana pretext to delay a special meeting. Allergan's contrived “claim” rests on publicly disclosed events that pre-date PS Fund l'sstock purchases between February 2014 and April 2014. But Allergan did not file suit at that time or in the months thereafter.



Instead, for strategic reasons, it filed suit only after the Allergan Board concluded that Pershing Square was on the cusp ofsubmitting the special meeting requests.

78. Without seeing shareholders' special meeting requests-and before they were even submitted-Defendants made clear thatthey intend to use their allegations in the California Lawsuit to refuse or delay a special meeting regardless of the number ofrequests received or the purposes for which a special meeting was sought. Defendants have not tried to conceal that the purposeof the California Lawsuit was to cast doubt on and delay the shareholders' special meeting request. Immediately upon filing itssuit, Defendants wrote this Court that “the violations of the Exchange Act alleged in Allergan's federal action may be relevant tothe Allergan board's consideration of any Special Meeting request.” According to Allergan, the Special Meeting Bylaw requiresthat a proper special meeting request comply with the Exchange Act and its pending federal litigation casts that into doubt.

79. Allergan then embarked upon a media campaign to sow fears that the California Lawsuit would delay any order from thisCourt directing that a meeting be held. Allergan has even tried to forestall entirely this Court's review by claiming that this Courtlacks jurisdiction to review the requests' compliance with the Special Meeting Bylaw and that bylaw's validity under Delawarelaw until the federal court resolves its claims under the Exchange Act. According to Allergan, the federal court has “exclusivejurisdiction” to rule on “the Exchange Act issues,” and only once it does so can the Allergan Board (“subject to the Delawarecourt's oversight”) evaluate the special meeting requests. By Allergan's lights, the Special Meeting Bylaw's incorporation ofa federal law standard suffices to place this state law dispute on indefinite hold until its pretextual federal litigation is fullyresolved.

80. Defendants' attempt to create delay through the California Lawsuit is all the more shocking and deplorable in light of thepatent baselessness of the claims being asserted by Defendants. In the California Lawsuit, Allergan alleges that Pershing Squareand Valeant violated the trading restrictions in Rule 14e-3, but those restrictions plainly do not extend to the person makingthe tender offer (i.e., the “offering person”) or any other person acting on behalf of, or as the agent of, the offering person. 17C.F.R. § 240.14e-3. SEC guidance (as well as SEC comments to Valeant's exchange offer documents) confirms that PS Fund

1 and Pershing Square are co-bidders with Valeant and, thus, offering persons. 2

81. In fact, at every opportunity prior to filing the California Lawsuit, Allergan agreed that Valeant and Pershing Square wereco-bidders and, therefore, not covered by the trading restrictions in Rule 14e-3:

Allergan Press Release 3

Allergan urges all of its stockholders to refrain from taking any action, including returning any proxy card sent by co-biddersPershing Square and Valeant, until they have reviewed the recommendation of Allergan's Board of Directors. Under federalsecurities laws, Pershing Square and Valeant cannot solicit proxies from Allergan stockholders until Pershing Square andValeant provide stockholders with definitive proxy solicitation materials.

Allergan Schedule 14D-9, filed June 23, 2014 4

Valeant and Pershing Square Have Used Highly Questionable Tactics in an Attempt to Facilitate a Series of Grossly InadequateProposals: Valeant's co-bidder, Pershing Square only recently became a stockholder of Allergan in 2014, after a rapid andoriginally undisclosed accumulation of beneficial ownership of approximately 9.7% of Allergan's Common Stock.

Allergan Schedule 14A, filed July 15, 2014 5

Rather than put forward their proposals at the next annual meeting of stockholders, Pershing Square, Valeant and their affiliatedparticipants are now soliciting your revocable proxy (the ‘Pershing Square/Valeant Solicitation’) to demand a special meeting

http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000547&cite=17CFRS240.14E-3&originatingDoc=I09b83280372d11e497db9d5f5437d5f0&refType=LQ&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.History*oc.RelatedInfo)

http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000547&cite=17CFRS240.14E-3&originatingDoc=I09b83280372d11e497db9d5f5437d5f0&refType=LQ&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.History*oc.RelatedInfo)



of the Company's stockholders, to consider and vote upon a number of proposals, which include proposals (i) to remove sixmembers of Allergan's Board of Directors that were duly elected by our stockholders at our last annual meeting of stockholderson May 6, 2014, (ii) to request that the Board elect or appoint six of Pershing Square's nominees to serve on the Board, (iii) toamend certain provisions of our Amended and Restated Bylaws and (iv) to request that the Board engage with Valeant, PershingSquare's co-bidder, regarding its proposal to acquire Allergan.

Allergan Schedule 14A, filed July 29, 2014 6

Pershing Square's specific and short-term interests are not aligned with other Allergan stockholders because Pershing Squareis a co-bidder with Valeant in its efforts to acquire Allergan. Pershing Square and Valeant are rushing to attempt to acquireAllergan at the lowest possible price they can. The Board intends to deliver the most value to Allergan stockholders through adeliberate process of implementing the most effective options available to the Company. Rather than raise proposals at the nextannual meeting of stockholders, Pershing Square, Valeant and their affiliated participants are now soliciting your revocableproxy (the ‘Pershing Square/Valeant Solicitation’).

Allergan Investor Presentation, June 10, 2014 7

Co-bidder Pershing Square has now fixed the number of Valeant shares it would receive in a transaction, so Pershing Squareis better off if Valeant is able to acquire Allergan for a lower price.

82. Indeed, even after filing its California Lawsuit and delivering that pleading to this Court-in which Allergan alleges thatPershing Square and Valeant “construct[ed] a co-bidder fiction” and that “Valeant was the sole bidder”-on August 8, 2014,Allergan filed its definitive revocation statement on Schedule 14A with the SEC, in which it again, while under a duty to speaktruthfully and completely, stated that “Valeant [is] Pershing Square's co-bidder, regarding its proposal to acquire Allergan.”

83. In fact, shortly after Valeant and Pershing Square announced their acquisition, Allergan's legal counsel acknowledged ina public memorandum that Valeant and Pershing Square did not violate the federal securities laws. A true and correct copy ofthat memorandum is attached to this complaint as Exhibit J. As the memorandum explained, Valeant and Pershing Square had“structured their accumulation plan to outflank the SEC's outdated ‘early-warning’ rules and the Hart-Scott-Rodino Antitrustfiling requirements (by taking advantage of Regulation 13D's 10-day filing window, and using derivatives, for which clearanceis only needed to exercise options, not to buy them).” (Ex. J.) The memorandum also acknowledged that Valeant and PershingSquare had “sidestep [ped] Rule 14e-3 which outlaws insider-trading in connection with a tender offer, by styling themselvesas co-bidders and not (yet) proceeding towards a tender offer.” (Id.) Rather than suggesting that Valeant's merger offer ranafoul of current law, Allergan's counsel instead urged the SEC to change the law “to bring its early-warning rules into the 21stcentury.” (Id.)

84. In any event, the claims and allegations made in the California Lawsuit do not provide a basis for delaying the schedulingof a Special Meeting for a plethora of reasons, including:a. The Bylaw provision that supposedly allows the Board to reject special meeting requests on the basis of the claims allegedin the California Lawsuit is not valid because it is not consistent with the right to call a special meeting established in theCertificate and otherwise is unreasonable and inequitable.

b. The California Lawsuit's primary claim, from which all subsidiary disclosure claims derive, is that Valeant and PershingSquare violated Rule 14e-3 of the Exchange Act. But the alleged Rule 14e-3 violation relates to PS Fund l's acquisition ofshares, and does not involve a special meeting request that “was made in a manner that involved a violation of Regulation 14A.”



c. The claims asserted in the California Lawsuit are baseless and Allergan may not deprive or delay the shareholders requestingthe special meeting of their right to a special meeting based merely upon the Board's self-serving assertion of the claims inthe California Lawsuit.

VIII. Defendants Disingenuously “Schedule” A Sham Meeting.

85. In response to the delivery of the special meeting requests, Defendants announced that they had purported to schedulea special meeting for December 18, 2014, 118 days after the date of delivery of the requests. But this supposed setting of ameeting was merely a sham. Defendants have not actually noticed a meeting (which under their Bylaws could not occur morethan 60 days before the meeting) and have reserved the right to call off the sham meeting if they decide they do not wantactually to hold it. Thus, the sham “scheduling” of the December 18 meeting served no purpose other than litigation-drivenposturing, and is legal nullity.

86. Moreover, in the event Defendants were actually to concede that shareholders are entitled to a special meeting, and actuallyschedule an unconditional meeting to be held on December 18, their selection of that date-just two days before the latest possibledate even under their own incorrect interpretation of their own unreasonable Bylaws-would be a breach of fiduciary dutydesigned to impair the shareholder franchise and entrench themselves in office for as long as possible. Allergan has claimed thatit scheduled the meeting in mid-December in order to allow for the solicitation of proxies after the companies issue their thirdquarter earnings. Yet, Defendants signaled that, if forced to actually hold the special meeting, they intend to set a record datealmost 60 days in advance of the meeting, a stale date prior to the date on which the companies typically announce their thirdquarter results. This gamesmanship is indicative of Defendants' ploy to protect themselves at the expense of the shareholdersfranchise.

Claims For Relief

Count I: Declaratory Judgment

87. Plaintiffs repeat the allegations of paragraphs 1 through 84 as if fully set forth herein.

88. Pursuant to Chapter 65 of Title 10 of the Delaware Code, Court of Chancery Rule 57, and 8 Del. C. §11 (a)(2), this Courthas the power to declare the rights, status or other legal relations of the parties before it. Specifically, Section 6502 of Title10 permits any person interested under a written contract to obtain a declaration of that person's rights, status, or other legalrelations thereunder, and Section 111 of Title 8 grants subject matter jurisdiction to this Court to “interpret, apply, enforce ordetermine the validity of ... the certificate of incorporation or bylaws of a corporation.”

89. There is an actual, narrow, ripe and purely legal controversy regarding the facial validity of the Special Meeting Bylawenacted by the Board to regulate the calling of a Special Meeting.

90. Allergan's Certificate gives shareholders the right to call a Special Meeting upon submission of written requests by theholders of record of 25% of the shares of Allergan's outstanding common stock. The Special Meeting Bylaw adopted by theAllergan Board impermissibly alters, conditions, and burdens the right provided in the Certificate.

91. On August 22, 2014, PS Fund 1 delivered written requests for a special meeting by shareholders who are owners ofrecord and own more than 25% of outstanding Allergan common stock. The Delivered Requests comply with the Certificateof Incorporation and any valid provisions of the Special Meeting Bylaw.

92. Defendants have not called a Special Meeting.

http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1007662&cite=DERCHCTR57&originatingDoc=I09b83280372d11e497db9d5f5437d5f0&refType=LQ&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.History*oc.RelatedInfo)




93. Plaintiffs request that this Court declare that:a. The Delivered Requests comply with Allergan's Certificate;

b. The Special Meeting Bylaw is facially invalid as a matter of law; and

c. The Delivered Requests comply with any valid requirements of the Special Meeting Bylaw.

94. Plaintiffs have no adequate remedy at law.

Count II: Declaratory Judgment

95. Plaintiffs repeat the allegations of paragraphs 1 through 92 as if fully set forth herein.

96. There is an actual, narrow, and ripe controversy regarding the sufficiency of the special meeting requests delivered by PSFund 1 to require the Allergan Board to call a special meeting. Based upon any reasonable application of any valid requirementscontained in the Bylaws, the Delivered Requests are sufficient to require the Allergan Board to call a special meeting.

97. Allergan's Certificate gives shareholders the right to call a Special Meeting upon submission of written requests by theholders of record of 25% of the shares of Allergan's outstanding common stock.

98. On August 22, 2014, PS Fund 1 delivered written requests for a special meeting by shareholders who are owners of recordand own more than 25% of outstanding Allergan common stock.

99. Defendants have not called a Special Meeting.

100. Plaintiffs request that this Court declare that the Delivered Requests: (a) comply with the Certificate; (b) comply with anyreasonable interpretation of the remaining Bylaw requirements that are both valid and validly applied; and (c) are sufficient torequire the Board to call a special meeting.

101. Plaintiffs have no adequate remedy at law.

Count III: Breach of Fiduciary Duty

102. Plaintiff PS Fund 1 and VPI repeat the allegations of paragraphs 1 through 99 as if fully set forth herein.

103. The Allergan Directors owe shareholders a fiduciary duty of loyalty.

104. The Allergan Directors have violated their fiduciary duties by relying upon an unreasonable interpretation of the SpecialMeeting Bylaw, by unreasonably applying the purported requirements of the Bylaw to the Special Meeting requests, and bytaking actions designed primarily to seek to delay the special meeting.

105. Defendants have also violated their fiduciary duties by attempting to eliminate the primary impetus for a specialmeeting-Valeant's premium acquisition offer-by attempting to execute an alternative management-friendly transaction withouta shareholder vote and prior to the date of the special meeting.

106. Defendants have further violated their fiduciary duties by scheduling a special meeting almost four months from the dateAllergan received the Delivered Requests, and by setting what will then be an exceedingly stale record date. The meeting date



and the record date are the latest in a string of defensive measures designed to disenfranchise the shareholders and allow theBoard to find and force through a preclusive transaction.

107. Defendants are both delaying the special meeting and trying to silence the shareholder franchise entirely by racing forwardwith a preclusive transaction. Without an order from the Court requiring a special meeting as soon as reasonably possible,Defendants can continue to breach their fiduciary duties.

108. PS Fund 1 and VPI have no adequate remedy at law.

Prayer For Relief

WHEREFORE, Plaintiffs pray this Court enter an Order:

A. Declaring that PS Fund 1 and the supporting shareholders have validly requested a special meeting under the Certificate andany Bylaws that are both valid and validly applied.

B. Declaring that the Special Meeting Bylaw is invalid on its face because it conflicts with the Certificate.

C. Declaring that the Special Meeting Bylaw is invalid on its face because it imposes requirements that are neither ministerialnor procedural.

D. Declaring that the Special Meeting Bylaw is invalid as applied to the Delivered Requests.

E. Declaring that the Delivered Requests comply with any reasonable interpretation of all valid provisions of the Certificateand Bylaws.

F. Declaring that the Allergan Directors breached their fiduciary duties by taking actions with the primary purpose of delayingthe special meeting.

G. Declaring that the Allergan Directors breached their fiduciary duties by taking actions designed to preclude the primaryimpetus for the special meeting, Valeant's acquisition offer.

H. Declaring that the Allergan Directors breached their fiduciary duties by relying upon an unreasonable interpretation of theSpecial Meeting Bylaw and by unreasonably applying the purported requirements of the Bylaws to the special meeting requests.

I. Declaring that the Allergan Directors breached their fiduciary duties by setting unreasonable and inequitable special meetingand record dates.

J. Ordering Defendants to call a special meeting between 45 and 50 days after the Court issues its post-trial order in this litigation,but in any event before Defendants execute, consummate, or reach any binding agreement or understanding on any alternativetransaction (including one with a breakup fee or one that is not subject to a shareholder vote), stock repurchase, recapitalization,or other defensive transaction.

K. Ordering Defendants to set a reasonable and equitable record date.

L. Awarding Plaintiffs their attorneys' fees and costs.

M. Granting Plaintiffs such other and further relief as this Court deems just and appropriate.



September 2, 2014

YOUNG CONAWAY STARGATT & TAYLOR, LLP

/s/ David C. McBride

David C. McBride (# 408)

Martin S. Lessner (#3109)

Christian Douglas Wright (# 3554)

Tammy L. Mercer (# 4957)

Benjamin Z. Grossberg (# 5615)

1000 North King Street

Rodney Square

Wilmington, Delaware 19801

Telephone: (302) 571-6600

Attorneys for PS Fund 1, LLC and Pershing Square Capital Management, L.P.

OF COUNSEL:

Jay P. Lefkowitz

Matthew Solum

John P. Del Monaco

Danielle R. Sassoon

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022

(212) 446-4800

SKADDEN, ARPS, SLATE,

MEAGHER & FLOM LLP

September 2, 2014



s/ Robert S. Saunders

Robert S. Saunders (# 3027)

Ronald N. Brown, III (# 4831)

Brian D. King (# 5028)

Arthur R. Bookout (# 5409)

920 North King Street

Wilmington, Delaware 19801

Telephone: (302) 651-3000

Attorneys for Valeant Pharmaceuticals International, Inc. and Valeant Pharmaceuticals International

OF COUNSEL:

Brian T. Frawley

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10004

(212) 558-4000

Footnotes1 The Certificate requires a meeting request to come from the holder of record of at least 25% of the shares. The Special Meeting

Bylaw adds to this a requirement that each beneficial owner that wants to support a call for a special meeting must itself become a

record holder of at least one share and sign the special meeting request. In the case of one shareholder, DTC charged a fee of $16,000

to make each of its affiliated funds a record owner.

2 Rule 14d-1 (g)(2) of the Exchange Act defines a bidder as “any person who makes a tender offer or on whose behalf a tender offer is

made ....” Similarly, General Instruction K to Schedule TO defines an offeror as “any person who makes a tender offer or on whose

behalf a tender offer is made.” Thus, a bidder is an offering person under Rule 14e-3.

3 http://agn.client.shareholder.com/releasedetail.cfm?ReleaselD=851831.

4 http:// www.sec.gov/Archives/edgar/data/850693/000119312514244537/d746340d sc14d9.htm.

5 https:// www.sec.gov/Archives/edgar/data/850693/000119312514236843/d742354 dprec14a.htm.

6 http://agn.client.shareholder.com/secfiling.cfm?filingID=193125-14-283115

7 http://www.allergan.com/assets/pdf/investor_presentation_jun_10_ 2014.pdf.

End of Document © 2014 Thomson Reuters. No claim to original U.S. Government Works.

Documents

Chancery Court of Delaware. PS FUND 1, LLC, …blogs.reuters.com/alison-frankel/files/2014/09/pershingv...PS FUND 1, LLC, PERSHING SQUARE CAPITAL..., 2014 WL 4386165