<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
(AMENDMENT NUMBER 1 TO FORM 10-K FILED ON MARCH 31, 1994)
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-9934
ICN BIOMEDICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 33-0004340
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
3300 HYLAND AVENUE, COSTA MESA, CALIFORNIA 92626
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 545-0113
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<S> <C>
COMMON STOCK, $.01 PAR VALUE AMERICAN STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. X
THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S VOTING STOCK HELD BY
NON-AFFILIATES ON MARCH 29, 1994 WAS APPROXIMATELY $13,012,000.
THE NUMBER OF OUTSTANDING SHARES OF COMMON STOCK AS OF MARCH 29, 1994 WAS
9,033,623.
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR ITS 1993 ANNUAL
MEETING OF STOCKHOLDERS ARE INCORPORATED INTO PART III OF THIS REPORT BY
REFERENCE.
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<PAGE> 2
ITEM 10. INFORMATION CONCERNING NOMINEES AND DIRECTORS
The current Board of Directors consists of four members: Messrs. Jerney,
Kurz, Lenagh and Panic, all of whom are standing for re-election. The four
nominees were elected at the 1993 Annual Meeting of Stockholders. The names of
the four nominees for election as directors are listed below, together with
certain personal information, including the present principal occupation and
recent business experience of each.
<TABLE>
<CAPTION>
YEAR
NAME, PRINCIPAL OCCUPATION AND BUSINESS COMMENCED
EXPERIENCE AGE SERVING OTHER CORPORATE DIRECTORSHIPS
- - ----------------------------------------------- --- --------- -----------------------------
<S> <C> <C> <C>
Adam Jerney 51 1992 ICN Pharmaceuticals, Inc.;
Mr. Jerney served as the Company's Chief SPI Pharmaceuticals, Inc.;
Executive Officer from October 1992 until Viratek, Inc.
March 4, 1993, when Mr. Panic returned as
Chief Executive Officer of the Company, ICN,
Viratek and SPI. Mr. Jerney also served as
President and Chief Executive Officer of ICN
and SPI from July 1992 and Chief Executive
Officer of Viratek from July 1992 through
March 4, 1993 when Mr. Panic returned to the
Company. He is President of SPI. Mr. Jerney
has served as director of the Company, ICN,
Viratek and SPI since July 1992. He joined ICN
in 1973 as Director of Marketing Research in
Europe, and assumed the position of general
manager of ICN Netherlands in 1975. In
December 1978, he was appointed President of
the European Pharmaceutical Group. In May
1981, he was elected Vice President-Operations
and in March 1987, President of SPI. Prior to
joining ICN he spent four years with F.
Hoffmann-LaRoche & Company.
Jean-Francois Kurz (a) 60 1989
Mr. Kurz has been a board member of the
Company since October 1989. He is currently a
director of Banque Pasche S.A., Geneva. From
1990 to 1992 he was a member of the Board of
Directors and the Executive Committee of the
Board of DG Bank Switzerland Ltd. From 1988 to
1989, he served as a General Manager of TDB
American Express Bank of Geneva. From 1969 to
1988, Mr. Kurz was Chief Executive Officer of
Banque Gutzwiller, Kurz, Bungener S.A. in
Geneva.
Thomas H. Lenagh (b)(c) 73 1989 Adams Express Company; U.S.
Mr. Lenagh is an independent financial Life Corporation; SCI
advisor. He was Chairman of the Board of Systems, Inc.; Gintel Funds;
Greiner Engineering, Inc. from 1982 until Irvine Sensors, Inc.; CML,
1985. He served as Financial Vice President to Inc.; Clemente Global Funds,
the Aspen Institute from 1978 until 1980, and Rexhall, Inc.; MTC
since then as an independent financial Electronics; Franklin Quest.
consultant to the Aspen Institute. From 1964
to 1978 he was Treasurer of the Ford
Foundation. He served as a director of ICN
Pharmaceuticals, Inc. ("ICN") from 1979 to
April 1989.
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
YEAR
NAME, PRINCIPAL OCCUPATION AND BUSINESS COMMENCED
EXPERIENCE AGE SERVING OTHER CORPORATE DIRECTORSHIPS
- - ----------------------------------------------- --- --------- -----------------------------
<S> <C> <C> <C>
Milan Panic (a) 64 1983 ICN Pharmaceuticals, Inc.;
Mr. Panic has been the Chairman of the Board SPI Pharmaceuticals, Inc.;
and Chief Executive Officer of the Company Viratek, Inc.
since its inception in 1983. Mr. Panic is the
founder of ICN, of which the Company is a
majority-owned subsidiary, and has been
Chairman of the Board, President and Chief
Executive Officer of ICN since ICN's inception
in 1960, except he did not serve as President
from October 1979 to June 1980 and from July
14, 1992 through March 4, 1993 he was on leave
of absence from the Company while serving as
Prime Minister of Yugoslavia. Mr. Panic is
also Chairman of the Board and Chief Executive
Officer of SPI Pharmaceuticals, Inc. ("SPI"),
an ICN subsidiary, and Chairman of the Board
and Chief Executive Officer of Viratek, Inc.
("Viratek"), and ICN subsidiary, and a
Director of a joint venture ICN Galenika and
may be deemed to be a " control person" of ICN
and of the Company.
</TABLE>
None of the proposed nominees is related by blood or marriage to one
another, or to an executive officer of the Company.
- - ---------------
(a) Member of the Executive Committee of the Board of Directors.
(b) Member of the Audit Committee of the Board of Directors.
(c) Member of the Compensation and Stock Option Committee of the Board of
Directors.
COMPENSATION OF DIRECTORS
Members of the Board of Directors, other than Mr. Panic and Mr. Jerney,
were paid an annual fee of $20,000 in 1993. In addition, all members other than
Mr. Panic and Mr. Andrea received fees in the amount of $500 per Board meeting
and $300 per Committee meeting actually attended, and were reimbursed for their
out-of-pocket expenses.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. Such officers, directors
and shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
Based on its review of the copies of such forms received by the Company, or
written representations from certain reporting persons that no Forms 5 were
acquired for those persons, the Company believes that during fiscal year 1993
all filing requirements applicable to its officers, directors and ten percent
beneficial owners were timely satisfied.
3
<PAGE> 4
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation paid
by the Company during the twelve months ended December 31, 1993, to the Chief
Executive Officer and the four most highly compensated executive officers of the
Company for services rendered in all capacities for 1993, 1992, and 1991.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------
ANNUAL COMPENSATION PAYOUTS
--------------------------- AWARDS -------
OTHER ANNUAL ------- LTIP ALL OTHER
NAME AND PRINCIPAL COMPENSATION STOCK PAYOUTS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($) OPTIONS ($) ($)(1)(2)(3)
- - ---------------------- ---- ---------- ---------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Milan Panic 1993 535,000 -- 60,000 39,262
CEO 1992 535,000 $5,675,000 39,041
1991 535,000 150,000 1,458
Adam Jerney 1993 380,000 38,100
CEO 1992 321,821(4) 370,000(4) 100,000 18,438
1991 244,799(4) 156,150(4) 6,421
Bill MacDonald 1993 200,000(5) -- 50,000 4,497
1992 168,322(5) 90,000(4) 4,659
1991 157,310(5) 190,000(4) 4,237
Fred Andrea 1993 199,509 -- -- 3,854
1992 (5) (5) 25,000
1991 190,000 -- --
Richard M. Fallis 1993 272,242 -- 33,976 3,854
1992 160,000 3,000 25,000 4,729
1991 155,000 3,896 -- 4,883
</TABLE>
- - ---------------
(1) Excludes certain personal benefits such as medical insurance and life
insurance which, after reasonable inquiry, the Company is unable to
determine specifically or with precision, but which do not, in any event,
exceed for any person $50,000 or 10% of the total compensation reported as
salary and bonus for any person.
(2) ICN entered into certain Change-in-Control Employment Agreements in 1993.
Additionally, in the three year period 1993, 1992 and 1991 Mr. Milan Panic
realized $4,643,750, $6.030,112 and $1,461,306 on sales of ICN, SPI and
Viratek common stock respectively. Mr. Adam Jerney realized $2,640,239,
$365,577 and $2,167,822 on sales of ICN and SPI common stock respectively.
Mr. Fred Andrea realized $54,901 and $274,514 on sales of ICN and the
Company's common stock respectively in the same three year period. Mr.
Richard M. Fallis realized $105,850, $94,068 and $147,412 on sales of ICN,
SPI and Viratek respectively in the same three year period. These stock
option gains are not disclosed in the "All Other Compensation" column.
(3) Includes amounts paid as matching contributions to the Company's 401(k)
plan.
(4) Mr. Adam Jerney was Chief Executive Officer of the Company from July 15,
1992 through March 4, 1993. His compensation was paid by SPI
Pharmaceuticals, Inc. an affiliate of the Company.
(5) Mr. Bill MacDonald, President since March 1993 was paid by ICN.
(6) Mr. Andrea was compensated in 1992 by ICN, $190,000 in salary. Mr. Andrea
will be retiring from the Company on June 7, 1993.
In July 1992, Milan Panic, Chairman of the Board, and Chief Executive
Officer of the Company, with the approval of ICN's Board of Directors, became
Prime Minister of Yugoslavia and was granted a paid leave of absence from all
duties to the Company while retaining his title as Chairman of the Board. Mr.
Panic and ICN entered into a Leave of Absence and Reemployment Agreement which
contained mutual obligations, requiring, among other things, that ICN and the
Company reemploy Mr. Panic and that Mr. Panic return to his previous positions
with ICN and its subsidiaries. Mr. Panic was succeeded as Prime Minister on
March 4,
4
<PAGE> 5
1993, and pursuant to the Leave of Absence and Reemployment Agreement, returned
to his duties at the Company as well as ICN and its other subsidiaries.
On April 1, 1992 the Board of Directors of ICN granted Mr. Panic a bonus of
200,000 shares of SPI common stock for his extraordinary efforts in completing
the ICN Galenika transaction. The value at the date of grant was $5,375,000. Mr.
Panic sold the shares during 1993 for a realized value of $4,005,000.
Mr. Milan Panic, Chairman of the Board and Chief Executive Officer,
returned to the Company on March 4, 1993 as well as to ICN, SPI and Viratek. His
compensation was paid by ICN.
COMPENSATION PURSUANT TO PLANS
Stock Option Plan
At December 31, 1993, under the Company's 1983 Incentive Stock Option Plan
("1983 ISO Plan") (which terminated in 1993) options for 433,360 shares were
outstanding and exercisable (at prices ranging from $0.83 to $10.50 per share).
There were no exercises in 1993.
Pursuant to the 1983 Non-Qualified Stock Option Plan ("1983 Plan"), as of
December 31, 1993 there were options for 323,970 outstanding (at prices ranging
from $0.83 to $7.50 per share) of which 199,165 are currently exercisable.
During 1993, 4,800 shares were exercised at an average price of $4.125 per
shares.
At December 31, 1993, under the Company's 1992 Incentive Stock Option Plan
("1992 Plan") options for 418,750 shares were outstanding (at a price of $3.25
per share) of which 10,000 are currently exercisable. During 1993 there were no
exercises.
At December 31, 1993, under the Company's 1992 Non-Qualified Stock Option
Plan ("1992 Plan"), options for 500,000 shares were outstanding (at prices
ranging from $3.25 to $7.00 per share) of which there are currently 132,500
shares exercisable. During 1993 there were as no exercises.
Pursuant to the terms of an individual grant of stock options to Milan
Panic, Chairman of the Board, which was approved by stockholders in 1988 and
1992, 600,000 shares are outstanding, all of which are exercisable at a price of
$6.125 to $7.00 per share.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
% OF TOTAL ANNUAL RATES OF
OPTIONS STOCK PRICE
EXTENDED TO APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION OPTION TERMS(1)
NAME GRANTED FISCAL YEAR PRICE DATE ($)
- - ------------------------------------------ ------- ------------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Milan Panic............................... 60,000 12% 3.25 2003 60,600
Bill MacDonald............................ 50,000 10% 3.25 2003 50,500
Peter Coggins............................. 20,000 4% 3.25 2003 20,200
</TABLE>
- - ---------------
(1) Assumed rates of appreciation are not necessarily indicative of future stock
performance. The potential realizable value at assumed annualized rates of
stock price appreciation is based on the Black-Scholes option pricing model
adapted for use in valuing executive stock options. The actual value, if
any, an executive may realize will depend on the excess of the stock price
over the exercise price on the date the option is exercised, so that there
is no assurance the value realized by an executive will be at or near the
value estimated by the Black-Scholes model. The estimated values under that
model are based on arbitrary assumptions as to variables such as interest
rates, stock price volatility and future dividend yield.
5
<PAGE> 6
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to (i) stock option
exercises by the named executive officers and (ii) unexercised stock options
held by the named executive officers at December 31, 1993.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES STOCK OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE DECEMBER 31, 1993 DECEMBER 31, 1993($)(2)
ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------------- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Milan Panic.................... -- -- 400,000 260,000 -0- $75,000
Adam Jerney.................... -- -- 25,000 75,000 18,750 56,250
Fred Andrea.................... -- -- 36,250 29,750 -0- -0-
Bill A. MacDonald.............. -- -- 9,900 52,500 -0- 62,500
Richard Fallis................. 4,800 -- 35,000 55,000 -0- 37,500
Peter Coggins.................. -- -- 25,000 35,000 -0- 25,000
</TABLE>
- - ---------------
(1) Difference between the fair market value of Biomedicals common stock and the
exercise price at the date of exercise.
(2) Difference between the fair market value of Biomedicals common stock at
December 31, 1993 and the exercise price.
DEFERRED COMPENSATION PLAN
During 1985, the Company's parent, ICN, adopted a four year executive plan
("the Plan") available to officers and certain key employees of ICN or any of
its subsidiaries, including the Company, with benefits commencing at death or,
if the participant is at least 55 years of age and has participated in the Plan
for at least 10 years, on retirement. The four year term ended May 1, 1989.
Participants in the Plan had to be key employees earning $40,000 or more as a
base salary who elected to participate for either a two or four year period.
Each participant in the Plan was required to execute a salary deferral
agreement, which provided that the participant's compensation from the Company
would be reduced by a specified percentage, which amount would not be less than
$2,000 per year nor more than 50% of covered salary (including bonuses, if any).
The Company contributed an annual amount not greater than 5% of the
participant's base annual salary.
A retiring participant receives his account balance (his contributions plus
the Company's contributions) together with interest and may elect to delay
receiving payments. The payments are normally made in monthly installments
unless the balance at time of retirement is less than $25,000. The minimum
number of such installments a participant may elect is 180, the maximum 300. If
a participant dies prior to retirement, such participant's designated
beneficiary receives the greater of such participant's account balance, with
interest at Moody's plus 3%, or ten times the participant's contributions for
the prior year, with interest at Moody's plus 3%. The beneficiary may elect a
lump sum payment or up to 180 monthly payments. If a participant becomes
disabled prior to retirement, such participant will receive an annual benefit
equal to one and one-half times the amount of such participant's annual
deferral, and the Company pays the regular retirement benefit commencing at age
65. Finally, if a participant terminates employment with the Company for any
other reason, such participant receives his contributions plus the vested
portion of the Company's contributions, with interest calculated based on years
of participation. The Company's contribution vests for this purpose based upon
the participant's years with the Company as follows: 40% vests after four years
of employment, followed by 10% additional vesting per year until 100% is vested
after 10 years. The interest is calculated as follows: one year in plan, no
interest; two to four years, Moody's; five to six years, Moody's plus 1%; seven
to 10 years; Moody's plus 2%; and after 10 years, Moody's plus 3%. Payment of
the amount due is made as follows: if under $25,000 owed, a lump sum payment
within 90 days; if $25,000-$50,000, 120 monthly payments; if over $50,000, 180
monthly payments.
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<PAGE> 7
The present value of benefits expected to be paid is being accrued with
interest. In 1993, 1992 and 1991, $114,000 and $152,001 was accrued pursuant to
the agreements for all participating employees as a group, respectively. Of
these numbers $48,000, $24,000 and $55,000 was accrued for fiscal 1993, 1992 and
1991, respectively, for all current executive officers.
CHANGE IN CONTROL EMPLOYMENT AGREEMENTS
On March 18, 1993, the Board of Directors of ICN adopted Employment
Agreements ("Employment Agreements") which contain "change in control" benefits
for seven key senior executive officers of ICN and its subsidiaries. The
executives include Mr. Jerney, Mr. John E. Giordani, Mr. Richard M. Fallis (who
recently retired from the Company on February 28, 1994) and Mr. Bill MacDonald,
officers of the Company.
The Employment Agreements are intended to retain the services of these
executives and provide for continuity of management in the event of any actual
or threatened change in control. Each agreement has an initial term of three
years and is automatically extended for one year terms unless either the
employee or ICN elects not to extend it (provided that any notice by ICN or the
Company not to extend the agreement cannot cause the agreement to be terminated
prior to expiration of the third anniversary of the date of any change in
control). These Employment Agreements provide that each executive shall receive
severance benefits equal to three times salary (and certain other benefits) if
following a change in control of the Company or a subsidiary, as the case may
be, the executive's employment is terminated without cause, the executive
terminates employment for certain enumerated reasons (including a significant
reduction in the executive's compensation, duties, title or reporting
responsibilities or a change in the executive's job location) or the executive
leaves ICN or the Company for any reason or without reason during a 60 day
period commencing six months after the change in control. The executive is under
no obligation to mitigate amounts payable under the Employment Agreements.
For purposes of the Employment Agreements, a "Change in Control" means any
of the following events: (i) the acquisition (other than from ICN or the
Company) by any person, subject to certain exceptions, of beneficial ownership,
directly or indirectly, of 20% or more of the combined voting power of ICN's or
the Company's then outstanding voting securities; (ii) the existing Board of
Directors cease for any reason to constitute at least two-thirds of the Board,
unless the election, or nomination for election by ICN's or the Company's
stockholders, of any new director was approved by a vote of at least two-thirds
of the existing Board of Directors; or (iii) approval by stockholders of ICN or
the Company of (iv) a merger or consolidation involving ICN or the Company if
the stockholders of ICN or the Company, immediately before such merger or
consolidation, do not, as a result of such merger or consolidation, own,
directly or indirectly, more than eighty percent of the combined voting power of
the then outstanding voting securities of ICN or the Company resulting from such
merger or consolidation in substantially the same proportion as their ownership
of the combined voting power of the voting securities of ICN or the Company
outstanding immediately before such merger or consolidation, or (v) a complete
liquidation or dissolution of ICN or the Company or an agreement for the sale or
other disposition of all or substantially all of the assets of ICN or the
Company. Removal of ICN's or the Company's Board of Directors would constitute a
change in control under the Employment Agreements.
If all of the employees of the Company, including Mr. Panic, who have
entered into Employment Agreements were to receive change in control payments in
1993, the total amount that would be payable under those Employment Agreements
aggregates approximately $6,883,064 (based on present compensation and excluding
certain non-cash benefits which would be received).
COMPENSATION REPORT
In 1993 the Compensation Committee ("Committee") was composed of two
independent non-employee directors, Mr. Lenagh and Mr. Dale. Mr. Dale passed
away at the end of 1993. A new member of the committee will be appointed at the
next board meeting.
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The following statement made by the members of the Committee shall not be
deemed incorporated by reference into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934 and shall not otherwise be
deemed filed under such Acts.
Compensation Philosophy
The Board of Directors adopts an annual and financial plan which
incorporated the goals and objectives to be achieved by the Company and the
specific operating units. The goals focus on growth in operating income and
growth in earnings per share. Each executive is responsible for the performance
of their unit in relation to the plan. Specific goals and objectives for each
executive are reviewed by the executive and their supervisor. In reviewing the
annual performance which will determine the executive's compensation, the
supervisor assesses a performance grade based on the pre-set performance
objectives. This assessment is used to determine base salary for the following
fiscal year. The salaries and bonuses of Mr. Panic, Chief Executive Officer, and
Mr. MacDonald, President, were paid and charged to the Company by ICN and
reviewed by the ICN Compensation Committee. The members of the ICN Compensation
Committee are different individuals than those on the Committee, although the
criteria used by them to determine compensation are the same. With respect to
ICN, eligibility for bonus awards for Mr. Panic, Mr. Giordani and Mr. MacDonald
was based on the pre-set performance guidelines and growth in operating income
and earnings per share. However, payment of bonuses may be paid even when these
objective standards are not met if specific contributions by an employee merit a
bonus or the reason for failure to meet the objective standards are beyond the
control of the Company and/or the employee. Growth in earnings per share goals
for the Company were not met in 1992, primarily due to a restructuring of the
Company. No bonuses were paid to executives in 1993 as the performance goals of
the Company were not met. Stock options are granted based on a program developed
for the Company by Towers Perrin, a compensation consulting company. Each
individual's base number of options is derived from a formula which ties to
their base salary. The Committee may then consider the achievement of individual
as well as corporate performance goals in determining the ultimate number of
options granted.
The compensation of executives consists of salary, a bonus plan to reward
performance and a long-term incentive stock option program.
Base Salary
Salaries are paid within certain grades which are established by the Human
Resources Department reviewing data of other like companies in the same
industry. The Company reviewed salary surveys prepared by Coopers & Lybrand and
Towers Perrin. These surveys did not state which companies participated in the
surveys. The salary levels were in the median range of compensation for similar
positions. Grades are updated to reflect changes in the marketplace. The
salaries of executives are reviewed on an annual basis by supervisory managers
and the Committee.
Bonus Plan
During 1988, the Company adopted an Incentive Bonus Plan which is based on
target goals of growth in both operating income and earnings per share.
Individual performance goals are compared against the target goals established.
Recommendations are made by individual supervisors and approved by the
Committee.
Long-Term Stock Incentive Plans
Stock options are granted as long range incentives to executives. Options
vest over a ten year period. Options are granted at fair market value. The
amount of options granted is tied to salary and performance and each grant is
evaluated. No grant to executives is automatic.
Base Salary
Salaries are paid within certain grades which are established by the Human
Resources Department reviewing data of other like companies in the same
industry. Grades are updated to reflect changes in the
8
<PAGE> 9
marketplace. Normally, executives are reviewed annually; however, in 1992, only
certain executives were reviewed with an eye to retaining them as in 1992
performance of the Company was below expectations in 1993 executives base
salaries were not reviewed due to the Companies' performance.
Bonus Plan
The Company adopted a bonus plan in 1993 which is directly tied to results
of operations and if results are achieved a portion of the operating profit will
accrue to the bonus pool. Individual performance of key employees is evaluated
and employees are rewarded within stated guidelines.
Long-Term Stock Incentive Plans
Stock options are granted as long range incentives to executives. Options
generally vest over a ten year period. Options are granted at fair market value
at the time of grant. The amount of options granted is tied to salary and
performance and each grant is evaluated. No grant is automatic other than yearly
grants pursuant to a provision of the 1992 Non-Qualified Stock Option Plan which
provides for automatic non-discretionary annual grants to outside directors.
Currently this grant is fixed as an option for 10,000 shares of common stock to
be granted on the first business day following the day of each respective annual
meeting.
The Committee determines the compensation of the Chief Executive Officer
based on a number of factors. The goal of the Committee is to grant compensation
consistent with compensation granted to other chief executive officers of
companies in the same industry. The Chief Executive Officer's compensation is
comprised of a base salary and based on the Company's performance special
one-time bonuses will be paid, at the Committee's discretion, based on special
contributions made to the Company. Mr. Milan Panic is compensated by ICN
pursuant to an employment agreement with ICN (see "Executive Compensation").
Substantial bonuses are approved by the Board of Directors. With respect to Mr.
Jerney, when he became Chief Executive Officer of the Company during Mr. Panic's
paid leave of absence, Mr. Jerney's compensation was increased based on a salary
survey conducted at the time by the Committee of other chief executive officers'
compensation.
Compensation and Stock Option Committee
Thomas H. Lenagh
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
9
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PERFORMANCE GRAPH
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING DECEMBER 31, 1988
<TABLE>
<CAPTION>
CUSTOM
ICN BI- COMPOSITE
MEASUREMENT PERIOD OMEDICALS INDEX (9
(FISCAL YEAR COVERED) INC. S&P 500 STOCKS)
--------------------- --------- ------- ---------
<S> <C> <C> <C>
DEC-88 100 100 100
DEC-89 92 132 133
DEC-90 65 128 170
DEC-91 56 166 265
DEC-92 33 179 237
DEC-93 41 197 221
</TABLE>
The 9-Stock Custom Composite Index includes Abbott Labs Inc., Bio Rad Labs
Inc. -- Class A, Diagnostic Products Corp., Dynatect Corp., Life Technologies
Inc, Sigma Aldrich Corp., Whittaker Corp., Applied Biometrics Inc., and
Smithkline Beecham Plc ADR.
ITEM 12. OWNERSHIP OF THE COMPANY'S SECURITIES
PRINCIPAL STOCKHOLDER
As of March 31, 1994, the following stockholder was known to the Company to
be the beneficial owner of more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING
------------------- ------------------ ----------------
<S> <C> <C>
ICN Pharmaceuticals, Inc. 6,257,631(1) 69%
3300 Hyland Avenue
Costa Mesa, California 92626
</TABLE>
- - ---------------
(1) Total outstanding shares for purposes of this table include 9,033,623 shares
outstanding on May 2, 1994.
(2) ICN has sole voting and investment power with respect to the shares shown.
ICN, the Company's parent, is a Delaware corporation which is engaged
primarily in the development, manufacture and sale of pharmaceutical and
biomedical products and services.
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<PAGE> 11
SECURITIES OWNERSHIP BY MANAGEMENT
The following table sets forth, as of December 31, 1993, the number of
shares of Common Stock of the Company and ICN beneficially owned by each
director and nominee for director of the Company, each of the executive officers
named on page 6 and all directors and officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES AND SHARES AND
NATURE OF NATURE OF
BENEFICIAL BENEFICIAL
OWNERSHIP OF OWNERSHIP
THE COMPANY'S PERCENTAGE OF ICN PERCENTAGE
IDENTITY OF OWNER OR GROUP COMMON STOCK(1) OF CLASS COMMON STOCK OF CLASS
------------------------------------- --------------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Milan Panic.......................... 423,867(2) % 533,008 %
Francis L. Dale...................... 2,500(3) (4) 0 (4)
Adam Jerney.......................... 25,000(5) (4) 57,500(6) (4)
Jean-Francois Kurz................... 7,000(7) (4) 0 (4)
Thomas H. Lenagh..................... 27,000(8) (4) 0 (4)
Bill MacDonald....................... 16,400(9) 12,858(10)
Fred Andrea.......................... 77,502(11) (4) 37 (4)
Richard M. Fallis.................... 3,500(12) (4) 0 (4)
All officers and directors as a group
(10 persons)....................... 657,644(13) 6.8% 618,187(14) 3.0%
</TABLE>
- - ---------------
(1) Except as indicated otherwise in the following notes, shares shown as
beneficially owned are those as to which the named persons possess sole
voting and investment power. However, under the laws of California and
certain other states, personal property owned by a married person may be
community property which either spouse may manage and control, and the
Company has no information as to whether any shares shown in this table are
subject to community property laws. Shares shown are shares subject to
options exercisable within 60 days following December 31, 1993.
(2) Does not include 1,349 shares indirectly held for which Mr. Panic disclaims
ownership.
(3) Represents 2,500 shares of common stock which Mr. Dale's estate holds in
the form of currently exercisable stock options. Mr. Dale is deceased.
(4) Less than 1%.
(5) Represents 25,000 shares of Common Stock which Mr. Jerney holds in the form
of currently exercisable stock options.
(6) Represents 37,500 shares of Common Stock which Mr. Jerney holds in the form
of currently exercisable stock options.
(7) Represents 7,000 shares of Common Stock which Mr. Kurz holds in the form of
currently exercisable stock options.
(8) Represents 7,000 shares of Common Stock which Mr. Lenagh holds in the form
of currently exercisable stock options.
(9) Represents 9,900 shares of Common Stock which Mr. MacDonald holds in the
form of currently exercisable stock options.
(10) Represents 36,250 shares of Common Stock which Mr. Andrea holds in the form
of currently exercisable stock options.
(11) Represents 6,250 shares of Common Stock which Mr. MacDonald holds in the
form of exercisable stock options.
(12) Represents 35,000 shares of Common Stock which Mr. Fallis holds in the form
of currently exercisable stock options.
(13) Includes 579,525 shares which certain directors and executive directors
have a right to acquire upon the exercise of currently exercisable stock
options.
11
<PAGE> 12
(14) Includes 15,244 shares of ICN which certain directors and executive
officers have a right to acquire upon the exercise of currently exercisable
stock options.
ITEM 13. CERTAIN TRANSACTIONS
In October 1984, ICN, Viratek and SPI formed an Oversight Committee to
review transactions between or among the corporations. In October 1986, a
representative of the Company joined the Oversight Committee. For additional
information regarding that Committee, see "Information Concerning Nominees and
Directors -- Committees and Meetings of the Board of Directors."
Effective December 1, 1986, ICN and its affiliates have adopted an
investment policy covering intercompany advances and interest rates, and the
type of investment acquisitions (marketable equity securities, high-yield bonds,
etc.) to be made by ICN and its affiliates. As a result of this policy, excess
cash held by the Company is transferred to ICN and in turn, invested by ICN and
cash advances have been made by ICN to the Company to fund acquisitions and
certain other transactions. ICN charges interest at the prime rate plus 1/2%
and credits interest at the prime rate less 1/2% on the amounts invested or
advanced. Interest (income) expense, related to this balance was $420,000,
$314,000, and ($218,000) for 1993, 1992 and 1991, respectively, at average
interest rates of approximately 6.5%, 6.75%, and 7.9%, respectively.
In accordance with this investment policy, the Company advanced the net
proceeds of the Company's Bio Capital Holding Swiss Franc public offering,
completed in February 1987, to ICN. These advances are payable to the Company by
ICN in Swiss Francs. At March 1, 1991 the Company converted to an advance due
from ICN of SFr.14,386,000 into $10,849,000. As a result of this change, the
Company removed the hedge from its Swiss franc liability and recorded
translation gains of $151,000, $758,000 and $170,000 in 1993, 1992 and 1991,
respectively.
On September 24, 1990, ICN Pharmaceuticals, Inc. issued 123,750 shares of
ICN Biomedicals, Inc. registered Common Stock owned by ICN to DG Bank in payment
of costs incurred by the Company totaling SFr 985,350 ($772,200) in connection
with the amendment to certain terms of the 5 1/2% Swiss Franc Exchangeable
Certificates. These costs were charged to the Company by ICN.
In connection with the acquisition of Flow, the Company obtained a
$27,000,00 revolving line of credit from First City. As of November 30, 1990,
the loan agreement was amended to provide for a Revolving Credit Facility of
$10,000,000 and Term Loan Facility of $10,500,000. As of December 31, 1991, the
outstanding balances were $10,000,000 and $6,300,000, respectively. At March 30,
1992, First City issued a commitment for the restructuring of the existing First
City debt whereby ICN became primarily liable for the debt and Biomedicals
became a guarantor of the debt. Biomedicals transferred the oustanding balance
of the debt ($13,072,000 plus accrued interest) to ICN as of April 1, 1992.
Terms of the commitment eliminated the Company's maintenance of certain
financial ratio covenants. Substantially all of the Company's domestic assets
remained pledged as collateral. The debt was repaid in full by ICN on December
3, 1992 pursuant to a repayment schedule and all pledges were extinguished.
On January 1, 1992, the Company and Viratek entered into an agreement
whereby Viratek performs Biomedicals' research and development and the Company
retains a right of first refusal to marketing and distribution rights. Viratek
will receive a royalty on developed products. Products being developed on or
prior to January 1, 1992, remain with the Company.
On March 31, 1992, the Company transferred $2,711,184 of debt owed Skopbank
of Finland to ICN for 500,334 shares of the Company's common stock at $5.42, the
closing market price on March 31, 1992 less a 15% discount. ICN became primarily
liable for the debt and the Company became primary guarantor.
On March 31, 1992, the Company issued 892,703 shares of its common stock at
$5.42, the closing market price on March 31, 1992 less a discount of 15% in
exchange for the retirement of $4,837,000 of intercompany debt owed to ICN
Pharmaceuticals, Inc.
12
<PAGE> 13
On December 31, 1992, the Company exchanged $11,250,000 of debt owed to ICN
for 3,214,286 shares of the Company's common stock issued to ICN at a price of
$3.50 per share which represents the closing market price of the stock on that
date.
On December 31, 1992, the Company transferred $5,747,000 of debt owed to a
major supplier, to ICN. ICN became primarily liable for the debt and the Company
became guarantor.
On August 30, 1992, the Company issued 300,000 shares of a new series "A"
of the Company's non-convertible, non-voting, preferred stock valued pursuant to
a fairness opinion, at $30,000,000 to ICN. In exchange, ICN delivered 4,983,606
shares of the Company's common stock that ICN owned and exchanged intercompany
debt owed to ICN by the Company in the amount of $11,000,000. On August 30,
1993, the Company issued 390,000 shares of a new series "B" of the Company's
non-convertible, non-voting, preferred stock valued pursuant to a fairness
opinion, at $32,000,000 to ICN. In exchange, ICN delivered to the Company
8,384,843 shares of the Company's common stock that ICN owned. Subsequent to the
exchange, the Company had 9,033,623 common shares issued and outstanding.
Subject to declaration by the Company's Board of Directors, the new series "A"
preferred stock pays an annual dividend of $8, noncumulative, payable quarterly
and the new series "B" preferred stock pays an annual dividend of $10,
noncumulative, payable quarterly. Both series "A" and "B" preferred stock become
cumulative in respect to dividends upon certain events deemed to be a change in
control, as defined by the certificates of designation. The series "B" preferred
dividends are subject to the prior rights of the holders of the series "A"
preferred stock and any other preferred stock ranking prior to the series "B"
preferred. The series "A" preferred stock is senior in ranking to the series "B"
preferred stock and the series "B" preferred stock is senior to the Company's
common stock as to voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Company, after payment or provision for payment of the
debts and other liabilities of the Company. The holders of the series "A"
preferred shares are entitled to receive an amount in cash or in property,
including securities of another corporation, equal to $100 per share in
involuntary liquidation or $106 per share in voluntary liquidation prior to
August 31, 1994 and declining ratably per year to $100 per share after 1998,
plus dividends, in the event dividends have become cumulative. The holders of
the series "B" preferred shares are entitled to receive an amount in cash or in
property, including securities of another corporation equal to $100 per share in
voluntary or involuntary liquidation, plus dividends, in the event dividends
have become cumulative. The series "A" and "B" preferred shares are redeemable,
for cash or property, including securities of another corporation, in whole or
in part, at the option of the Company only, subject to approval by a vote of a
majority of the independent directors of the Company. The series "A" preferred
shares are redeemable at $106 per share prior to August 31, 1994 and declining
ratably per year to $100 in 1998, plus dividends, in the event dividends have
become cumulative. The series "B" shares are redeemable at $100 per share, plus
dividends, in the event dividends have become cumulative. There were no
dividends declared on the Series "A" or Series "B" preferred stock during 1993.
The Company subleases space on a month-to-month basis in Costa Mesa,
California, pursuant to an oral lease with ICN at an annual rental of $310,000,
which rental was determined under a formula based on a proportionate usage of
the facility by various ICN subsidiaries and affiliates.
Costs for certain common services at the Company's subleased space in Costa
Mesa, California, such as maintenance, food services and personnel, are incurred
by SPI, a co-tenant, and allocated to Biomedicals based upon services utilized.
Management of the Company believes that the foregoing transactions with ICN
and ICN affiliates have been effected on terms no more or less favorable than
could be obtained from third parties. Any future material transactions between
the Company and its officers, directors, principal stockholders or affiliates
will be effected only on terms which disinterested directors will have
determined to be no more or less favorable to the Company than could be obtained
from third parties, and the Company does not expect that any preference will be
given to the interests of the Company or its affiliates. However, there can be
no assurance that the terms of the foregoing transactions or the future
development of ICN or other ICN affiliates will not adversely affect the
prospects of the Company.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ICN BIOMEDICALS, INC.
Registrant
Date: April 27, 1994
By: /s/ MILAN PANIC
Milan Panic
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - ----------------------------------------------- ------------------------------ ---------------
<C> <S> <C>
/s/ MILAN PANIC Chairman of the Board and April 27, 1994
Milan Panic Chief Executive Officer
/s/ JOHN E. GIORDANI Senior Vice President and April 27, 1994
John E. Giordani Chief Financial Officer
/s/ JEAN-FRANCOIS KURZ Director April 27, 1994
Jean-Francois Kurz
/s/ ADAM JERNEY Director April 27, 1994
Adam Jerney
/s/ THOMAS LENAGH Director April 27, 1994
Thomas Lenagh
</TABLE>
14
